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Business Owner’s Policy Coverages Don’t Address Cyber Risks

By July 20, 2022April 18th, 2024No Comments

Published by Cyber Insurance

Buying Business Owners Policy coverages is a convenient, cost-effective way for small businesses to manage their risk. A Business Owners Policy (BOP) combines coverage for major property and liability risks. It costs less than buying each insurance coverage separately, and purchasers can often add additional coverages, which may yield more savings.

But, there is a hidden downside that small business owners need to know: Business Owners’ insurance won’t sufficiently—or sometimes at all—help them meet some of the biggest risks of today’s digital world.

Business Owner Policy coverages won’t be enough when cyber threats strike. Discover below how you can offer coverage that protects your business clients from digital disasters’ costliest outcomes.

Why Small Business Owners Must Take Cyber Risk Seriously

When cyber events like ransomware attacks or data breaches hit big companies, they make headlines. But 70% of all cyber attacks target small and medium-sized businesses (SMBs). These experiences don’t always get news coverage, but they aren’t any less serious.

Statistics like these mean small business owners can’t ignore cyber risks.

They also can’t assume BOP insurance will cover the costs cyber incidents bring. These expenses can include:

  • Ransomware payments are unfortunately often the fastest way to retrieve files and resume operations.
  • Loss of income due to business interruption stemming from a hacked website or network.
  • Forensic IT investigation to establish whether and how a data breach occurred, and its full extent.
  • Payment card industry (PCI) fines for having failed to keep personal data secure.
  • Notification and credit monitoring for affected customers, vendors, and other third parties.

Weathering and recovering from a cyber incident isn’t cheap, and BOP insurance won’t cover the costs. Without an adequate cyber insurance policy, small businesses may find themselves up against an existential threat.

The Advantages of a Standalone Cyber Insurance Policy

Some insurance companies offer cyber-related riders or endorsements to their business owner policy coverages. Small business owners, motivated by the understandable desire to streamline their insurance and save money, might consider such add-ons a good solution.

However, these add-ons generally offer only small sub-limits. These amounts, ranging from $50,000 to $100,000, aren’t extra coverage, but maximum coverages for a certain kind of loss. The policy will also likely spell out other sub-limits within the already small sub-limit. In the event of a claim, these sub-limits won’t provide nearly enough coverage.

Even worse, BOP insurance cyber riders are designed only for third-party claims. They don’t even begin to cover the first-party costs mentioned earlier. Notification costs alone can run hundreds of dollars per record. A competent cyber forensic investigation will cost between $10,000 and $30,000, conservatively. PCI compliance fees add another $5,000 to $100,000 to a cyber incident’s cost. BOP insurance won’t cover any of these expenses.

Not even the best BOP policy gives small businesses access to top forensic, legal, or public relations vendors to help recovery. It’s also not likely to provide active cyber risk management services, such as scanning, which can reduce vulnerabilities.

In contrast, a strong standalone cyber insurance policy will cover all these costs and more (such as the expense of restoring compromised data and rebuilding a company’s website). It will also provide risk management services, and give small business owners peace of mind.

Education For Clients About Cyber Insurance Needs

You have every reason as a small business owner to buy a cyber insurance policy. Simply put, cyber insurance coverages address major expenses that business owners’ policy coverages don’t.

A standalone cyber policy that protects your business with broad coverage and up to $1,000,000 in limits is very affordable for most small businesses.

For help explaining the needs and the solutions, we can provide, download our free resourceCyber Exposure: What’s the Real Cost? 

It will help you educate you about not only the risk but also the cost-effective, comprehensive cyber insurance solutions you can purchase.

To get a free quote and cyber checkup complete our online application today.