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Cyber Liability Insurance: Do Businesses Really Need It?

By Alex Vanover
Business.com / Security / Last Modified: February 22, 2017

Cyber liability insurance isn't just for large corporations anymore. Small businesses can also benefit from cyber liability coverage.

Most brick-and-mortar business owners have never heard of cyber liability insurance.

This is unfortunate because this type of insurance can protect businesses in the event of a cyber attack, a type of attack that can essentially destroy a business's online presence.

A cyber liability insurance policy is critical for businesses that do most or all of their business online.

Online business entities of all sizes and types are at risk from a multitude of cyber attacks, and the number of attacks continues to grow in staggering numbers with each passing year.

Related Article: The 8 Types of Insurance Your Business Actually Needs

Not only are cyber criminals going after the large corporations, they are also targeting the small mom and pop operations that are more vulnerable to intrusion.

Most businesses don't think much about the issue of cyber security until they experience suspicious activity with their websites.

And by then it may be too late to prevent theft or other damage.

How serious is the threat of cyber crime? Very. There is an entire town located in Romania known as Hackerville, for example, where cyber criminals abound and the streets are filled with their expensive luxury vehicles.

Hackerville is just one of many places where such illicit activity occurs. There are many communities throughout the world where the main industry is cyber crime.

In order to help combat cyber crime and protect your business, you need to know where you are vulnerable and what types of attacks to be on the look out for.


Ransomware is software designed to hold your website or other digital information hostage. The software essentially locks access to a particular computer's files.

After locking the files, the cyber pirates behind the scam then demand a fee or ransom to restore access. These types of attacks are becoming increasingly more common, and there seems to be no way to effectively stop it.

One of the best ways to prevent falling victim to a ransomware scam is to get in the habit of frequently backing up your data.

If you have an automated system in place that automatically backs up your data at the end of a work day, you do not have to worry about losing critical information to one of these pirates.

Identity Theft

The most prolific cyber crime that businesses need to be aware of is identify theft. Criminals can steal company information to create new credit accounts, get medical treatment on employees' health insurance, and many other activities that will leave your company footing the bill.

As bad as that is, it can be worse. Much worse. What if one of your clients' identities is stolen because of a cyber attack against your company?

A situation like this could turn into a trust issue with clients, especially if news of the incident is leaked to the media. If this happens, it could completely destroy a business.

Related Article: The Security Risks in Social Media: Interview with Joseph Steinberg

Theft of Sensitive Data

As a business owner, securing sensitive data is a must. Sensitive data involves a wide range of information from personal medical records to important client information.

Client information may include such data as bank account information for wire transfers, contractual agreements, and other business and personal information.

Many cyber crimes focus on obtaining a company's client database to obtain access to such records as credit card receipts or bank account information.

Theft of Intellectual Property

Cyber crimes also focus on the theft of intellectual property such as patents or industrial design rights.

This information is then sold on the black market to rival companies that use the information to develop similar products or to steal existing customers.


Spam is more often associated with cyber crimes than any other form of cyber attack. Spam normally comes in the form of emails sent to thousands of individuals at once.

The spam email uses a tactic known as phishing to entice the recipient to contribute personal information such as social security numbers, home address, date of birth, and similar information.

The object is to obtain any and all information the criminal may need to open fraudulent accounts using stolen information that can be obtained from this simple tactic.

The information can also be used to access bank accounts online directly and make large withdrawals.

Should You Get Cyber Liability Insurance?

Cyber Liability Insurance Cover (CLIC) is an insurance policy that covers a wide range of information security devices, processes, and services.

CLIC can be used to recover losses incurred by data breaches, defacement of website or infringement of intellectual property rights, extortion, and third party damages.

Small businesses can now benefit greatly from CLIC. This type of coverage is beneficial in recovering losses incurred by cyber crime such as attorney fees, loss of income, and even damage of reputation.

Most major insurance companies offer some form of cyber liability insurance. As with any insurance policy it is always a good idea to shop around for the best coverage and pricing.

Related Article: Get Covered: 8 Times It's Absolutely Necessary to Have Business Insurance

So, to answer the question, “Should small business owners have cyber liability insurance?” Simply put, yes.

Especially if you do some or most of your business online. CLIC insurance will protect you in the event of a data breach, extortion, or other cyber mishap.

In the day and age we live in, it's protection you can't afford not to have.

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