A data breach can be a costly event for a business.
Not only do you have to deal with the cost of resolving the problem, but you may also face fines and sanctions from regulatory bodies and lawsuits from customers who had their data stolen.
A recent study showed that 73% of insurance claims filed by companies between 2013 and 2019 were for data breaches, incident response, and crisis management. Not only that, but data breaches were responsible for exposing more than 37 billion personal information records in 2020 alone.
That’s why businesses need to have a data breach insurance policy. This type of insurance not only offsets some of the costs associated with a data breach but can also ensure your business is adequately protected should a breach ever occur.
In this article, we will discuss what data breach insurance is, why it is necessary, and the criteria a business must meet to obtain coverage.
What Does Data Breach Insurance Cover?
Data breach insurance is a type of business insurance policy that helps companies cover the costs and losses associated with a data breach.
The fees can include the cost of hiring a data security firm to help fix the problem, as well as any fines or lawsuits that may arise from customer information lost as a result of the incident.
Why is Cyber Data Breach Insurance Necessary?
One common misconception held by many small business owners is that cyber attacks only target larger enterprises because they generally have larger amounts of data. That is not entirely true.
Small businesses are equally likely to be targeted by cybercriminals because they tend to be easier to hack. Budgetary limitations and a lack of available resources mean they cannot afford the same level of digital protection as a large corporation.
As a result, there are more coverage gaps or potential points of entry for attackers to exploit to gain access to networks and data.
If your business does not presently have insurance against data breaches, you may be putting your clients and their sensitive information at risk. With data breaches costing companies $4.24 million in 2021, according to IBM’s Cost of a Data Breach Report. Additionally, 75% of organizations have purchased some form of cyber liability insurance.
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Where Can You Get Insurance Against Data Breaches?
As cyber criminals and the attack vectors they use become more complex, many prominent insurance providers began to take note. In response to the increase in malicious activities, they have since started offering data breach insurance policies to their business customers.
In addition to data breach insurance, some insurers also provide cybersecurity and cyber liability insurance. Before you purchase a policy, you should consult with the insurer to learn about their offerings, see if they align with your coverage needs, and determine whether or not your business qualifies for coverage.
How to Qualify for Data Breach Insurance
Like other insurance products, if you’re applying for a data breach insurance policy, you will be subject to an assessment to determine if your business meets the minimum requirements for coverage.
As breach attempts and security issues increase in size, number and complexity, insurance providers are introducing minimum coverage requirements, which typically include:
1. Multi-Factor Authentication (MFA) Processes
Used when logging into a system or network, Multi-Factor Authentication confirms your identity upon signing in.
MFA adds another layer of protection to the user verification process by sending a notification or code to your mobile device. To safely log in, you must enter the code or approve the prompt when you receive it.
If your company relies on cloud-based services or a Virtual Private Network (VPN), MFA is a must. Even if your login information becomes compromised, MFA will prevent intruders from gaining access to your company’s network and data.
2. Effective Password Policies
Using strong passwords and changing them routinely should be part of every company’s cyber security policy.
To be considered for data breach insurance, you must demonstrate that your business’s password policy covers:
- How often old passwords can be reused
- How often your users reset their passwords
- The minimum character length for your passwords
- How long a password must be kept until it can be changed
- The number of incorrect logins before the system locks a user out
- The types of characters that can and cannot be used in passwords
3. Endpoint Security and Protection
Any device connected to your network, whether physically or wirelessly, is considered an endpoint. Each endpoint must be protected with anti-malware, anti-ransomware, and antivirus software to prevent unauthorized access.
4. Next-Generation Firewall Protection
Next-generation firewalls offer a level of protection that is far more advanced than standard firewalls. They generally include:
- Upgrade paths
- Intrusion prevention
- Sources of threat intelligence
- Traditional firewall capabilities
- Application awareness and control
- Techniques or tools that handle evolving cyber threats
5. Localized and Off-Site Data Backups
Another essential element that helps you qualify for cyber data breach insurance is localized backups that involve backing up all of your applications, data, and system to a dependable device located on-premises.
Off-site backups involve backing up your critical data to an off-site source, such as an off-site server or the cloud. They should always be performed in tandem with localized data backups as a means of creating a failsafe when a significant business interruption occurs.
6. Software Updates and Patching
If you update your software regularly and apply patches whenever necessary, your business might be a good candidate for data breach insurance.
However, software that is not updated or patched not only slows down your business and impacts your productivity but can also leave you vulnerable to a major cyber attack or data breach.
7. Phishing Testing
Phishing scams originate from emails masquerading as legitimate internal communications. They are among the most common types of social engineering attacks.
When links are clicked, or attachments are downloaded from these malicious emails, they could steal sensitive information, infect your network with malware or spyware, or both.
Every organization should conduct a phishing test to help educate their employees on the severe dangers of phishing scams. Another example would be using ethical hacker services to see if your organization is susceptible to social engineering attacks (BEC, vishing, baiting, etc.).
What Does Data Breach Insurance Cover?
Get all the answers from the small business security experts at Tenecom.
Get the Advice You Need Before You Purchase Cyber Data Breach Insurance
While data breaches are unfortunately becoming more common, data breach insurance can help protect your business in the event of cyber threats or a major cyber attack.
Keeping personal information, customer information, and other types of data safe not only prevents business interruption, it also helps you avoid cyber risk, regulatory sanctions and fines, legal issues, and reputational damage.
As a trusted cyber security specialist in the Greater Toronto and Hamilton Area since 1986, the experts at Tenecom can advise you on finding a data breach insurance policy that suits your needs. If you’re concerned about data security, contact us today for more information.