TL;DR: Cyberattacks increasingly target small businesses, making cyber insurance a vital safety net.
Main points:
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Nearly half of cyber breaches hit companies with <1,000 employees.
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70% of attacks are aimed at small businesses.
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Breaches cost legal, repair, and PR expenses.
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Insurance covers ransoms, lost income, and recovery.
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Essential for compliance, trust, and financial resilience.
Cybersecurity breaches at small businesses are on the rise
We frequently see stories online and in the news about major corporations being hit by security breaches. These attacks potentially expose the personal data of millions. At the same time, legal cases and settlements are getting more expensive for companies hit by breaches.
Why Cyber Insurance for Business Is More Important Than Ever
Unfortunately, many think cybersecurity insurance for small business isn’t an issue they need to worry about.
Perhaps they feel that their operation is too small to get the attention of malicious actors. Or, the stakes are lower since they have less data to expose. However, the statistics paint a different picture. Cyber insurance for business can offer much needed protection.
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46% of cyber breaches impact businesses with fewer than 1,000 employees.
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According to Cisco, 70% of cyber attackers target small businesses.
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More than 60% of retail customers said they would not shop at a business with a recent breach
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Unlike major corporations, small businesses lack the funds to deal with prolonged legal action or massive fines.
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In 2024, 21% of small businesses that had a cybersecurity breach suffered a loss less than $250,000.
7 reasons why small businesses need cyber liability protection
Keeping these statistics in mind, it’s easy to see that small businesses are likely cybersecurity targets. An essential tool for small business cyber liability protection is a cyber liability protection policy. Let’s take a closer look at why you might need cyber insurance coverage.
1. Repair and recover costs
Depending on the type of cyberattack, your hardware or software might need replacing. The breach may damage equipment or make it unsafe to use. Replacements and repairs can be expensive.
Sometimes, you’ll need to pay extra for rush services or equipment. These costs help get your business running again quickly. First-party cyber liability insurance can help cover these expenses.
2. Business interruption and lost income
One of the first things that many companies do after a data breach is halt operations. This gives them time to figure out what the root source of the breach. It also allows them to put together a solution to stop the breach and report it to regulatory authorities.
This all means lost income, and a cyber insurance for business policy can help you recoup some of that. Some commercial cyber insurance policies also cover breach of contract fees. This helps if a cyberattack prevents you from completing a client project.
3. Regulatory fees and legal penalties
Data breach fines are at an all-time high. This could potentially wipe out your business as opposed to the actual breach itself. Cyber insurance for business liability policies can help pay fines that you may be responsible for after a breach.
4. Ransom and extortion response
Sometimes, cybercriminals demand ransom to release stolen data. A cyber insurance for business policy can cover losses from extortion. It may also pay for expert help to resolve the situation.
5. Marketing/PR response expenses
After a data breach, it can be a long road back to gain the confidence of your customers and community after a breach. You’ll need to rebuild trust through extra customer updates and marketing. This shows you’ve fixed the breach and learned from it. This is where cyber insurance coverage is essential.
6. Risk assessment and prevention services
Note that this isn’t something that every policy will have, but bears mentioning. After a data breach, one of your top priorities is preventing it from happening again. Risk mitigation services can be an essential tool here.
The insurance provider will send a professional to an appraiser. The goal is to assess risks in your software, hardware, and business practices. You can use this service to lower the chance of another breach.
7. Media liability claims and reputation management
Today’s consumers expect more transparency from companies. As a result, the media often highlights and shares stories about data breaches. However, sometimes, the truth can get twisted in a way that misrepresents your company.
You may have a legal case for libel, slander, or defamation. Second-party liability insurance can help cover legal fees. Cyber liability protection for a small business can help offset those much needed costs.
Commercial cyber insurance liability protection is an essential tool that helps protect small businesses
As cyberattacks become more serious, having cyber insurance coverage helps protect your bottom line and keeps customer trust. Trying to determine the best cyber insurance fit for you?
Take a proactive approach to protect your business and livelihood from cyberattacks and data breaches. Working with experienced insurance professionals can help you find the best solution for your business.
Frequently Asked Questions about Cyber Insurance for Small Businesses
What is cyber insurance for small businesses?
Cyber insurance helps small businesses cover financial losses from cyberattacks, data breaches, and other digital threats. It may include costs related to legal fees, lost income, system repair, and customer notification.
Is cyber insurance required for small businesses?
It’s not legally required, but many industries and contracts now expect it. Some clients may also require proof of cyber liability protection before working with a vendor.
What does cyber liability insurance cover?
Coverage varies, but typically includes:
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Data breach response
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Legal fees and settlements
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Ransomware payments
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Lost income from downtime
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Public relations support
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Regulatory fines
How much does cyber insurance cost for a small business?
The cost of cyber insurance for small businesses depends on your industry, data volume, and coverage limits.
What’s the difference between first-party and third-party cyber coverage?
First-party coverage pays for your own losses (e.g., data recovery, lost income). Third-party coverage handles claims from others affected by the breach, such as customers or partners.
This post is for informational purposes. The details and conditions of insurance policies vary. We always recommend speaking with an agent to understand the terms of your existing policies and the policies you plan to purchase.
To consult with an insurance advisor, call 800-392-6532 or email insure@colby-group.com.
