As a startup, you know you need general liability insurance, property insurance, and workers compensation insurance, but have you ever considered cyber liability insurance?
What is cyber liability insurance?
Cyber insurance generally covers your startup’s liability for a data breach that can involve private, sensitive customer information such as social security numbers, credit card numbers, account numbers, addresses, health records and driver’s license numbers.
When hackers gain this information, they can utilize it to open and/or access accounts, take your customers’ money, and destroy your customers’ credit.
Recovery from a cyber data breach can be devastating for small startups.
This type of insurance protects your business and your users from internet-based risks relating to information technology.
Your general liability insurance in most cases doesn’t cover cyber issues. General liability covers bodily injuries and property damage resulting from use of your products, services or operations.
Bottom line – cyber liability insurance protects you and keeps you from losing your business in the event of a security breach.
So, how do you know if you need it? Let’s look at the scenarios:
You process data
If your startup processes any kind of data, and you’re connected to the internet, you have a cyber risk.
Even if you don’t yet have large amounts of data, the data you do have is still vulnerable.
It may even be that hackers find startups more vulnerable than larger, more well-established firms and attack startups first.
This is one reason you should consider cyber liability insurance.
You outsource data
Does your startup outsource the storage or the processing of data?
If so, this doesn’t totally transfer your risk and liability to your outsource provider.
At the end of the day, even if you have some shared liability with your outsource provider, because you own the data, you are responsible for it.
You have security in place
Yes, tech security, firewalls and such are incredibly important to your business, but they can’t cover everything.
Not only are there savvy hackers, but often times your employees can unknowingly cause a data breach.
Consider the laptop left in the coffee shop or on the airplane. Or, look at the disgruntled employee. In some instances, it can just be an employee who isn’t well-versed in the handling of passwords.
So, be sure to have all of your tech security in place, have a responsible base of IT support, and train your staff how to handle cyber issues in addition to adding cyber insurance.
Restoration and monitoring costs
Another thing to think about when deciding if you need the insurance is asking yourself what would happen if you had a data breach.
Could you afford to pay for your customers’ identity restoration costs along with the damages they sustained because of the cyber-attack?
The costs involved with taking care of these things average in the hundreds of dollars per customer. You can see how quickly the costs add up.
So, if you foresee a financial burden if you have a data breach, cyber liability insurance makes sense.
To conclude
According to an article in the Denver Post from the National Cyber Security Alliance, one in five small businesses falls victim to cyber crime each year, and of those businesses, 60% fold within six months of an attack.
What’s more, you hear about data breaches and cyber crimes all the time. These can result in fines and legal fees as well as many headaches for your business.
Data breaches damage not only your computer systems but your reputation as well. They put you, your business and your customers at risk.
Ultimately, cyber issues can bring your small business down, so cyber insurance is a safe bet for most startups.
Are you a new startup ready to succeed? Are you looking to get your new business off the ground and watch it rise to success? We are here for you. We can help answer your questions and guide you through the process. Outsource your HR duties, finances, payroll and more to us.
Contact Escalon today to get started.
Image: frank mckenna on Unsplash
