Although large companies such as T-Mobile and Microsoft have received more media attention for their recent data breaches, even smaller companies are increasingly at risk.

According to a recent estimate by cybersecurity firm Sontiq, small businesses will be the primary targets of data breaches in 2021. While this is happening, the costs associated with each breach rise. In fact, Cybersecurity Ventures predicts that cybercrime would cost firms worldwide $10.5 trillion by 2025, up significantly from 2015's cost of $3 trillion.

As the danger escalates, more preventative measures may be considered by smaller companies. Insurance against cyber attacks is a viable option in many situations.

With Cyber Insurance, your business is protected from legal action in the case of a data breach, especially those that compromise private customer information. Data recovery, system repairs, and legal fees and costs associated with a breach may be covered by this.

So, how can you determine if commercial cyber insurance is something your company needs? We've laid out all the details to help you make a choice.

Do You Need to Protect Your Business from Cybercriminals?

Cyber insurance isn't necessarily a must-have across all industries. Financial organizations, manufacturers, healthcare providers, and service providers are particularly vulnerable because of the vast amounts of client data they store.

The reason for this is that hackers and con artists place a high value on the data of even the smallest businesses that deal with large numbers of customers. And with the number of new business applications growing, there’s simply more to steal. The average financial services organization, according to software startup Varonis, has more than 350,000 exposed, sensitive files; healthcare companies have more than 110,000.

It's still a significant choice to commit to yet another annual insurance premium. If you're wondering whether or not cyber insurance is worth the cost, here are three things to think about.

Determining Whether Cyber Insurance Is a Good Investment for Your Business

1. How Much Does Cyber Insurance Really Cost?

Cyber insurance premiums, alas, have been on the rise. In June 2021, insurance provider Howden Group announces that, internationally, policy costs had climbed by 32% year over year.

However, prices can vary greatly; annual coverage can cost anywhere from $500 to more than $5,000, according to insurance provider Progressive. Every provider is different, but in a study of its own customers, insurance company Insureon discovered that the average is roughly $1,675 per year or around $140 per month.

But the price tag for a real data breach can be substantially higher. One cybersecurity company, OSIbeyond, estimates that ransomware attacks cost small businesses an average of $84,000 in 2017.

It all depends on how much responsibility you need. Companies may have to pay more if they deal with a lot of customers or if they routinely deal with sensitive information. Simply put, you'll need a bigger policy if the insurer thinks your company poses a greater danger of financial loss. Additionally, organizations with a history of cyber liability claims may be charged a premium.

Start by requesting a quote from your insurance company to get a ballpark figure in mind.

2. Are You Prepared for a Cyber Attack?

Knowing your level of exposure will quickly tell you if you should invest in cyber insurance. That depends on a number of factors, including the security measures you've put in place and the nature of your business and its clients.

Cybersecurity isn't a priority for many smaller businesses, unfortunately. Only 28% of small businesses surveyed by CNBC claimed they have a concrete plan for responding to a cyber assault. A startling 42%, meanwhile, admitted they had nothing in place.

However, how can you evaluate whether or not you are indeed ready? Fortunately, there is a Cyber Security Planning Guide available from the FCC. The Federal Communications Commission (FCC) recommends beginning with a data inventory to determine exactly what could be lost. The next step is to figure out where you'll keep your data and how you'll keep it safe from cybercriminals.

The FCC's manual is a good resource. A lot of it may sound foreign, in which case it may be worthwhile to implement extra safeguards and maybe purchase insurance to cover your vulnerabilities.

3. What Exactly Does Cyber Insurance Cover?

You might expect a lot more from your cyber insurance policy than from your basic liability policy. It is common practice to divide policies in half.

To begin, there is first-party coverage, which safeguards you against losses incurred immediately before, during, and immediately following a data breach. That could include the expense of restoring your data, the cost of paying for an investigation into the breach, and coverage for the lost business you may suffer in the process.

Then there's third-party liability insurance, which pays for the harm you do to others like customers or vendors in the event of a data breach. Cyber insurance can pay for your defense costs, settlement, and other liabilities in this case.

Best Practices for Keeping Your Data Secure

Whether or not you decide to invest in cyber insurance, it's important to take a close look at your current security practices and determine where you can make improvements. Simple guidelines are provided below:

Enforce Employee Security

Human mistake accounts for more than 90% of all data breaches. Conducting training sessions to create a firm cybersecurity policy across the board may help to mitigate this risk. An elementary step is to have workers always log out of their work computers and to instruct them to avoid bringing any company data home on their personal devices.

Watch Out for Phishing Scams

Any form these scams take is a disguise for the same thing: an attempt to steal your personal information. Don't give your personal information without verifying the legitimacy of the request first. This includes clicking on suspicious links and paying unexpected bills.

Keep Your Software Up-To-Date

This may seem elementary, but it has far-reaching effects. Using a patch assessment program is a simple approach to ensure that all of your machines are updated with the most recent security patches.

Bring in an Expert

Think about hiring a consultant to evaluate your company's greatest security risks if you don't already have a dedicated cybersecurity team.