Published: February 2015
If your small business is moving to mobile payments, digital data storage or online transactions, you may be more concerned than ever about the threat of a data breach. And for good reason: If sensitive customer or employee information were stolen from your company, the financial effects could be significant.
According to a recent study by the Ponemon Institute, companies hit by a data breach in 2013 paid an average of $201 per customer or employee to resolve identity theft concerns.
Data compromise coverage, which can be added onto your business insurance policy, can help reimburse your company for expenses related to a data breach.
Think your small business isn’t susceptible to a data breach? Even if you have a state-of-the art system for safeguarding customer and employee information, your company's data could still be compromised in a number of ways, according to the nonprofit Privacy Rights Clearinghouse. For instance:
- A computer virus or phishing attack could damage your computer system and open it up to hackers.
- A worker could improperly dispose of customer or employee records containing personally identifying information (PII).
- An employee’s work laptop or smartphone containing customer or employee PII could be lost or stolen from her luggage while traveling.
Of course, the best way to prevent a data breach is to create a company policy for handling sensitive, personal information and to train employees in proper “data hygiene” procedures, according to the Federal Trade Commission (FTC). If a data breach occurs despite your best efforts, however, data compromise coverage can help you respond to the crisis.
Most U.S. states now require companies to notify individuals if a data breach may have compromised their personal information, according to PRC. Compromised information could include Social Security, driver’s license or passport numbers; financial information; or digital signatures. Federal laws also require institutions to notify individuals if personal health information has been compromised, says the PRC.
According to the Insurance Information Institute (III), data compromise coverage can help reimburse your company for expenses related to notifying individuals affected by the data breach.
Data compromise coverage may also help reimburse your company for the following expenses, up to your policy limits, according to the III:
- Informational materials for affected customers or employees
- Credit monitoring services for affected customers or employees
- Access to an identity theft help line if customer or employee information is stolen
- Legal fees after a data breach
Get in touch with your business insurance agent to learn more about the about the coverage options available for your business.