Do I need cyber insurance? 5 things to check

Cyber insurance is a hot topic. In recent years, cyber security has arguably overtaken physical security as a primary concern for businesses, particularly those that operate largely in the online space. It’s not just a consideration for big business anymore – it’s a serious consideration for even small startups. Indeed, larger businesses will be better equipped to deal with a major cyberattack so a data breach will always be more damaging to the little guy.

It’s estimated that the average cyberattack will cost a business around £2.9 million per incident and that kind of cost could sink many small companies. With such a threat looming, it’s only natural that more businesses would start to consider taking out cyber insurance to protect themselves in the event of a data breach or DDoS attack.

But is cyber security insurance the right fit for your business and what should you consider before you take the plunge?

1.What is cyber insurance?

Also referred to as cyber risk insurance or cyber liability insurance, it’s a form of legal cover that protects your business against hacks, ransomware attacks, malware attacks and data breaches. It will provide support to keep your business running throughout the attack and financial compensation to offset the cost of recovery following an attack or breach.

2. Do you need cyber insurance?

Any business that stores or sends digital data will benefit from cyber insurance. Those that will particularly benefit are in finance, manufacturing and healthcare, as well as any service industry. The chances are that this data is either sensitive information or could be used to attack your digital infrastructure if it fell into the wrong hands. If this happens and you are uninsured, the business will be held 100% responsible. Cyber insurance, meanwhile, mitigates some of that responsibility.

3. What’s the cost of cyber insurance?

The one thing preventing many small businesses taking out a cyber insurance policy is the cost. This cost will depend on not only the size of your business and its annual revenue but the type of sector you work in and the kinds of data you use. The higher the risk, the more you will pay so companies based in finance and healthcare will always pay a premium. Overall cyber insurance prices have also been rising in recent years, with an increase of around 32% in average prices in the past year. The cost of a breach, however, is always going to be more severe, regardless of your size or sector.

4. Are you vulnerable to a cyber attack?

If you feel you are adequately prepared for a cyber attack then you might assume you don’t need cyber insurance. However, very few small businesses are prepared. Many don’t have a plan in place at all. The best way to prepare is to make a complete inventory of your data so you are aware of what you have and what could be lost. Also, bulking up your online security defences is never a bad idea. More than 90% of data breaches are a result of human error so it’s wise to create a strong cybersecurity policy and ensure your employees are well trained in it.

5. What does cyber insurance cover?

There will be some things covered by your public liability insurance but that is unlikely to cover the cost of recovering lost data, the cost of investigating a breach or the cost of lost business that could occur as a direct result of an attack. This will all be covered by a good cyber insurance policy. Depending on the policy you choose, it might also protect you from potential costs involving lawsuits that might arise in the fallout of a breach.

We can help

If you’re interested in finding out more about cyber insurance, or any other aspect of your finances, get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.