In 2024, the U.S. Small Business Administration warned small businesses and entrepreneurs to stay aware of cyber security threats due to the impact on their bottom line (and resiliency).1

Cybersecurity is no longer a “nice-to-have” for small businesses—it’s a necessity. The digital age has brought countless benefits but also significant risks, especially for businesses operating online or storing sensitive data. Cyber insurance offers the safety net small business owners need to survive and thrive in this fast-changing landscape.

According to a report by Tulsa University, 41% of small businesses fell victim to a cyber-attack in 2024.2 The types of attacks vary, and some are more costly than others. For example, the average data breach cost for small businesses (fewer than 500 employees) is $2.98 million (IBM and the Ponemon Institute).3 This high cost leads to roughly 60% of small businesses folding within 6 months of a cyberattack.4

This blog dives into how small businesses can evaluate their need for cyber insurance, the common cyber risks they face, and how they can prepare for the evolving threats of the future.

Does My Small Business Need Cyber Insurance?

Wondering if cyber insurance is necessary for your small business? Start by asking yourself these questions to assess your risk level:

  • Do you collect or store personally identifiable information (PII), like customer names, addresses, or credit card information?
  • Do you maintain digital files, databases, or financial records sensitive to breaches?
  • Does your business use cloud-based services, email, or other digital platforms to conduct daily operations?
  • Do you rely on multimedia, including videos, marketing content, or brand assets, that could expose you to copyright risks?
  • Would downtime caused by a cyberattack impact your ability to deliver services or generate revenue?

If you answered yes to any of these questions, cyber insurance is a critical layer of protection for your business.

Related Resource

To better understand how handling PII could make your business vulnerable, check out Thimble’s guide to [personal identifiable information (PII).

Why Does My Small Business Need Cyber Insurance?

Think cyberattacks only happen to big corporations? Think again. Small businesses are prime targets because they often lack robust cybersecurity measures. Consider these common (and rising) cybercrimes and how cyber insurance can help mitigate their impacts.

Most people in the US recall the massive cyber-attack on AT&T in 2024 that compromised the data of 73 million current and former customers.

1. Ransomware Attacks

Ransomware encrypts a company’s data, holding it hostage until a ransom is paid. When a hacker successfully targets files and encrypts them while they wait to be paid, businesses are put in a rock and a hard place (to put it lightly). Forced to decide between losing critical data or shelling out a large sum, both outcomes result in a loss of customer trust that could be devastating in the long run. Cyber insurance would cover ransom payments and data recovery efforts. From BlackCat to MedusaLocker, you can read more about 26 mainstream examples of recent ransomware attacks here.

2. Phishing Scams

Phishing schemes are crafted to deceive employees into revealing sensitive information, posing a significant threat to businesses. These scams often target small business owners through fraudulent emails or links disguised as legitimate. By falling for these tactics, you may unknowingly share confidential details or grant hackers access to your financial data. Cyber insurance plays a vital role in mitigating the impact, offering essential support to help you recover from the financial damage caused by such attacks.

3. Data Breaches

A single breach can expose customer PII, resulting in lawsuits and reputational damage. Businesses storing sensitive client details are at risk if their systems are compromised. Cyber insurance helps mitigate these liabilities and covers costs like PR crisis management.

A quick scan of the Breach Portal hosted by the US Department of Health and Human Services Office for Civil Rights shows that most cases currently under investigation for breaches of unsecured protected health information are caused by hacking/IT incidents.

4. False Payroll or Employees

A car dealership in Kansas, Green Ford Sales, experienced a loss of $23,000 that could’ve been a lot worse when hackers broke into their network and added 9 fake employees to the company’s payroll before it was caught by a (real) employee. Hackers managed to pay out $63,000 and only $40,000 was recovered.6

5. Copyright/Trademark Issues

Multimedia liabilities, such as unintentional copyright infringement, can lead to significant financial and legal consequences for businesses. These issues often arise when using images, videos, music, or other media without proper licensing or permissions, even if the infringement was accidental.

The costs associated with resolving such cases, including legal fees, settlements, and potential fines, can quickly escalate and place a heavy burden on companies. Cyber insurance provides a safety net by covering these expenses, ensuring that businesses are protected from the financial strain of lawsuits while allowing them to focus on their operations without fear of unexpected liabilities.

6. Malware Attacks

Malware incidents can be extremely costly attacks, sometimes causing a business to shut down altogether. This was the case for Efficient Escrow of California, which fell victim to a Trojan horse malware attack, allowing cybercriminals to steal $1.5 million from their accounts. Although a portion of the funds was recovered, the company still suffered a $1.1 million loss.

With banks under no obligation to recoup losses from cyber theft against commercial accounts, the financial blow was devastating. Unable to recover, the company was forced to shut down and lay off its entire staff. This case underscores the severe impact cyber-theft can have on businesses and highlights the importance of cyber insurance in protecting against such catastrophic losses.6

The Future of Cyber Insurance

Cybercrime tactics evolve as swiftly as technology itself. Here’s a glimpse of what small businesses might face in the near future—and how to prepare.

1. AI-Powered Threats & Advantages

Hackers increasingly use AI to craft convincing phishing emails, automate attacks, and bypass traditional security systems. From impersonating decision makers to scaling phishing communications, the dark side of AI is coming to light.

While AI can be the enemy, AI can also help improve cyber security’s accuracy, speed and productivity. According to IBM, AI tools that serve small businesses aid in cyber security by helping to prevent threats using data modeling and data abnormalities to alert and triage, reducing costs by up to 90%.7

Businesses should invest in updated cybersecurity tools, including endpoint detection and response (EDR) platforms, to counter this challenge.

2. Internet of Things (IoT) Vulnerabilities

IoT devices are everywhere, from smart thermostats to wireless payment systems. These gadgets expand the “attack surface” for hackers since they are often less secure than primary IT systems. Protecting IoT networks requires rigorous password protocols and firm device management processes.

IoT introduces a new level of vulnerabilities (think interconnected devices and sensitive data) with weak security. This requires an intentional focus on device management, data privacy compliance, and keeping firmware and software updated, in addition to cyber insurance coverage.

3. Supply Chain Attacks

Sophisticated hackers infiltrate businesses indirectly via vendor or partner networks. Evaluate your supply chain’s cybersecurity measures and require vetted vendors before collaboration. Businesses must tighten controls over third-party access to their systems to prevent exploitation.

At Thimble, we’re always a step ahead. We offer modern cyber insurance policies that evolved to address existing and emerging threats, so your small business remains protected, no matter what the future holds.

Get Protection with Cyber Insurance for Small Businesses from Thimble

By protecting your business financially, legal cyber coverage can mean the difference between recovering from a cyberattack and shutting down for good.

Read the details of what Thimble cyber insurance covers and see how it protects small businesses like yours.

Cyber insurance is no longer a luxury; it’s essential for small business survival in today’s digital-first world. The faster you protect your business, the sooner you can focus on what really matters—running it.

Get a quote

 

Sources:

  1. https://www.sba.gov/article/2024/10/03/entrepreneurs-need-stay-aware-cybersecurity-threats-may-directly-impact-bottom-line
  2. https://online.utulsa.edu/blog/cybersecurity-tips-for-small-businesses/
  3. https://www.ibm.com/think/topics/data-governance
  4. https://www.inc.com/joe-galvin/60-percent-of-small-businesses-fold-within-6-months-of-a-cyber-attack-heres-how-to-protect-yourself.html
  5. https://www.sentinelone.com/cybersecurity-101/cybersecurity/ransomware-examples/
  6. https://syscon-inc.com/stories-from-small-businesses-that-were-attacked/#:~:text=Green%20Ford%20Sales%2C%20a%20car,could%20be%20canceled%20in%20time
  7. https://www.ibm.com/ai-cybersecurity