As cybercrime becomes more sophisticated and widespread, and with so many companies having a remote workforce, cyber security is an even more pressing concern for startups. Cyber insurance offers companies the safety net they need to operate online platforms without the fear of sensitive information being leaked, stolen, or mirrored and can help protect startups should a breach or cyberattack occur.
On the surface it may seem like banks, financial institutions, and healthcare entities are the only ones who need to invest in cyber insurance; in reality, many startups from Software as a Service (SaaS) to life science companies have sensitive client data that needs to be protected.
If your company doesn’t handle, work with, or store sensitive consumer information, cyber coverage may not seem like a necessity. There are other benefits, though, to carrying cyber insurance beyond keeping sensitive information secure. For instance, if there is a breach, and your company is pulled into a lawsuit in response to that breach, cyber insurance policies can be activated to help cover the legal fees and other costs associated with making your defense. A very common scenario, for example, is when a startup stores sensitive consumer information using an outside vendor, such as a cloud service or for payment/billing purposes. Should that payment or cloud service provider be hacked, the startup could potentially be named in a lawsuit alongside the outside vendor and be financially liable for expenses and damages their customer incurred.
Additionally, any startup that relies on their online systems to conduct business can benefit from having business interruption and cyber insurance in place should their product experience down-time related to a breach event. If a startup is providing SaaS, network availability is essential. In the event of a Distributed Denial of Service (D/DOS) attack, it could cause financial impact both to the client (i.e. productivity) and the startup (business income).
While cyber insurance policies are optional, with the threat of cybercrimes growing, the risks of not having this insurance go up as well. In fact, a cyberattack can be a business-ending event: 60% of startups and small businesses that are victims of a cyberattack go out of business within six months.
Many companies and investors also require that you have some kind of cyber insurance policy in place before they’ll partner with you. Your company could also end up with high costs to pay in the instance of a breach if you opt out of insurance. The decision whether or not to invest in this type of insurance really comes down to how at risk your company is and how high your risk tolerance is.
Fine Point Consulting is fortunate to partner with several local agencies that offer outstanding support for our clients. If you’d like more information, please reach out to hr@finepointconsulting.net and we will help you find a good fit for your company insurance needs.
Fine Point Consulting is a boutique consulting firm offering expert-level professional accounting & human resources services customized to meet your budget. We help entrepreneurs who are trying to scale fast, get more done, and stay lean.
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