More than half of businesses in the U.S. currently carry cyber insurance. However, many companies still hesitate to secure the coverage they need. Decision-makers often think, “It won’t happen to us.” But the reality is that cyber breaches can impact businesses of all sizes and in every industry.

Industries such as healthcare, education, hospitality, and gaming tend to have higher rates of cyber coverage. They recognize the critical need to protect sensitive data. On the other hand, sectors like manufacturing lag behind. In fact, only about 8% of manufacturers have cyber insurance—a significant oversight considering the potential risks they face. It may seem surprising at first, but even manufacturing companies are vulnerable to cyber threats.

Every organization is at risk of a data breach, whether through malware attacks, system hacks, or other forms of cybercrime. Despite the growing concern about these risks, many businesses remain slow to invest in proper protection. This leads to an important question: why aren’t more companies rushing to buy the cyber coverage they need?

What Is Cyber Insurance?

Cyber insurance is a specialized form of coverage designed to protect businesses from digital threats. It helps mitigate the costs associated with data breaches, cyberattacks, and other online vulnerabilities. Large corporations like Sony and Equifax have experienced devastating breaches in the past, proving that no business is immune.

Costs of a Cyber Breach

Many smaller businesses assume that they are unlikely targets, but hackers don’t discriminate. Cybercriminals are constantly on the lookout for weaknesses, and small companies with limited resources can be especially appealing. When a cyber breach occurs, the financial impact can be immense. Businesses face downtime, notification expenses, legal fees, and even cyber extortion demands—where hackers hold data hostage in exchange for a ransom.

The cost of a breach goes beyond immediate financial losses. Legal liabilities can arise if customers or employees file lawsuits, especially if sensitive information is compromised. Companies are often required to notify affected individuals, which adds to the expense. Failing to take these potential risks seriously could leave your business vulnerable to catastrophic losses.

The Increasing Threat of Cybercrime in Vulnerable Industries

While all businesses face cyber risks, certain industries are more prone to attacks than others. For example, in the first half of 2018 alone, 688 breaches were reported across various sectors. Of those, 309 impacted businesses, while 181 targeted medical or healthcare organizations. Banking, credit, and financial firms followed closely behind, with 84 breaches. Even government and military institutions, which are often considered highly secure, reported 94 breaches combined.

Given the scope of these threats, it’s clear that any business handling sensitive data should prioritize cyber coverage. Here’s a closer look at which types of businesses should seriously consider investing in this crucial insurance:

Small Businesses

Large corporations typically have the infrastructure in place to respond to cyberattacks. Small businesses, however, may lack the resources and expertise needed to recover quickly. In April 2017, reports indicated that approximately 14 million small businesses had been hacked over the preceding 12 months. This shows that cybercriminals target companies of all sizes, making cyber insurance a must for smaller operations.

Retailers

Retailers are especially vulnerable because they collect and store customer payment information and other personal data. High-profile attacks, such as those against Target, have raised awareness of these risks. However, such incidents have also driven up the cost of cyber insurance for retailers, making it challenging for some to find affordable coverage with appropriate limits.

E-Commerce Businesses

E-commerce shops, which rely on online sales, are highly susceptible to cyber threats. Cyber insurance can protect these businesses from claims related to data breaches and other liabilities. Additionally, it provides critical support if an e-commerce business experiences a security breach, helping them recover and resume operations.

Healthcare Providers

Healthcare organizations are prime targets for cybercriminals due to the sensitive nature of the information they handle. Medical records, which include personal and financial details, are valuable commodities for hackers. A cyberattack on a healthcare provider can disrupt patient care and result in significant financial and reputational damage. Moreover, healthcare entities must comply with strict regulations like HIPAA, which requires robust cybersecurity measures to protect electronic protected health information (ePHI).

Manufacturers

Many manufacturers mistakenly believe they are less likely to experience a cyberattack because they don’t handle large amounts of sensitive data. However, manufacturers are not immune. Financially motivated attacks, such as funds transfer fraud, are a significant threat. In addition to data breaches, manufacturers must be concerned about operational disruptions caused by ransomware or other forms of cybercrime.

Types of Cyber Damages That Could Impact Your Business

Every business, regardless of industry, relies on data to some extent. This makes cyber insurance essential across the board. Failing to obtain proper coverage could leave your business exposed to several types of liabilities, including:

  • Third-party damages: Your business could inadvertently transmit a virus or suffer a data breach while responsible for safeguarding sensitive information. In such cases, you could be held liable for damages incurred by other businesses or clients.
  • Cyber extortion: Hackers may take control of your website or network and demand a ransom to restore access. This can result in substantial financial losses and disrupt your operations.
  • Data breaches: Whether caused by hacking, employee negligence, or lost devices, data breaches expose personal information and can lead to costly legal actions.
  • Intellectual property theft: Social media exposure or improper data handling can result in intellectual property issues, leaving your business open to claims.

How to Purchase Cyber Insurance

Understanding the importance of cyber insurance is the first step. Now, how do you go about purchasing the right level of coverage for your business? Here are some essential tips:

  • Start with the basics: Assess your specific needs and choose coverage that aligns with your business risks.
  • Watch out for exclusions: Carefully review the policy language to ensure there aren’t any broadly worded exclusions that could leave you exposed.
  • Determine appropriate limits: Work with an insurance professional to establish the right limits of liability based on your assets and potential vulnerabilities.
  • Account for vendor risk: If you rely on third-party vendors to store or process data, make sure your policy includes coverage for vendor acts and omissions.

Cyber Coverage Is a Necessity, Not a Luxury

In today’s digital world, every business relies on data to some degree. Whether you’re a small business owner, a healthcare provider, or a manufacturer, cyber insurance is essential for protecting your company from the financial fallout of a breach. By securing the right coverage, you can not only protect your business but also provide peace of mind to your customers.

If you want to safeguard your business and reduce the risk of cyberattacks, now is the time to act. Cyber insurance should be a key part of your overall business strategy. Contact us today to learn more about how we can help you find the right policy for your needs.