Insurance Basics: Cyber Insurance

Paul Tarins, RICP®,WMCP®,CSRIC™

A data breach can damage more than just your small-business computer system – it also can damage your reputation and put your customers and/or employees at risk. That's why cyber insurance can be a smart precaution for any size business.

Ask yourself the following questions:

• Are your computers (and don't act like you're still doing payroll on an old 1978 calculator that's the size of a skateboard) hooked up to the Internet?
• Do you have financial data with banks that do online banking?
• Do you store customers' personal data on computers at your business?

Heck, do you service or sell cars that hook up to the Internet? (You'd be surprised how many new ones do!)

If the answer is yes to any of these, you are exposed to cybercrimes. Yeah, that's a link to an FBI website.

So, let's see what risks you're exposed to and then talk about what cyber liability insurance can do to help you recover if something does happen.

Attacks on Your Business

There are several types of attacks that can hit any business.

Ransomware – This is an attack in which intruders get into your system and encrypt (or lock away behind a code) data that you need to run your business or personal life. These intruders typically ask for money in exchange for giving your data back, thus ransoming it. Some estimates say that there are over 4,000 attacks like this per day.

Denial-of-Service – This is an attack in which intruders overwhelm your system or website, causing it to crash repeatedly.

Malware – This is an attack in which a program is loaded onto your system without your knowledge, allowing intruders to steal information, gain access to systems, damage systems, or spread viruses.

Phishing – This is an attack in which an email contains an attachment or link that will download harmful programs onto your system.

Drive-by – This kind of attack hides on a questionable website and loads harmful programs onto any unprotected computer that accesses it.

There are many, many more types of cyberattacks, but the aforementioned attacks are common ways through which cybercriminals can slip between the cracks and gain access to your systems.

Now, let's look at what you have that they want.

What is Stolen?

Hackers, intruders, thieves—whatever you want to call them, they are looking for something valuable. There are several kinds of information they are looking for, and the most common are:

• Customer Personal Records – Such as names, addresses, Social Security numbers, or anything else they can sell to identity thieves.
• Financial Records – So they can take money directly from or charge items to your business.
• Security Information – This includes things like passwords, links, and other ways to access your business partners. Intruders may be looking not just for you but also for the big companies you buy from and do business with.

The problem is that this isn't a bank heist. Thieves don't just sneak in, steal cash, and leave, taking only one thing. They take information and money at the same time.

This breach of information leaves you wide open to lawsuits and other penalties because it is a business's responsibility to protect its data and the data of its customers.

How Secure Are You?

Sure, you're connected to the Internet and you have Wi-Fi for your customers. You take pictures of things on your phone and email them to your business. No big deal, right?

You set everything up the way the guy at the cable company told you. The box with the blinking lights has a “firewall.” Isn't that what they said?

It's their job to make sure you're safe, right?

Wrong.

Unfortunately, the responsibility falls on you. You have to make sure that your computers, WiFi networks, and passwords are all safe from people who want to steal from you and your customers.

The simple fact of the matter is that the law holds you accountable for your Internet and network safety.

But what happens if you are attacked? What if you find yourself at the end of a huge loss? Or a massive lawsuit?

That's why you get cyber liability insurance.

How Cyber Liability Protects You

Cyber liability insurance protects you with a whole range of coverages that can prevent you from going out of business after a major data breach.

It can reimburse you for direct financial losses, pay for legal costs if you are sued, cover regulatory fines if you are found guilty of not protecting your information, and more.

It can even help cover your business costs if you are disrupted and have to shut down due to an attack, such as a DoS or ransomware attack.

Just like the general liability insurance policy, cyber liability is a powerful, flexible piece of protection that can do so many things to keep you in business and get you back to where you were before an accident.

It's a new era, and the old protections of the past aren't going to cut it. It's time to get with the times.

Paul Tarins is an investment adviser representative of and offers investment and advisory services through Portfolio Medics, a registered investment adviser. Nothing contained herein should be construed as a solicitation for investment advisory services. Sovereign Retirement Solutions and Portfolio Medics are not affiliated.