Why Small Businesses Need Data Breach Insurance

When it comes to data breaches, only attacks involving well-known large companies typically make the news. However, roughly 43 percent of cyberattacks target small businesses. Why? Because hackers know that small businesses typically have fewer defenses and are thus easier to infiltrate. 

While big-time corporations can typically come back from a data breach or expensive ransomware attack, small businesses often have a difficult time recuperating their losses and redeeming their reputation. In fact, 60 percent of small businesses close within six months of a successful cyberattack.  

To save your company from going under after an attack, you’d be wise to consider investing in advanced cybersecurity software, data breach insurance, or both. 

What’s at Stake

Cyberattackers can hold your data, which includes private information about you and your clients, for ransom. They will often encrypt or steal your files so you can’t access them and demand financial compensation for your files’ safe return. 

Some hackers may threaten to leak your data or destroy it if you don’t comply with their demands, and some cybercriminals steal your data to halt your production until you pay them. However, other hackers will leak your data because they feel the information should be made public. These attackers often won’t ask for a ransom, meaning there won’t be much you can do to retrieve your data or stop a leak. 

The aftermath of a data breach can be more damaging to your reputation and finances than the actual attack. If your data were leaked, stolen, or destroyed, it would be hard to rebuild your reputation with clients or future clients. Many of them may stop doing business with you because they no longer trust you can protect their data and privacy. 

Common Attacks on Small Businesses

The first step to preventing an attack is understanding how hackers enact data breaches. Hackers tend to use the following attack strategies on businesses: 

• Malware compromises your computer by downloading spyware or ransomware. It can spread to other connected devices in your network and even destroy that network. 

• Phishing attacks most commonly rely on your or an employee downloading a malicious virus by clicking on an infected link, email, or message. These attacks can result in login credential theft, identity theft, stolen funds, and more. 

• Denial of service (DoS) attacks shut down your network so authorized users can’t access it. Most commonly, the attacker will either flood your system with traffic or information that crashes it. While most DoS attacks don’t involve the theft of information or money, they can still cost you a lot of time and money to resolve. 

Proper Defenses 

To minimize your chances of an attack, invest in high-quality cybersecurity software. If you have an IT team, ask them to assess your risks for an attack, and identify your vulnerabilities. This process can help determine which software will best protect your company. 

Even if you don’t have a dedicated IT team, you can use online assessment tools, such as those provided by the U.S. Small Business Association as a starting point. Understanding your risks is the best way to narrow down your cybersecurity software needs and ensure you invest in the correct defenses. 

While you’re determining your software needs, remember to train your staff in cybersecurity basics. Ensure they know how to identify suspicious links and why they shouldn’t share their passwords with anyone. You can also start backing up your data to mitigate some of the aftereffects of a cyberattack. 

Worst Case Scenarios 

Many small businesses can also benefit from data breach insurance. While this will add an upfront cost, small business quotes tend to be manageable and small compared to how much you could lose if you suffer an attack.

Standard small business insurances, such as a business owner’s policy (BOP), don’t cover cyberattacks. You can add cyber liability insurance or data breach insurance to protect your business. Cyber liability insurance can help you if a virus makes your data publicly accessible, customers sue you after an attack, or your public relations costs increase because of a leak. Data breach insurance will help pay for notifying affected clients after an attack, hiring a public relations firm, and offering credit monitoring to affected clients.

Take Preventative Action, or Pay the Price 

Most small businesses can’t afford to recover their financials or reputation after an attack. While it may be tempting to skimp out on insurance or cyberattack prevention software, doing so can cost you your entire business in the long run. Understand your cybersecurity risks and plan for the worst-case scenario—doing so will make sure you’re protected if you face a data breach.