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Is your business dependent on technology? Think about it. Do you use a computer at work? Do you accept credit card payments?

Unless you are collecting cash out of a cave, there is a good chance your business uses 21st century technology to conduct its operations. And with new technology comes new risk.

Why You Need Cyber Liability Insurance

If you innocently store employee and customer information, if you engage in any sort of e-commerce, you face the peril of cyber liability. Hackers and other bad actors are targeting businesses with malicious intent – to steal identities and financial information and to just plain create havoc. The government’s gracious response has been not to go after the hackers, but rather to penalize you for being hacked. You are on your own here.

Small Businesses Are Not Safe

Many of my small business clients react to the whole issue with incredibility: Why would a hacker go after my small operation? Don’t they only go after big businesses?

Fact: smaller businesses are hacked more often. The reason is twofold. First, most small firms are unaware of the potential exposures and thus are not ready for them. Secondly, most small firms – even if they do know of the risk – don’t have the financial wherewithal to competently protect their data. A recent report indicated that 82,000 malware threats are being released every day, and half of the attacks are aimed at small businesses.

What Are the Problems You Face After a Hack of Your Business?

  1. System Recovery. It would be nice to get your data back. Recovering it can be very expensive. Work with your IT (information technology) person ahead of time to implement the necessary recovery strategies.
  2. Notification. Now 47 states require that all parties affected be notified of a breach. If you store, maintain or own the personal information of others you must reveal what happened, even if the breach occurred at an outsourced data processing firm. These state notice mandates can get expensive. Only Alabama, New Mexico and South Dakota do not have privacy notification laws.
  3. Liability. Notification is just the start. Your business may be responsible for any damages your customers and vendors suffer in a breach.
  4. Regulatory. If you don’t comply with government regulations, your breach can expose you to significant fines. The fact that you had no idea such regulations even existed, while quaint, provides no defense.


What is Protected by Cyber Liability Insurance?

As the foregoing indicates, the time and expense of dealing with a breach can be significant. Many small business owners somehow believe that their regular business owner policy will cover such problems. This is not the case.

Instead, an independent cyber liability insurance policy is warranted. Standalone cyber liability coverage can insure against:

  • Loss of data
  • Business interruption
  • Identity theft
  • Website liability
  • Forensic costs
  • Credit monitoring expenses
  • Cyber extortion (covering ransomware)

Better yet, when you obtain a cyber liability policy the insurance company will have you work with a third party risk management firm. They will help you obtain more secure data systems and implement best practices to prevent a breach.

There is one point of caution in concluding. Cyber liability coverage is a new type of insurance. Not every insurance agent is up to speed on it. The broker who says ‘You don’t need it’ may really be saying ‘I know nothing about it.’ Work with an experienced broker on this. If you are on the internet or keeping electronic records, you most certainly need this insurance.