The True Cost of Cyber Insurance: An Essential Investment for Any Business

As data breaches and cyberattacks rise, cyber insurance has become a necessity for businesses of all sizes. But how much does it really cost? What exactly does it cover? And is it worth the price tag? This article breaks down everything you need to know about cyber insurance so you can make an informed decision about protecting your business.

What is Cyber Insurance?

Cyber insurance provides financial protection in the event your business suffers a data breach or cyberattack. It helps cover costs like:

• Legal fees, fines, and damages from lawsuits by affected customers
• Notifications to affected parties via certified mail
• Hiring a PR firm for damage control
• Remediation of compromised systems and data restoration
• Lost income and expenses from business interruptions

Essentially, cyber insurance acts like a seatbelt - it can't prevent an accident from happening, but it can greatly reduce the impact if disaster strikes.

Cyber insurance policies typically cover both first-party and third-party costs associated with a data breach or cyberattack. First-party coverage helps pay for your own losses and expenses resulting from an incident, like business interruption, data restoration, and notification costs. Third-party coverage helps pay for liabilities and damages to other parties, like legal fees, settlements, and regulatory fines. Comprehensive cyber insurance plans include both first-party and third-party protections to fully shield your business.

The Cost of Cyber Insurance

According to Insureon, the average cost for small businesses is around $145 per month or $1,740 per year. However, premiums vary based on factors like:

• Annual revenue
• Security posture
• Number of users
• Industry and compliance requirements
• Past insurance claims

Because the cyber insurance market is still new and evolving, rates remain competitive as more businesses recognize the growing need for coverage. The Cybersecurity and Infrastructure Security Agency (CISA) is even incentivizing early adopters with more affordable premiums to help build awareness and adoption.

On average, small businesses can expect to pay between $500 - $2,500 annually based on their risk profile. However, costs may be higher for mid-size and enterprise organizations, or those in heavily regulated industries like healthcare and finance. Industry research indicates cyber insurance rates rose nearly 30% in 2021, but are beginning to stabilize as insurers refine their models.

What Does Cyber Insurance Cover?

Cyber insurance can provide both third-party and first-party coverage:

Third-Party Coverage

• Legal defense fees
• Settlements and judgements
• Regulatory fines and penalties
• Damages to affected customers after a breach

This protects you from liabilities to external parties in the event of an incident.

First-Party Coverage

• Notifications, call centers, and public relations
• Income loss from business interruptions
• Remediating and restoring compromised systems
• Ongoing credit monitoring for affected customers
• Cyber extortion and ransomware payments

This covers your own internal costs and losses resulting from an attack.

Some policies only offer third-party coverage, while comprehensive plans include both first- and third-party protections. Review your options closely to ensure you get the right coverages to fully protect your business. Look for extras like breach response services, reputation repair, and cyber crime rewards programs for a complete safety net.

Why Your Business Needs Cyber Insurance

Data breaches increased nearly 100% from 2010 to 2021, with over 80% targeting small businesses at an average cost of $80,000.

Year	% Increase in Data Breaches
2010	Baseline
2021	Nearly 100%

And 60% of breached small businesses close permanently within 6 months according to IBM. The impacts of a breach extend far beyond just the direct financial costs - customer trust, brand reputation, business operations, and employee productivity also take major hits that can sink a company.

Even tech giants like Sony fell victim. Their 2011 PlayStation Network breach compromised 77 million customers' data and caused a 23 day outage costing millions in lost revenue. Without insurance, Sony paid over $171 million in uncovered costs - a burden that would devastate most small businesses.

While robust security is critical, breaches can still occur. A 2022 Hiscox report found that over 60% of cyberattack victims had implemented advanced security prior to being breached. And the growing sophistication of hackers makes the risk nearly unavoidable. Cyber insurance provides a safety net to help businesses survive, making it a vital component of risk management.

Choosing the Right Cyber Insurance Policy

With cyber insurance still an emerging market, take time to understand exactly what you're buying. Here are key factors to consider:

• Coverages included - Ensure you have both first- and third-party protections. Look for extras like breach response services.
• Policy limits - Higher limits mean greater coverage when disaster strikes. Aim for at least $1 million.
• Deductibles - Like other insurance, this is the amount you pay out-of-pocket before coverage kicks in. Keep it affordable.
• Exclusions - Know what the policy won't cover, like acts of war, bodily injury, or inadequate security.
• Insurer reputation - Choose an established carrier known for prompt claim payments and support services.
• Broker expertise - An experienced broker can help you navigate options and find the optimal plan.

Leaning on a trusted advisor can make the buying process smooth and ensure your business gets the coverages it needs.

Partnering with an MSP for Security & Insurance

As a leading MSP serving Cincinnati, Northern Kentucky, and beyond, LK Technologies partners with businesses to implement the security required for cyber insurance approval. We then help you obtain tailored coverage at the best possible rate.

Our layered security approach combines:

• Next-gen endpoint protection against malware and ransomware
• Email security with advanced threat protection
• Vulnerability assessments to identify risks
• Security awareness training for employees
• Encryption, access controls, firewalls, and more

We'll also provide documentation like network diagrams, incident response plans, and security policies often required by insurers.

Then when you're ready to buy a cyber policy, we'll shop quotes and review options to find the right fit. We even act as your advocate for reliable support after a claim.

Contact us today to discuss your cyber risk management strategy, including how cyber insurance can protect your organization from financial ruin. With the proper precautions in place, you can rest easy knowing your business is prepared for the worst. Our team is here to guide you every step of the way.

Get a Free Assessment of Your Cyber Insurance Needs

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If you're looking for a team of IT experts in Cincinnati, Ohio, LK Technologies offers exceptional IT solutions tailored to your organization's needs. Contact us today to get a free consultation!