Cyber threats for small businesses operating in an increasingly digitalized world are no abstract worries; they're an everyday reality with serious financial and reputational repercussions from scams or ransomware attacks resulting from cyber security vulnerabilities. Cyber insurance policies have become more popular as a way to manage these risks more effectively.

Cyber insurance policies vary significantly. Business owners may think they're covered, only to discover (all too late!) that their policy falls short. This blog will outline what's typically covered and how best to select an effective cyber policy policy.

Cyber insurance has never been more essential. Hackers no longer only target large corporations;

Small businesses are becoming increasingly susceptible as hackers increasingly target them as well. According to The 2023 IBM Cost of Data Breach Report 43% of cyberattacks targeted small and mid-sized companies; breaches can have devastating financial effects for them with an average estimated cost to smaller firms of $2.98 Million per breach incident.

Customers today expect businesses to safeguard their data, while regulators enforce any violations. Cyber insurance provides not only a safety net but can help cover the costs associated with data breaches as well.

Cyber insurance typically covers

It is essential that businesses have an effective cyber insurance plan in place in order to mitigate against the financial effects of a cyber-attack, with two forms of coverage offered through these policies: First-Party Coverage and Third-Party Liability Coverage - these provide different levels of protection depending on your unique business needs and incident type - we have broken each down below and what each typically covers.

First-Party Coverage

A First-Party policy provides coverage in the event of a cyberattack and helps your business recover from its immediate costs associated with an attack.

Breach Response Costs

First-party insurance should cover the costs associated with managing a data breach. After an attack has taken place, however, you will need to:

What was the impact of the breach?

Consult a lawyer to make sure you comply with all laws and reporting requirements.

Inform all customers who may have had their data compromised of this incident and provide any necessary updates or notifications to those whose data may have been exposed.

If your personal information has been stolen, credit monitoring may provide protection.

Business Interruption Cyberattacks can result in substantial revenue losses if they disrupt network operations or cause downtime, but business interruption insurance can mitigate financial effects by compensating lost income during downtime - leaving you free to focus on recovering rather than worrying about cash flow issues.

Cyber Extortion and Ransomware Attack

Ransomware attacks have become more frequent and threaten businesses at an unprecedented scale, locking away vital files and rendering them inaccessible. Cyber extortion insurance policies exist to assist companies when encountering this situation.

• Cost of paying ransom to cyber-attackers.


• Hire professionals to negotiate lower ransoms and recover your data.


• Costs associated with decrypting files encrypted during an attack are significant.

Data Recovery Critical information can quickly disappear in a major cyber attack, so having data restoration coverage ensures your business can quickly access backups or retrieval services to restore its data and keep operations running as usual. This helps minimize disruption and keep the business functioning at full steam ahead.

Reputation Management

Following a cyberattack, it is vital that businesses work quickly to rebuild the trust of customers, partners and investors. Many policies include reputation management as part of the coverage. This typically includes:

Public Relations firms can assist your company in managing crises, making statements, and protecting its reputation by hiring one.

Guidelines on how to effectively communicate with customers and other stakeholders to preserve transparency.

Third Party Liability Insurance

Your third-party liability coverage protects your business against claims by external parties who could be affected by cyber incidents, including customers, vendors or partners. It will provide financial and legal security if an attack or breach affects those outside of your organization.

Privacy Liability

This coverage protects your business in the event that sensitive customer data is lost, stolen, or exposed due to a data breach. It typically includes:

• Legal costs will be covered if a lawsuit arises because of mishandling personal data.


• You could be covered for costs associated with data breaches that cause third-party losses.

Cyber incidents can often be scrutinized by regulatory bodies like the Federal Trade Commission and industry-specific regulators, so having regulatory defense coverage available is crucial if your company is fined or investigated for violating data protection laws.

Coverage may also be used to pay fines and penalties imposed by regulators for noncompliance with compliance standards.

Mitigate the costs associated with defending against regulatory actions against your company - they could be substantial.

Media Liability Insurance

Media liability insurance provides businesses with protection in case their cyber attack leads to defamation online, copyright violations or leakage of sensitive information (like trade secrets). It covers:

Defamation Claims: Should a data breach result in defamatory remarks or reputational damage online, this policy provides coverage for legal fees associated with defending these claims.

Media liability coverage provides financial resources needed to defend infringement claims arising from cyberattacks that violate intellectual property.

Defense and Settlement Costs

Third-party liability insurance provides coverage in case your company is sued following a cyberattack or data breach, covering legal expenses related to such an attack (ie: costs associated with litigation). For example:

Attorney fees must be included as part of a lawsuit for data breach.

If your company is found responsible, settlement or court costs can be covered through insurance or payments made directly to third-parties.

Businesses can add optional coverage riders and custom coverage options to their cyber insurance policies to address specific threats or needs of their business. This provides them with more tailored protection against risks they might be vulnerable to.

Social Engineering Fraud

Social engineering fraud is an increasingly prevalent form of cyber-fraud that uses deceptive techniques such as phishing to persuade employees to disclose sensitive data or transfer funds or give access to internal systems. Social Engineering Fraud coverage offers vital protection against this form of attack.

If an employee falls victim to a phishing scam, they could suffer irreparable financial harm.

Losses caused by fraudulent transfers executed by attackers.

Hardware Bricking

Cyberattacks can damage business devices to such an extent that they become inoperable - known as "bricking." This rider covers costs associated with replacing or repairing devices damaged due to cyberattacks.

Errors & Omissions in Technology.

Technology E&O policies provide critical coverage for technology providers such as software or IT firms. By protecting against claims related to errors or failures in technology operations, these policies offer security for technology-related providers.

Cyber insurance often does not cover certain risks, making it all the more important that small businesses understand exactly what is excluded in their cyber policy and where there may be gaps that leave them open to certain threats.

Negligence in Cyber Hygiene

Most insurance policies contain stringent clauses regarding cybersecurity of your company. Your claim could be denied if your business fails to employ basic practices like firewalls, Multi Factor Authentication (MFA), and keeping software updated.

Pro tip: Insurers increasingly require proof of good cyber hygiene before issuing policies, so be prepared to demonstrate you have conducted employee training and vulnerability testing as well as implemented other proactive security measures.

Incidents that Are Ongoing or Known

Cyber insurance does not cover cyber incidents that were already underway before your policy was activated. For instance, an attack or data breach occurring before activation would not be covered; damages related to them would not be paid. Likewise if there was a vulnerability identified prior to activation but not addressed, your insurer may deny your claim as well.

Expert Tip: Before purchasing insurance, always ensure your system is secure and address any vulnerabilities immediately.

Responding to high-profile cyberattacks such as NotPetya, many insurers have implemented "war-exclusion" clauses into their policies as a form of defense. If an attack can be traced back to any government or nation-state, your policy may not cover any damages from such attacks as they typically constitute acts of war and therefore fall outside the scope of commercial insurance policies.

Expert Tip: Stay aware of these clauses and double-check the terms of your policy to stay compliant.

Insider Threats

Cyber insurance typically does not provide coverage against malicious acts perpetrated by employees or contractors within your company unless your policy specifically includes "insider threats". This represents a critical weakness as internal actors can often cause devastating harm.

Pro Tip: If insider threats are an issue for your organization, speak with your broker about coverage options that can provide adequate protection from their malicious intentions.

Future Business Loss or Reputational Damage

Cyber insurance policies often cover crisis management services; however, they don't typically include coverage of long-term reputational or future business losses due to cyberattacks. Cyber policies don't typically account for losses like lost customers and sales from trust issues that arise following breaches; such situations usually fall outside their scope of coverage.

Pro Tip: If your brand's reputation is of paramount concern to you, invest in crisis management or additional coverage. Damage caused to its standing may go beyond financial losses that result from an attack.

How to Select an Effective Cyber Insurance Policy

Assess Your Business Risk

• 
  Assess Your Exposure. What type of data am I storing, such as health, financial or customer details? Each requires different levels of protection.


• How reliant is your business on digital platforms or tools? If it relies heavily on them, additional coverage may be required to protect its future growth.


• Are third-party vendors accessing your systems? Vendors represent potential weak points; make sure they're covered under your insurance policy.


• Your answers will allow you to identify areas requiring the greatest protection.


• Future Business Loss or Reputational Damage

Consider These Key Questions

It is vitally important that businesses ask the appropriate questions when purchasing insurance policies as these two threats pose increasing dangers to many companies today and specific coverage for these is key to protecting themselves against these vulnerabilities.

Are Your Legal and Regulatory Fees Covered? You will require legal costs and fines coverage in the event your business becomes involved in court cases or must pay fines due to violative practices.

Before filing your claim, read carefully through your policy to understand when and what may be excluded to avoid any surprises.

Get Second Opinion

Do not attempt to navigate this decision alone. Consult a broker or cybersecurity expert familiar with both legal and technical aspects of cyber risks to help understand policy language and identify gaps. They can ensure you're adequately covered while making an appropriate choice for your company.

Consider Coverage Limits and Deductibles Cyber insurance policies come with specific limits of coverage and deductibles that must align with your company's risks; ensure the limits reflect that of a data breach costing millions to your business, for instance. When selecting a deductible amount that your business can comfortably bear should an accident happen.

Review Policy Renew Terms & Adjustments

Cyber risks and threats are constantly shifting, making an existing policy ineffective in protecting you against new challenges tomorrow. Check the renewal terms and policy adjustments with your insurer periodically in order to stay compliant. As your business expands and threats alter, adjust coverage limits as necessary so your policy meets changing business needs.

Cyber insurance can be an intelligent investment for small businesses. But only when purchasing cyber policies will you truly understand what coverages exist and the gaps that might result from non-coverage can make an effective recovery more likely than an abrupt closure.

Ask the appropriate questions, read all fine print carefully and assess your risk accurately. By pairing insurance with excellent cybersecurity practices, you will be well equipped to deal with whatever digital challenges come your way.

Are you needing assistance deciphering or implementing your policy? Reach out to us immediately so we can start on the path towards creating a safer future together. For inquiries on how to fortify your business:📞 (404) 932-5940 or 📩info@nuwaveitc.com