Technology has long made accounting easier, from the first adding machines to electronic spreadsheets to today’s cloud computing ecosystem. While recent advancements have allowed business owners and their accountants to collaborate efficiently from any location, they also created a growing cybersecurity risk that cyber insurance can help manage.
Manage the Risk with Cyber Insurance
Cyber insurance has become an increasingly important risk management tool for businesses. This insurance policy provides businesses with various coverage options to help recover from data breaches and other security issues.
While the exact coverages vary from policy to policy, cyber insurance typically covers two broad categories of losses:
- First-party losses. These are losses impacting the business due to a cyber incident. According to the Federal Trade Commission, first-party coverage typically covers costs related to:
- Hiring legal counsel to determine legal and regulatory obligations after a breach
- Recovering and replacing lost or stolen data
- Notifying customers and other third parties
- Lost income due to an interruption of business activity
- Public relations and crisis management
- Paying a ransom to have stolen data restored
- Forensic services to investigate a data breach
- Paying fees, fines, and penalties stemming from the incident
- Third-party losses. These are losses that result from a third party bringing a claim against the business. It typically covers costs related to:
- Paying customers affected by the breach
- Settling claims and paying legal expenses relating to disputes or lawsuits
- Litigating and responding to regulatory inquiries
- Forensic accounting costs
How to Buy Cyber Insurance
Most major commercial insurance carriers offer cyber insurance coverage, so reach out to your agent or broker to get a quote.
Following a few IT security best practices can reduce your risk and improve your chances of getting coverage at an affordable price. Those best practices include:
- Requiring strong, unique passwords and multi-factor authentication on any network or system that can be accessed remotely.
- Ensuring your company has backups of all crucial systems and databases.
- Regularly installing software updates on all devices, applications, and networks.
- Educating employees about basic cybersecurity and how to spot common schemes.
- Having a secure, encrypted WiFi network and ensuring employees working from home encrypt their networks.
As technology evolves, so will your exposure to various types of cyber-risks. While cyber insurance coverage can be a critical part of managing those risks, it doesn’t replace security best practices. Take the necessary steps to protect your business to a better chance of minimizing your exposure.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.