Protecting What Matters: Cyber Insurance for Small and Mid-Sized Businesses

It’s easy for small to mid-sized businesses to believe they’re flying under the radar of cybercriminals. After all, with giants like Target, Equifax, and Colonial Pipeline dominating the headlines after major breaches, why would hackers waste their time on a business with a fraction of the revenue and staff? The reality, however, is far more concerning. 

Small and mid-sized businesses (SMBs) are increasingly in the crosshairs of cyber attackers, and the fallout from an attack can be devastating. According to the 2024 Verizon Data Breach Investigations Report, the average cost of a breach for a small business ranges from $100,000 to $1.24 million. Yet, many remain uninsured and unprepared. 

In this post, we’ll explore why SMBs are increasingly targeted, what makes them vulnerable, and how cyber insurance can serve as a critical layer of protection. 

Why Cyber Criminals Target Smaller Businesses

Despite being smaller in size, these businesses are often more exposed than they realize. Cybercriminals know that small and mid-sized companies may not have the same defenses as large corporations—and they’re betting on that vulnerability. Here’s why SMBs continue to be prime targets: 

1. Lack of Cybersecurity Infrastructure: Many SMBs lack the advanced cybersecurity systems that larger enterprises have in place, making them easier targets. 

2. Human Error: Smaller teams mean fewer formal training programs and more opportunities for phishing attacks to succeed. 

3. Valuable Data: SMBs still store personal, financial, and business-critical data—the same kind of data that attackers seek from large enterprises. 

4. Gateway to Larger Targets: Some SMBs act as vendors or subcontractors to larger firms. Breaching a smaller business can give hackers access to enterprise networks. 

The Cost of a Breach for a Small Business

According to the IBM Cost of a Data Breach Report 2023, the average data breach cost for small businesses (under 500 employees) was $3.31 million. While the average may vary by industry, even a fraction of that can be devastating for a small firm. 

Small businesses often lack the financial buffer to absorb these costs. The expenses range from data restoration and legal fees to customer notification and public relations recovery. 

Common Attacks Against SMBs

Cybercriminals don’t always need sophisticated tools or extensive planning to break into your systems—sometimes, all it takes is a single click on a malicious email. Understanding the most common types of cyber attacks can help your business identify vulnerabilities and implement preventative measures before damage is done. Here’s a closer look at three of the most prevalent attack methods that target small and mid-sized businesses: 

• Phishing Emails: These are deceptive emails that appear to come from a trusted source—such as a colleague, vendor, or bank—but are designed to trick recipients into revealing sensitive information or clicking malicious links. Attackers may ask for login credentials, request fake invoices to be paid, or direct users to counterfeit websites that install malware. 

• Ransomware: Ransomware is a type of malicious software that encrypts a victim’s files or systems, rendering them inaccessible. The attacker then demands a ransom—usually in cryptocurrency—to unlock the data. Even if the ransom is paid, there’s no guarantee that access will be fully restored, and the business can still face significant downtime and data loss. 

• Business Email Compromise (BEC): In a BEC attack, cybercriminals gain access to a business email account—often through phishing or weak passwords—and use it to impersonate a high-level executive or trusted vendor. They then send convincing emails authorizing wire transfers or requesting sensitive data, causing financial and reputational harm to the business. 

How Cyber Insurance Protects SMBs

Even with the best cybersecurity tools and employee training in place, no defense is foolproof. That’s where cyber insurance becomes a vital part of your business’s risk management strategy. It acts as a safety net, helping you recover quickly and affordably when a cyber incident does occur. Here’s what a comprehensive cyber insurance policy can help cover: 

• Data breach response 

• Business interruption 

• Legal expenses and regulatory fines 

• Ransomware payments and negotiations 

• Notification costs and credit monitoring for affected customers 

The right policy also gives you access to expert vendors, including cybersecurity firms, legal counsel, and PR specialists to manage the fallout. 

Taking Action: What You Can Do Today

Knowing the risks is only half the battle—taking proactive steps to protect your business is what really makes the difference. Cybersecurity may feel overwhelming, but you don’t need to be a tech expert to make meaningful changes. Here are practical, manageable actions you can take right now to strengthen your business’s cyber resilience: 

1. Evaluate Your Risk: Conducting a cyber risk assessment should be your first step. This can include reviewing your data storage practices, software systems, employee access controls, and vendor relationships. BakerHopp offers tailored risk assessments that help identify weak points and provide actionable insights to mitigate those risks. 

2. Train Your Team: Human error continues to be the most common entry point for cyber attacks. Implement regular cybersecurity training for employees, including recognizing phishing emails, secure password practices, and properly reporting suspicious activity. You can even simulate phishing attacks to test your team’s awareness in real time. 

3. Enforce Multi-Factor Authentication (MFA): One of the easiest ways to enhance security is to require MFA for all user logins, especially for email, financial platforms, and file-sharing tools. MFA makes it significantly harder for cybercriminals to gain unauthorized access—even if they have your password. 

4. Backup Your Data Regularly: Ensure that your business performs regular, automated backups of all critical data, both on-site and in the cloud. Test your backup systems periodically to confirm that you can restore data quickly and accurately in case of a breach or system failure. 

5. Update Your Software and Hardware: Unpatched systems and outdated hardware are low-hanging fruit for cybercriminals. Create a maintenance schedule that ensures regular updates and upgrades across all devices and platforms. 

6. Review Existing Insurance Coverage: Many business owners assume their general liability or property insurance will cover cyber events, but that’s rarely the case. Review your policies to understand what is and isn’t covered. A stand-alone cyber liability insurance policy can fill those critical gaps. 

7. Talk to an Expert: Every business has unique exposures based on its size, industry, and digital infrastructure. Schedule a conversation with an experienced BakerHopp advisor who can recommend a cyber insurance solution tailored to your needs. From data recovery to regulatory fines, they’ll help ensure you’re prepared for whatever may come. 

8. Create an Incident Response Plan: If a cyber attack were to occur tomorrow, would your team know what to do? An incident response plan outlines the specific steps to take in the first hours and days after a breach. Include roles and responsibilities, communication strategies, and points of contact for legal, IT, and insurance teams. 

Final Thoughts: Don’t Wait to Take Cyber Seriously

No business is too small to be targeted. In fact, it’s precisely this false sense of security that cybercriminals exploit. Understanding your vulnerabilities and investing in a strong cyber insurance policy can significantly reduce the risks and help you recover faster if the worst happens. Contact BakerHopp’s coverage experts today to review your coverage and ensure you have the right level of coverage should you find yourself becoming a target. 

Cyber threats may be growing, but so are the tools and strategies to protect your business. Taking even small proactive steps today can dramatically reduce the likelihood and severity of an attack tomorrow.