Cyberthreats are no longer just a big-business problem. In fact, large corporations with deep pockets are not the primary target for most cybercriminals. Less well-defended small and medium-sized businesses are increasingly at risk. To make matters worse, the average cost of a data breach now totals over $4 million (IBM). For many smaller businesses, a cyber incident can be devastating. Our primary goal is always the prevention of cyber events. However, many businesses also choose to carry cyber insurance as an added safeguard.
In this article, we’ll break down what cyber insurance is and the baseline requirements you’ll need to meet to get a policy. In our experience, the requirements will vary depending on the carrier. Your IT service provider can help with answering their questions and ensuring you accurately depict your environment during the application process.
What Is Cyber Insurance?
Cyber insurance is a policy that helps cover the costs related to a cyber incident, such as a data breach or ransomware attack. If a breach happens, cyber insurance can help cover:
- Notification Costs: Informing your customers about a data breach.
- Data Recovery: Paying for IT support to recover lost or compromised data, such as restoring computer systems.
- Legal Fees: Handling potential lawsuits or compliance fines if you’re sued because of an attack.
- Business Interruption: Replacing lost income if your business shuts down temporarily.
- Reputation Management: Assisting with PR and customer outreach after an attack.
- Credit Monitoring Services: Assisting customers impacted by the breach.
- Ransom Payments: Depending on your policy, cyber insurance will cover payouts in some cases of ransomware or cyber extortion.
These policies are typically divided into first-party and third-party coverage.
- First-party coverage addresses losses to your company directly, such as system repair, recovery and incident response costs.
- Third-party coverage covers claims made against your business by partners, customers or even vendors who are affected by the cyber incident.
In most industries, cyber insurance is not legally required. However, with attacks on the rise, think of cyber insurance as your backup plan in the event cyber risks turn into real-world problems.
Cyber Insurance Requirements
Now let’s talk about what’s required to qualify for cyber insurance. Insurers want to make sure you’re taking cybersecurity seriously before they issue a policy, so they’ll likely ask about these key areas:
Security Baseline Requirements
Insurers will check that you have basic security measures like firewalls, antivirus software and multifactor authentication (MFA) in place. These are foundational tools to reduce the likelihood of an attack and show that your business is actively working to protect its data. Without them, insurers may refuse coverage or deny claims.
Employee Cybersecurity Training
As you might have heard us say in the past, employee errors are a major cause of cyber incidents. That’s why Invario includes cyber security awareness train our services. Teaching employees how to recognize phishing e-mails, create strong passwords and follow best practices goes a long way toward minimizing risk. Iinsurers know this and often require proof of cybersecurity training
Incident Response and Recovery Plan
Insurers want to see that you have a documented plan for handling cyber incidents if they occur. An incident response plan includes steps for containing the breach, notifying customers and restoring operations quickly. This preparedness not only helps you recover faster but also signals to insurers that you’re serious about managing risks. Bonus points if you
Routine Security Audits
Regularly auditing your cybersecurity defenses and conducting vulnerability assessments helps ensure your systems stay secure. Insurers may require that you perform these assessments at least annually to catch potential weaknesses before they become big problems.
Identity Access Management (IAM) Tools
Insurers will want to know that you’re monitoring who is accessing your data. IAM tools provide real-time monitoring and role-based access controls to make sure that only select people have access to the data they specifically need when they need it. They’ll also check that you have strict authentication processes like MFA to enforce this.
Documented Cybersecurity Policies
Insurers will want to see that you have formalized policies around data protection, password management and access control. These policies set clear guidelines for employees and create a culture of security within your business. This is only the tip of the iceberg. They’ll also consider if you have data backups, enforce data classification and more.
Conclusion: Protect Your Business with Confidence
As a responsible business owner, the question to ask yourself isn’t if your business will face cyberthreats – it’s when. Cyber insurance is a critical tool that can help you protect your business financially when those threats become real. Whether you’re renewing an existing policy or applying for the first time, meeting these requirements will help you qualify for the right coverage. If you have questions or want to make sure you’re fully prepared for cyber insurance, reach out to our team for a FREE Security Risk Assessment. We’ll evaluate your current cybersecurity setup, identify any gaps and help you get everything in place to protect your business. Click here to schedule a meeting or call our office at 202-223-1234 to book now.
Not ready to meet yet? Click here to download our Cyber Insurance Readiness Checklist.