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How to Best Protect Yourself From Being Liable for Data Breaches

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It’s never been more critical to invest in cybersecurity. Cyber threats are more rampant than ever, with 3.5 billion people having their personal data stolen in the top two biggest breaches of this century alone. This will likely continue to happen, considering how devices and software are becoming more advanced than ever before.

If you’re running a business, not only is it your responsibility to protect your enterprise from a data breach, but you also have to handle any liability that follows. The last thing you want is to lose everything should you fall victim to a hacker.

As stated in our post on ‘5 Cybersecurity Tips That Can Save a New Business‘, it’s crucial to have the right measures in place to ensure that your company is safe and secure.

In this article we present steps you can take to safeguard yourself from any liability as a result of data breaches:

Establish Good Cybersecurity Policies

One of the best ways of protecting yourself from being liable to any data breach is by not allowing data breaches to happen in the first place.

Even if you have the best tools, the most talented IT specialists, and cyber security-conscious employees, notes that it’s still important to lay down the right policies to ensure that everyone is on the same page. When you have the right policies, you can ensure that the appropriate measures are being taken to prevent a data breach.

You can enforce rules like restricting your business data to authorized employees only so you can easily trace who’s responsible in the event of a data breach. A policy that requires antivirus software to be installed on the devices of employees would also help, as this measure ensures hackers won’t gain access to your business data through their personal devices.

Form An LLC

While forming an LLC is not a preventative measure against actual breaches, it does protect you from being personally liable for any consequences of a data breach.

For instance, in October, a Medicaid billing company called Timberline Billing Service LLC, that works with more than 190 schools in Iowa, experienced a data security incident resulting in a breach of students’ personal information, like names, birthdays, Medicaid identification numbers, and even Social Security numbers. But the owners of the company will not be held personally liable for the consequences because of their business structure, which is an LLC.

Even though the rules for forming an LLC can differ depending on your state, the protection remains the same. If considering this structure here in Pennsylvania, or any other state, ZenBusiness outlines how an LLC allows you to keep your personal assets separate from those of your business.

If you undergo something as drastic as a data breach, you are personally protected from any claims or lawsuits linked to your business. By forming an LLC, you’re essentially adding a layer of legal protection between what happens to your business and what happens to you personally. Should any hacker attack your business and cause legal issues you won’t personally face financial ruin.

Invest in Cyber-liability Insurance

With the growing number of cybersecurity threats companies face every day, cyber liability insurance is now less of a luxury and more of a necessity.

In fact, according to data curated by Help Net Security, the take-up rate for cyber insurance continues to climb, with 78% of businesses claiming to have purchased such coverage.

Even in the face of economic difficulties, these companies did not make any cuts on their cyber risk budget and have chosen to seek out more insurance to protect themselves.

If your company communicates with customers electronically, advertises via electronic media, stores data on a computer network, and sells products or services via a website, then it’s well worth to invest in cyber liability insurance. It can protect you against lawsuits filed by customers as a result of a privacy breach, particularly when they allege that you failed to preserve pertinent information stored on your systems.

However, it should be noted that cyber liability policies vary widely. Some include media liability insurance, which also covers claims alleging libel or slander and invasion of privacy. Moreover, all cyber liability policies operate on a claims-made basis.


If you have a business or are starting a new business, then we hope our tips have helped you understand how important it is to be protected from being liable for data breaches.

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