What Every Small Business Should Know About Cyber Insurance

You have cyber insurance. But would your business actually be ready to make a claim?

Cyber insurance has become an important part of risk management for many small businesses. A policy may help a business respond financially to certain cyber incidents, depending on its terms and coverage.

But there’s something every business owner needs to understand:

Cyber insurance is not a replacement for cybersecurity.

Insurance carriers increasingly want to understand what security measures businesses have in place before issuing or renewing coverage. And if your application says certain protections are being used, you need to make sure those protections are actually implemented and maintained.

Here’s what small businesses should know.

What Is Cyber Insurance?

Cyber insurance is designed to help businesses manage certain financial risks associated with cybersecurity incidents.

Depending on the policy, coverage may address costs associated with events such as:

• Data breaches

• Ransomware attacks

• Business interruption

• Incident response

• Data recovery

• Legal expenses

• Notification expenses

• Certain forms of cybercrime

Exactly what is covered—and under what circumstances—varies significantly between policies.

That's why your insurance agent or broker should be your resource for questions about your specific coverage.

From an IT perspective, our concern is different:

Does your technology environment actually have the cybersecurity protections your business says it has?

Why Cyber Insurance Applications Ask So Many IT Questions

If you've completed a cyber insurance application recently, you may have noticed that the questions have become fairly detailed.

You may be asked whether your business uses:

• Multi-Factor Authentication (MFA)

• Endpoint protection

• Email security

• Secure backups

• Employee security awareness training

• Vulnerability management

• Regular software patching

• Network security controls

• Restricted administrative privileges

These aren't random questions.

They're designed to help the insurer understand your organization's cybersecurity posture and risk.

And that's where having a knowledgeable IT partner becomes particularly valuable.

1. Multi-Factor Authentication Is Critical

We've discussed MFA before, and cyber insurance is another reason businesses should take it seriously.

A password alone may not be enough to protect an account.

MFA adds another verification step, which can make it significantly more difficult for an attacker to access an account using stolen credentials.

Businesses should consider MFA particularly important for systems such as:

• Microsoft 365

• Remote access

• Administrative accounts

• Cloud applications

• Financial systems

• Password managers

Simply having MFA available isn't necessarily the same as having it properly deployed.

Your business should know which accounts are protected and whether any important gaps remain.

2. Backups Need to Be More Than a Checkbox

Having a backup system is important.

Knowing that you can actually recover from it is even more important.

If ransomware encrypts your business data, your backups could become one of your most valuable recovery tools.

A good backup strategy should consider:

• What data is being backed up

• How frequently backups occur

• How backups are protected

• Whether backup systems are isolated appropriately

• How long data is retained

• How quickly data can be restored

• Whether restores are regularly tested

The question isn't simply:

“Do we have backups?”

A better question is:

“Could we successfully recover our business if we needed them tomorrow?”

3. Email Security Matters

Email remains one of the most common ways attackers attempt to reach employees.

Phishing emails may be designed to steal passwords, convince someone to transfer money, install malware, or impersonate an executive or vendor.

Businesses should use appropriate email security protections alongside employee education.

Microsoft 365 security settings should also be reviewed rather than assuming default configurations provide everything your organization needs.

4. Endpoint Protection Needs to Cover the Business

Every computer connected to your environment represents another potential entry point.

Modern endpoint security can help detect and prevent malicious activity on workstations and servers.

But businesses also need to ask:

Is every company device actually protected?

That forgotten laptop sitting in a conference room matters.

So does the computer in the warehouse that nobody has thought about in three years.

Cybersecurity works best when protection is consistent across the entire organization.

5. Unsupported and Unpatched Systems Create Risk

This connects directly to our previous article.

Software vendors regularly release security updates to address newly discovered vulnerabilities.

If computers and applications aren't being patched—or they're running software that is no longer supported—those vulnerabilities may remain open.

Your business should have a process for keeping these items supported and updated:

• Operating systems

• Business applications

• Browsers

• Servers

• Network equipment

• Firewalls

If something can't be updated, there should be a plan for addressing the risk.

6. Employee Cybersecurity Training Matters

Your employees are an important part of your cybersecurity strategy.

Even excellent security technology can't prevent every employee from clicking every malicious email.

Security awareness training can help employees recognize:

• Phishing emails

• Fake Microsoft login pages

• Suspicious attachments

• Business email compromise

• Password attacks

• Social engineering attempts

Employees should also know what to do when something looks suspicious.

Reporting a questionable email quickly can make a significant difference.

7. Be Accurate on Your Cyber Insurance Application

This is one of the most important points in this article.

When completing a cyber insurance application, businesses should answer questions carefully and accurately.

Don't assume a security feature is enabled.

Verify it.

For example, there's an important difference between:

“Microsoft 365 supports MFA.”

and:

“MFA is enforced for the appropriate users in our Microsoft 365 environment.”

If you're unsure about a technical question on an insurance application, ask your IT provider to verify the answer before submitting it.

For questions about what the insurer is asking or how an answer affects coverage, talk with your insurance professional.

8. Don't Forget About Security After the Policy Is Issued

Getting the policy shouldn't be the end of the conversation.

Your business technology changes throughout the year.

You may:

• Hire employees

• Add cloud applications

• Replace computers

• Change vendors

• Add remote workers

• Open another location

• Upgrade network equipment

Your cybersecurity controls need to evolve with those changes.

This is another reason regular IT and cybersecurity reviews are important.

What Happens During a Cyber Incident?

If a serious incident occurs, resist the temptation to start making major changes without guidance.

Your cyber insurance policy may have specific requirements for reporting an incident and may provide access to approved incident-response professionals, legal counsel, forensic specialists, or other resources.

Your response plan should identify who needs to be contacted and in what order.

Having that plan before an emergency is far better than trying to figure it out during one.

Cyber Insurance + Cybersecurity

Think about cyber insurance and cybersecurity as two different parts of risk management.

Cybersecurity helps reduce the likelihood and impact of an incident.

Cyber insurance may help manage certain financial consequences if an incident occurs, subject to your policy.

Neither replaces the other.

A stronger strategy uses both appropriately.

How Black Dog IT Solutions Can Help

At Black Dog IT Solutions, we help small businesses understand and improve the technology controls protecting their organizations.

We can help review areas such as:

• Multi-Factor Authentication

• Microsoft 365 security

• Endpoint protection

• Email security

• Backup and recovery

• Patch management

• Firewall and network security

• Employee security awareness

• Aging or unsupported technology

If you're completing or renewing a cyber insurance application, we can also help verify the technical facts about your IT environment so you can discuss them accurately with your insurance professional.

We don't determine what coverage you need or interpret your insurance policy—that's a conversation for your insurance agent, broker, or other qualified professional.

Our job is to help make sure you understand the technology protecting your business.

Would Your Business Be Ready?

Cyber insurance is valuable, but purchasing a policy shouldn't create a false sense of security.

Ask yourself:

If we experienced a cyberattack tomorrow, would our security controls, backups, employees, IT provider, and response plan be ready?

If you're not confident in the answer, it's worth finding out now.

Contact Black Dog IT Solutions to schedule a cybersecurity assessment and make sure your business has the technology protections it needs.