Imagine waking up one morning to discover that your company’s entire network is locked down by a ransomware attack even though your company has been implementing cybersecurity measures. The cybercriminal demands a hefty ransom, and every hour of downtime means lost revenue, missed opportunities, and potential permanent closure.
Sadly, this scenario is all too common, and without the proper protections and insurance in place, many small and medium-sized businesses (SMBs) never recover. In fact, a staggering 60% of SMBs suffering a cyberattack go out of business within six months.
The truth is that having top-notch cybersecurity measures does not guarantee 100% safety for your business’s IT use. This is where cyber insurance comes in to provide an extra layer of financial protection to your business. A holistic approach of combining strong security practices with appropriate insurance coverage is key for SMBs to navigate today’s complex cyberthreat landscape.
But what exactly does cyber insurance cover, and how can you ensure that your business is fully protected?
Exploring the three main types of cyber insurance.
When it comes to protecting your business from the financial fallout of a cyberattack, you need the right type of cyber insurance tailored to address your specific risks. For SMBs, there are three main types to consider:
- Cybertheft insurance: This type of insurance covers financial losses due to the theft of digital assets, such as embezzlement or payroll redirection. As businesses increasingly store sensitive data online, the risk of cybertheft rises, making this coverage vital. Without it, a single breach could result in significant financial losses that could overwhelm your business.
➡️Extended reading: Credential theft is the leading cause of data breaches. - Cyber liability insurance: This broader coverage addresses third-party damages and losses, including legal fees, regulatory penalties, and costs associated with data breaches. For SMBs, which may not have the financial resilience to withstand the aftermath of a significant breach, cyber liability insurance is critical. This type of coverage can protect your business from the devastating consequences of a data breach, including lawsuits from affected customers and hefty regulatory fines.
- Cyber extortion insurance / Ransomware insurance: With ransomware attacks on the rise, this insurance covers the costs associated with ransomware demands, recovery expenses, and business interruption losses. Even with strong cybersecurity measures in place, no business is immune to ransomware. Having this coverage ensures that you have the financial support to respond to such threats quickly, potentially saving your business from catastrophic losses.
Understanding these types of insurance is the first step toward securing your business against cyberthreats. Once you’ve identified the type of insurance that your business needs, the next consideration involves the factors driving the cost of these policies and the requirements set by insurers.
Cyber insurance cost factors and requirements.
The cost of cyber insurance can vary widely based on several factors that influence premiums and coverage levels:
- Policy limits and deductibles
- Industry-specific cyberthreats
- The type of cyber insurance
- Volume and sensitive data handled
- Employee count and company size
- Insurance claims history
- Strength of cybersecurity measures
Most of these factors are out of your control except for one —the strength of your cybersecurity measures. Insurers value and reward businesses that allocate resources and efforts to prevent cybercrimes. The better cyberthreat management and prevention your company has, the fewer risks an insurer has to take on for your business.
In addition to evaluating your existing security posture, insurers also have set specific requirements for cyber insurance policies. These requirements help minimize the risk of cyber incidents and play a critical role in determining whether your claims will be honored in the event of a breach. Below are the essential requirements that insurers typically look for:
- Multi-Factor Authentication (MFA): MFA is a baseline for most cyber insurance policies, adding an extra layer of security by requiring multiple forms of verification before access is granted. This significantly reduces the risk of unauthorized access.
- Protecting backups: Regular data backups, stored securely and encrypted, are essential. Insurers often require robust backup procedures to reduce the risk of data loss during an attack. Secure backups ensure that your business can recover critical data quickly without paying a ransom.
- Patching systems and updates: Keeping software up-to-date with the latest security patches is another common requirement. Regular updates protect against vulnerabilities that cybercriminals often exploit. Insurers favor businesses that maintain a rigorous patching schedule, as it shows a proactive approach to cybersecurity.
- Educating the team: Insurers typically require ongoing cybersecurity training for employees. An informed workforce is less likely to fall victim to phishing and other social engineering attacks, which reduces the overall risk profile of your business and can lead to lower premiums.
Meeting these insurance requirements is essential to ensure that your business is adequately protected and that your claims will be honored if an incident occurs. Yet, the complexities involved in maintaining these standards can be daunting, which is where an IT Managed Service Provider (MSP) can make a significant difference.
➡️ Extended reading: Every business deserves stronger cybersecurity protection.
Why partnering with an IT service provider is crucial.
An IT Managed Service Provider (MSP) can be a game changer because it offers specialized support to help you meet insurance requirements, enhance your cybersecurity posture, and select the right coverage for your business. Providers like CMIT Solutions can assist with the following:
- Choosing the right coverage specific to your business: An MSP like CMIT Solutions has a deep understanding of cybersecurity. We can work alongside your insurance broker to help you choose the right coverage for your business. We provide insights into the types of risks your business faces and help you select a policy that offers the best protection.
- Auditing and compliance for your insurance: To get the most out of your insurance, an experienced MSP can conduct a thorough audit of your current cybersecurity measures and identify areas where you may fall short of insurance requirements. Working with CMIT will ensure that your business complies with these requirements, improving your chances of qualifying for comprehensive coverage and ensuring that claims are honored if an incident occurs.
- Improving your cybersecurity posture: Along with your cyber insurance plan, an MSP will assist in implementing best practices, such as multi-factor authentication, regular software updates, data backup solutions, employee training, and more. By strengthening your defenses, you not only protect your business but also make it more attractive to insurers, potentially leading to lower premiums.
- Incident response and support: In the event of a cyberattack, an MSP can provide immediate support to contain the breach, mitigate damage, and begin recovery efforts. At CMIT Solutions, we believe this rapid response is crucial in minimizing downtime and financial loss, which can be vital for SMBs. Having an MSP on your side can also reassure insurers that your business is well-prepared to handle cyber incidents.
Take action now.
Remember, while cyber insurance is essential for protecting your business against the financial repercussions of a cyberattack, it should not be your only line of defense. Pairing your cyber insurance with a dependable MSP like CMIT Solutions will give your business a robust cybersecurity posture, ensuring that you are prepared for whatever threats come your way. On the other hand, if you already have an MSP, cyber insurance will offer you financial protection in the event of failed cybersecurity.
If you need assistance navigating the complexities of cyber insurance and enhancing your cybersecurity posture, contact us today. Our experts are here to help you secure your business and ensure peace of mind in the digital age.
