Does My Business Need Cyber Liability Insurance

Cyber Liability Coverage Do I Really Need It?

Stop for a moment and consider how much your life is conducted through the internet. Our business communication, our banking, and our social interactions are all online and connected by email, document storage, social media, websites...and accessible from a variety of different platforms: smartphones, laptops, iPads and PCs. The internet has given us an unprecedented level of access and connection, and it’s rapidly expanding. But with all the upsides, there is a downside - and it, too, warrants our attention.

The growth of connectivity has brought with it the growth of cybercrime. According to the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT) programs (powered by, "Cybercrime costs the global economy about $445 billion every year, with the damage to business from theft of intellectual property exceeding the $160 billion loss to individuals." Obviously, cybercrime can be enormously expensive. For a business, it can be catastrophic. 


Financial Cost of Cyber Crime

For businesses: there are the direct costs of a cyber breach that can include:

  • Monetary theft. Cyber thieves can intercept bank transfers and transfer money out of company accounts.
  • System repair and remediation. Software will have to be reinstalled after a cyberattack. And in some instances, it is possible for a hacker to physically destroy a computer or server, usually in retaliation when the ransom is not paid.
  • Legal fees. Businesses that lose customer data in a cyberattack are targets of lawsuits. They need legal counsel as soon as they are aware of cybercrime.
  • Publicity fees. It's usually not a good idea for small businesses to announce cyber breaches on their own. The advice of a publicist or public relations representative specializing in reputation repair is usually a good investment.
  • Notification fees (businesses should seek legal advice before notifying customers their data was lost in a hack attack), credit restoration fees, and credit monitoring fees for affected customers.
  • Regulatory fees. Especially for medical practices, fines for loss of data in cyber breaches regardless of fault can be a crippling expense.
  • Overtime. State laws may set tight deadlines for notifying affected parties of a data breach. It may be necessary to pay employees overtime to meet these deadlines,
  • Higher insurance premiums. Every small business should have cyber insurance to cover the expenses caused by an attack. A cyber attack will make premiums go up.

Indirect Cost of Cyber Crime

And that’s not all. Cyber breaches can also result in indirect costs to small businesses:

  • Business disruption. If systems are down when an invoice passes 30 days, a discount may be lost. If systems are down when a creditor who has not been paid in any months issues an ultimatum, avoidable litigation may result. Businesses can miss opportunities to secure scarce inventory or fail to deliver rush orders.
  • Loss of customers. Customers whose banking information and credit card numbers and Social Security numbers wind up in the hands of hackers understandably may discontinue their patronage. And even the most patient customers will not be able to put in new orders while systems are down.
  • Loss of intellectual property. Confidential memos may become public knowledge. Trade secrets may be sold. Plans may be leaked to competitors. 
  • Damage to the company brand, credibility, and reputation. Brands take years to create. A cyber breach can cause irreparable damage to a brand and reputation in just minutes.

What Can You Do? 

Insurance is an important place to start. Be certain you have a rider that covers cyber property losses and cyber casualties included in your policy. It’s not a matter of if a data breach will occur..but when. Be prepared to minimize the damage when such an event occurs. Cyber liability can cover such things as: 

  • The cost of recovering, retrieving, or restoring stolen data.
  • The cost of physical damage to your computers and servers caused by a cyberattack.
  • The funds you lose in transfers to hackers (with some limitations on what you do to prevent losing them).
  • Your lost income resulting from a cyberattack.

But that isn't all. What about the liability that a breach can have in exposing confidential information about your customers and employees?

It's important to understand that your liabilities to third parties whose information you fail to protect can be greater than the direct losses to your business. Cyber liability insurance covers the thousands or even potentially millions of dollars of claims against your business from your customers who suffer losses because you didn't secure their information. 

All of this gets complicated as to what's covered by errors and omissions, what's general liability, what's employment practices liability, and what's covered by your contractors. You need an insurance expert to sort it all out and guide you in the right coverage for your business.

Prevention Before a Cyber Attack Occurs

Cyber insurance and cyber liability insurance only work for you if you are taking appropriate cybersecurity measures. It’s important to stay on top of security measures and regularly update them, because as technology advances, so do a hacker’s abilities. 

Cybersecurity isn't just something that is nice to have. Cyber thieves and hackers do everything they can to stay constantly one step ahead of you. The survival of a small business depends on it. Contact Winter-Dent by clicking here or on the link below for a cybersecurity assessment today, and don't go another day without taking the steps you need to keep your business safe. 




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