4 Things To Consider Before Buying Cyber Insurance

61% of Australian small businesses sustained a cyber attack in 2021.

And unfortunately, 60% of them will never recover.

Yet, despite rampant cybercrime, some small business owners still massively overlook cyber threats, with 59% reporting being too small to be targeted.  

The reality is that small businesses are easy targets for cybercriminals. And along with preventive security measures, cyber insurance is one of the most effective tools to protect your business against cyber threats.

Now, not all cyber insurance policies are created equal. 

So, what factors should you consider before buying cyber insurance?

This is precisely what we’ll answer in this blog post.

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1. Do You Have Security Measures In Place?

To qualify for cyber insurance, you’ll likely be required to have preventative security measures in place and comply with recognised cyber standards and frameworks. 

This allows insurance providers to ensure their clients have done all they can to mitigate vulnerabilities and reduce cyber threats. 

Some basic security measures you’ll be required to implement across your business before buying cyber insurance include setting up a firewall and having data encryption and intrusion prevention systems.

The reality is that professional and reliable insurers won’t provide you with cyber insurance coverage if they believe your business is highly vulnerable to cyberattacks.

So, make sure to work on your cyber risk management plan and implement strong cyber security measures to protect your business and access cyber insurance.

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2. What Type Of Cyber Insurance Policy Do You Need?

There are two main types of cyber insurance policies:

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First-party Coverage

First-party cyber liability insurance is designed to provide business owners with financial assistance and help them mitigate the consequences of a cyber incident, including a data breach on their own systems or networks. It covers the costs of business interruption, recovery activities, and PR management campaigns to control reputational damage. For instance, if a cybercriminal holds your data for ransom, you’ll be covered, and your insurer will provide incident response management.

This policy is a no-brainer if your business stores sensitive data and information, such as clients’ credit card details.

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Third-party Coverage

Third-party cyber liability insurance is designed to cover you if you make a mistake that results in a third-party company suffering a cyber incident. A third-party cyber insurance policy will typically cover the legal fees incurred by a lawsuit if you’re being sued for causing another company’s cyber losses.

This policy is often recommended for web hosting companies, IT businesses, IT consultants, software developers, or website designers who could be blamed for mistakes that lead to a cyberattack.

Every business carries different risks and levels of risk exposure. That’s why we recommend discussing with potential insurance providers and ensuring they can tailor a policy that will cater to your business needs. 

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3. What’s The Maximum Loss Your Business Could Afford?

One key factor to consider when evaluating whether or not you should buy cyber insurance is the maximum loss a cyberattack could inflict on your business. And once that’s done, you should ask yourself whether your business could afford cyber losses incurred by a cyberattack. 

The average cost of a cyberattack on Australian companies ranges from $23,209 for a phishing and social engineering attack to over $180,000 for a Denial-of-Service (DDoS) attack! Besides, the average time to resolve a cyberattack is 23 days, meaning your business might be disrupted for weeks.

While cyber insurance might be an extra cost you hadn’t considered initially, it could be well worth it if your business ever experiences a cyberattack.

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4. How To Find The Best Cyber Insurance Coverage?

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There isn’t a one-size-fits-all approach when it comes to purchasing cyber insurance. Different providers will offer different types of policies and levels of coverage. What’s more, the premiums you’ll have to pay depend on the size of your business and the specific risks your business might face.

This means that as a small business, you need to select a provider that can cater to the specific risks you might be exposed to. 

A recent report revealed that almost half of Aussie small businesses are vulnerable to cyberattacks. What’s more, 48% of Australian SMEs spend less than $500 a year on cybersecurity, making them easy targets for increasingly sophisticated cybercriminals. 

Some of the most common cyber threats small Aussie businesses are exposed to include:

• Phishing
• Malware
• Ransomware
• Supply chain attacks

Therefore, your insurance policy should protect your business against these cyber risks.

Now, we know how difficult it can be to navigate the cyber insurance field as a busy small business owner. That’s why we’ve recently launched cyber & privacy liability insurance specifically tailored for small businesses, independent contractors, and freelancers. 

All you need to do is jump on our instant quote generator, where you can get an estimate on market-leading insurance in seconds! Simply enter your occupation and expected revenue to get started. 

Alternatively, don’t hesitate to get in touch. We’re always here to support small business owners and would love to help you find the best policy to suit your business needs!

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