3 Reasons Why Startups Need Cyber Liability CoverageAugust 15, 2019
Starting a new business is no easy task. There is a lot of paperwork and red-tape to get through before any actual work can be done. Due to this, many businesses start as moonlighting ventures and it isn’t until they’ve better established themselves that they begin the task of getting paperwork, filings, and other necessities in order. Right or wrong, this is the nature of entrepreneurial endeavors. One of the things that often goes overlooked is a comprehensive insurance policy. Startups need Cyber Liability Coverage for several reasons, but it is often overlooked or left off of the policy, which leaves startup businesses at risk. Here are a few reasons why startups need Cyber Liability Coverage:
3 Reasons Why Startups Need Cyber Liability Coverage
1. A Standard General Liability Policy Doesn’t Include Cyber Liability
Oftentimes, many small startup businesses are just looking for General Liability Coverage. It’s also something often spurred on by the need for Evidence of Insurance in order to start a contracted job. Other business owners, who are involved in the manufacturing or creation of goods and services, simply realize the need to protect their business assets and revenue streams via the purchase of an insurance policy.
As an insurance buyer, it is easy to assume that a policy is a policy when seeking insurance coverage. However, the truth is that policies vary widely in limits, coverages offered, and even exclusions of coverage. General Liability (GL) could be considered as the basis of startup business insurance coverage, but there are some significant limitations to the coverage offered by a basic GL policy. One of those limitations is that, without an endorsement, a GL policy leaves a business owner exposed to Cyber Liability claims.
2. Cyber Liability is a Serious Risk and Coverage Can Save Your Business
Approximately 75% of small businesses do not carry Cyber Liability Insurance Coverage. This fact remains, despite over 40% of all cyber attacks targeting small businesses. On top of that, a staggering 60% of companies go out of business within 6 months after experiencing a cyber breach!
It is easy for small businesses to assume that they aren’t “big” enough to elicit a cyber attack, or that they don’t have a cyber liability exposure to begin with. However, it’s clear that small businesses are often a target for malicious hackers. Without Cyber Liability Insurance Coverage, many of them also don’t have the financial assets to survive the expensive consequences of a data breach.
3. Cyber Liability is Not Just for Payment Processors
In our digital age, most companies are engaged in at least some form of electronic transactions that open up the possibilities of security breaches. Businesses that store any type of customer information, such as financial information, social security numbers, and even contact information, have created a need for Cyber Liability Coverage.
Likewise, businesses that initiate electronic payment transactions can be drawn into cyber liability lawsuits even if they are not in direct receipt of the funds. The act of sending payments through a 3rd-party service does not absolve a company of all responsibility. Even if you use something like PayPal or Square to process payments for your startup, your business could be considered liable for a data breach on those platforms involving your customers’ information.
How to Get Cyber Liability Insurance Coverage
It’s important to adequately, and honestly, evaluate your new company’s need for cyber insurance. If it becomes evident that this is a type of coverage that your enterprise ought to purchase, there are several ways to obtain Cyber Liability Insurance:
1. Add Cyber Liability to an Existing Policy
The first, and often the most economical, way to receive this coverage is by endorsement to your GL policy. Many insurance companies have begun to offer this coverage as a policy add-on and are making it available at an affordable price point.
Business Owner Policies (BOP) often will include this line item along with various optional limits of insurance. Usually, the limits offered will be a “sub-limit” or amount less than the General Liability limits offered on the policy.
Many small businesses have smaller customer numbers, which makes a sub-limit of insurance sufficient in many cases. However, the costs of data restoration and the restoring of customer records in addition to any payment of damages that could be levied on the business can become quite expensive. So, it is imperative to discuss the limits your business needs with an experienced insurance agent.
2. Purchase a Stand-Alone Cyber Liability Policy
Another way to obtain Cyber Liability Coverage is by purchasing a stand-alone policy. Businesses that require limits above and beyond what is available through endorsements to standard GL or BOP policies will need to consider this route in order to obtain the coverage they need.
Usually, a stand-alone policy will be more expensive than adding the coverage to an existing policy. But, beyond the higher limits of insurance available, there can be other benefits. Often, the Cyber Liability Coverage offered via these types of policies is more comprehensive in its scope of coverage, which means more protection for your business.
Cyber Liability Coverage is often overlooked by new and established businesses alike. However, the need for, and the value of, this type of insurance coverage is ever-increasing. The statistics show the very real threat that data breaches pose to small business owners. Options are available to make sure that this risk does not end up shuttering your budding or growing business enterprise. Plus, obtaining the coverage is a relatively simple task.
If you would like to explore the Cyber Liability Insurance options available for your business, contact one of our experienced and licensed independent agents today at 1-800-537-6880 or 717-665-2283.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.