Does Your Small Business Need Cyber Insurance?

From managing cash flow and inventory to supporting employees and customers, small business owners have a lot on their plate. That makes it easy to overlook preventative measures that are critical to long-term success, like cybersecurity. With technology increasingly vital to daily operations, protecting your digital systems has become just as important as insuring physical assets.

While standard business insurance policies cover many risks, they typically don’t cover cyber-related losses. That’s where cyber insurance for small business comes in — helping you prepare for and respond to the unique risks of today’s digital landscape.

What Is Small Business Cyber Insurance?

Small business cyber insurance, also known as cybersecurity insurance, helps protect you from the financial fallout of cyberattacks like malware, phishing, ransomware, and DDoS (Distributed Denial of Service) attacks. It’s designed to help companies recover when a cyberattack on a small business causes operational disruption. Coverage typically includes costs related to lost income, legal fees, and system recovery. In many cases, it may also extend to data restoration, identity recovery, and cyber extortion demands. 

As cyber risks continue to evolve, insurance is becoming a key part of small business cyber security plans and broader risk management strategies

Why Cyber Insurance Matters for Small Businesses

Many small business owners believe they’re “too small” to be targeted by cybercriminals. But the risk is very real. 

Research shows that businesses are 67% more likely to experience a cyber incident than a physical theft, and nearly five times more likely to face a cyberattack than a fire. Yet, only 17% of small businesses currently carry cyber insurance.

Additionally, small business owners often juggle many competing priorities, leaving less time and resources for cybersecurity. Cybercriminals take advantage of this by targeting businesses with outdated software and computer systems, limited IT support, and no formal cybersecurity policies, factors that are common among smaller businesses.

As cyber threats become more frequent and sophisticated, it’s essential to invest in comprehensive small business cyber security solutions, including cyber insurance. 

The Far-Reaching Consequences of a Cyberattack on a Small Business

According to cybersecurity company VikingCloud, a cyberattack could force nearly one in five small or medium businesses to shut down. This high-risk stems from the wide-ranging and lasting impacts of such attacks, including:

• Financial losses: Lost income due to downtime, costly ransom payments, regulatory fines, and damage to critical IT assets and infrastructure can severely strain a small business’s budget.
• Data loss: Small business data breaches often involve sensitive data, such as personally identifiable information (PII), payment details, and proprietary customer information, all of which can lead to identity theft and legal complications.
• Reputational damage: Loss of customer trust and brand erosion can have long-term effects on a business’s ability to attract and retain customers.
• Operational disruption: Cyber incidents can cause significant downtime, lost productivity, and expensive recovery efforts, negatively impacting day-to-day business functions.

 What Kind of Cyber Insurance Do You Need? 

Your cyber coverage should be tailored to your operations, digital footprint, and how your business collects and stores sensitive data. Two common types of coverage — cyber liability insurance and data breach insurance — offer complementary protection. 

Cyber liability insurance for small business is designed to protect against the financial repercussions of cyber-related events. It typically helps cover:

• Legal and regulatory expenses or fines
• Ransom payments tied to cyber extortion
• Lost income due to business interruption

Data breach insurance, on the other hand, helps your business respond to a breach and manage its aftermath. This coverage often includes:

• Notification costs to inform affected individuals
• Credit monitoring services for impacted customers
• Lost income due to business interruption
• Costs related to investigation, legal counsel, and public relations

Most small businesses benefit from a cyber insurance package that includes both first-party and third-party coverage.

What is First-Party Cyber Insurance?

First-party coverages help protect against direct losses your business may experience in a cyber incident:

• Data Compromise Response Coverage: Pays covered expenses related to the breach of personal information.
• Computer Attack Coverage: Pays for damage to data and systems caused by a cyberattack.
• Cyber Extortion Coverage: Supports your business in responding to ransomware or other extortion threats.
• Identity Recovery Coverage: Offers case management and financial resources to help recover from identity theft.

What is Third-Party Cyber Insurance?

Third-party coverages provide protection when a cyberattack on your business affects others:

• Data Compromise Liability Coverage: Helps pay for legal expenses if your data breach response is challenged.
• Network Security Liability Coverage: Covers claims arising from security failures that impact clients or partners.
• Electronic Media Liability Coverage: Helps protect against claims related to digital content that causes reputational or financial harm to others.

How Much Cyber Insurance Do You Need?

The right amount of small business cyber insurance depends on your unique risk profile. Start by evaluating key factors like:

• The type and volume of sensitive data you store, such as payment information, health records, or personal identifiers.
• Your industry’s regulatory requirements, like HIPAA or PCI-DSS.
• The scope of your digital operations, including online sales, customer portals, and remote work systems. 

A formal cyber risk assessment is one of the most effective ways to determine appropriate coverage limits. It helps uncover vulnerabilities in your systems, processes, and employee practices —particularly important given that an estimated 95% of cybersecurity breaches are caused by human error.

To support this process, Westfield’s cyber insurance suite includes access to eRiskHub®, a cyber risk management platform that helps assess your exposure and strengthen your defenses. 

How Much Does Cyber Insurance Cost?

Cybersecurity insurance for small business is often more affordable than many business owners expect, especially when compared to the potential cost of a cyberattack. According to IBM and the Ponemon Institute, the average cost of a data breach for companies with less than 500 employees is $2.98 million. A financial hit of that size could force many small businesses to close for good. Investing in cyber insurance now can help protect your business from far greater losses down the road.

While insurance premiums vary, cyber insurance providers consider a variety of factors when determining cost, including:

• Industry and the type of data your business handles
• Annual revenue
• Claims history
• The strength of your current cybersecurity measures, such as firewalls, encryption, and employee training

Ready to Protect Your Business?

Cyber threats like data breaches and ransomware are rising, and small businesses are increasingly being targeted. From financial loss to reputational harm, the consequences of a cyberattack can be difficult to recover from — especially without the right protections in place.

Don’t wait until after a breach to think about coverage. Connect with a Westfield agent today to get a quote and learn how cyber insurance can help safeguard your business.