Cyber Insurance
Cyber insurance, also known as cybersecurity insurance, helps small businesses cover costs from data breaches and cyberattacks. It includes customer notifications, credit monitoring, legal fees, and fines, reducing financial risks.
Choose the right coverage from trusted insurance providers.
What is Cyber Insurance & Why Do Small Businesses Need It?
Cyberattacks are becoming more frequent, and small businesses are highly vulnerable due to limited cybersecurity measures. A data breach isn’t just a setback—it can shut down your business. In 2023, the global average cost of a breach was $4.45 million, with 43% of attacks targeting small businesses.
Cyber insurance helps cover financial losses from cyber incidents, including credit monitoring, legal fees, regulatory fines, and data recovery costs. It ensures your business can recover quickly and continue operating with minimal disruption.
Businesses that purchase cyber insurance typically handle:
- Credit card or bank account details.
- Medical records and health information
- Social Security numbers or driver’s license details
- Customer contact details (names, emails, phone numbers, addresses)
- Cybersecurity services for other businesses
Additional Coverages to Consider
Protect your business from unexpected risks with these essential coverages:
General Liability Insurance
fCovers customer injuries, property damage, and advertising claims. Helps with legal costs and is often required for leases and contracts.
Under this plan
Customer injuries
Business interruption incidents
Accidental damage to customer property
Business Owner’s Policy (BOP)
Bundles general liability and commercial property insurance for cost-effective protection against property damage and liability claims.
Under this plan
Customer injuries
Business interruption incidents
Accidental damage to customer property
Workers’ Compensation Insurance
Covers medical expenses and lost wages for work-related injuries or illnesses. Required in most states for businesses with employees.
Under this plan
Employee medical expenses
Disability benefits
Workplace injury lawsuits
Commercial Auto Insurance
Protects business vehicles by covering accident-related legal costs, medical bills, and property damage.
Under this plan
Car accidents
Vandalism and theft
Weather damage
What Is First-Party Cyber Liability Insurance?
First-party cyber liability insurance, also called data breach insurance, covers costs from a cyberattack or data breach that directly impacts your business. It’s often added to general liability insurance, especially for businesses handling customer data like credit card details or emails.
Data Breach Response
Covers costs for forensic investigations, customer notifications, credit monitoring, and PCI compliance fines.
Business Interruption
Helps with expenses when cyber incidents disrupt operations, such as hiring extra staff, renting equipment, or crisis management.
Ransomware Payments
Assists in paying ransom if hackers encrypt sensitive company or employee data.
What Does Cyber Liability Insurance Cover?
It helps businesses manage costs from data breaches and cyberattacks, including data recovery and legal fees.
There are two types of coverage:
First-party coverage
Protects your business from its own cyber risks, especially if you handle customer personal data (PII).
Third-party coverage
Needed by businesses managing client cybersecurity, offering legal protection from potential lawsuits.
Most businesses require first-party coverage, while cybersecurity service providers should consider third-party coverage.
How Much Does Cyber Insurance Cost?
On average, businesses pay $145 per month for cyber insurance. Pricing depends on:
- Amount of sensitive data handled
- Your industry
- Coverage limits
- Number of employees
These factors determine the coverage amount your business needs.
What Is Third-Party Cyber Liability Insurance?
Third-party cyber liability insurance covers legal costs if a client sues your business for failing to prevent a data breach or cyberattack at their company. It’s essential for tech businesses, especially those providing software recommendations or managing network security.
This coverage can be bundled with errors and omissions (E&O) insurance, forming technology E&O insurance.
What It Covers
- Legal Defense Costs: Covers attorney fees if a client sues over a data breach at their business.
- Settlements: Helps pay for out-of-court settlements to resolve lawsuits.
- Court-Ordered Judgments: Covers damages if a court rules your business liable for a client’s cyber incident.
Who Needs Cyber Insurance?
Cyber liability insurance is essential for businesses handling sensitive customer data, operating in the cloud, or working in cybersecurity. While any company can be a target for cyberattacks, certain industries are at higher risk.
Industries That Need Cyber Insurance
IT Professionals
Tech businesses can face legal action if a client suffers a data breach due to their recommendations or security measures.
Example: An IT consultant misconfigures a cloud database, leading to customer data exposure. Cyber insurance covers legal fees and settlements.
Retailers
Retail stores are vulnerable to cyberattacks that expose customer payment details.
Example: An employee unknowingly downloads malware, encrypting crucial data. Cyber insurance helps cover ransom payments and investigation costs.
Healthcare Organizations
Medical businesses must follow strict privacy laws (e.g., HIPAA) and are prime targets for cybercriminals.
Example: A ransomware attack locks patient records, disrupting services. Cyber insurance covers business interruption costs and data recovery.
Financial Service Providers
Banks, accountants, and tax preparers handle highly sensitive financial data and can face lawsuits if a data breach occurs.
Example: A tax preparer’s client data is stolen, and the client sues for damages. Cyber insurance covers legal expenses and court costs.
Real Estate Professionals
Agents and brokers store personal and financial client data, making them a target for cybercriminals.
Example: A lost laptop with client details triggers legal obligations to notify customers. Cyber insurance covers notification costs, PR efforts, and fraud monitoring.
What Does Cyber Liability Insurance Not Cover?
Cyber insurance helps protect against cyber threats, but it doesn’t cover everything. For example, data loss from a power outage is excluded.
Key Exclusions from Cyber Insurance Coverage
Mistakes and Oversights
Cyber insurance won’t cover lawsuits over professional errors. Instead, businesses need professional liability insurance (E&O insurance) for protection against negligence claims.
Accidental Data Loss
If physical damage to a network or storage device causes data loss, cyber insurance won’t help. Instead, electronic data liability coverage can cover customer data loss due to accidental damage.
Natural Disasters & Power Surges
Cyber insurance does not cover data loss from fires, floods, or power surges. To protect electronic data processing equipment like computers and backup systems, businesses need electronic data processing (EDP) insurance, often bundled with a business owner’s policy (BOP).
Understanding these exclusions helps businesses choose the right mix of insurance policies for complete protection.
Two ways to start your coverage
Quotes online
Talk to an agent
Verified BOP coverage reviews
Hear from customers like you who purchased insurance.
FAQs about Cyber Insurance
Cyberattacks occur when network security is outdated or employees lack the training to spot phishing scams, ransomware, and other threats.
Small Businesses Are Prime Targets
A report found that 82% of ransomware attacks target small businesses. Hackers go after companies that are:
- Profitable enough to pay a ransom
- Small enough to have weaker security
- Less likely to attract media or law enforcement attention
How Cyber Insurance Helps
If a business faces a cyberattack or data breach, cyber liability insurance can cover financial losses and help the company recover.
Examples of Data Breaches and Cyberattacks
Cybercrime is a multibillion-dollar industry, with hackers constantly finding new ways to exploit vulnerabilities even with strong security in place.
Recent Example: MailChimp Breach
A social engineering attack allowed hackers to access 133 accounts, exposing sensitive data. This is just one of many breaches in recent years.
Common Cyber Threats
- Phishing emails trick employees into sharing login details.
- Malware infects systems and steals or locks data.
- Security breaches expose confidential information.
- Network vulnerabilities allow unauthorized access.
- System breakdowns disrupt business operations.
These threats can impact any business, from a financial firm storing bank details to a gaming app collecting user profiles.
Want to dive deeper into cyber liability insurance?
- Check our FAQ section for detailed answers.
- Talk to an Eagle Nation agent to explore coverage options and get expert advice.
- Get quotes from top insurers to find the best policy for your business.
We’ll help you choose the right coverage to protect against cyber risks while staying within your budget.
"Cyber insurance is a must-have for small businesses! With cyberattacks on the rise, this coverage helps mitigate risks and ensures financial stability in case of a breach. Highly recommend for anyone handling sensitive customer data!"