Do I Need Cyber Insurance to Work with the DoD?

If your manufacturing company is considering or already working with the U.S. Department of Defense (DoD), you might have heard about the importance of cybersecurity and insurance. But do you really need cyber insurance to do business with the DoD? The answer isn’t always straightforward, so let’s break it down in plain language.

Understanding the DoD’s Cybersecurity Requirements

The DoD has specific cybersecurity standards your business must meet, especially if you’re handling sensitive or classified information. One key requirement is compliance with the Cybersecurity Maturity Model Certification (CMMC). This is a framework that sets cybersecurity practices and processes you need to implement, depending on the level of data involved.

However, the CMMC doesn’t directly mandate businesses to carry cyber insurance. Instead, it focuses on controls, practices, and risk management. But that doesn’t mean insurance isn’t important.

Why Consider Cyber Insurance?

Cyber insurance is a policy that helps protect your business financially if you suffer a cyber attack, data breach, or other digital security incident. For small to mid-sized manufacturers, a single breach could mean hundreds of thousands of dollars in damages—covering data recovery, legal costs, customer notification, and even business interruption.

Does the DoD Require Cyber Insurance?

While the DoD itself doesn’t explicitly require cyber insurance in most contracts, it’s becoming a common expectation in the defense supply chain. Many prime contractors and government programs now look for vendors who have cyber insurance, especially as part of their risk mitigation strategies.

In some cases, your contract might specify that you need to have a certain level of cyber coverage or demonstrate that you’re managing your cyber risks effectively. For example, contracts engaging with critical infrastructure or high-value data often come with such stipulations.

Key Reasons Why Having Cyber Insurance Is a Good Idea

• Financial protection: Cover costs associated with data breaches, ransom demands, or cyberattacks.

• Contract eligibility: Meet client requirements, especially when working with the DoD or government contractors.

• Risk management: Show your commitment to cybersecurity and risk mitigation.

• Business continuity: Minimize downtime and protect your reputation after an incident.

How to Decide if You Need Cyber Insurance

1. Review your contracts: Check if your DoD contracts or potential contracts mention cyber insurance coverage.

2. Assess your cybersecurity maturity: Are you meeting CMMC requirements? The more sensitive your data, the higher your risk—and the more you should consider cyber insurance.

3. Evaluate your risks: Do you store or transmit sensitive data? Are your manufacturing systems connected to the internet? These factors influence the likelihood and impact of a breach.

4. Consult with experts: Talk to cybersecurity and insurance professionals who understand defense contracting.

Next Steps for Small Manufacturers

1. Strengthen Your Cybersecurity

Meeting the basic requirements of CMMC (or NIST 800-171) is fundamental. Implement strong password policies, keep software updated, train staff, and document your cybersecurity practices.

2. Consider Purchasing Cyber Insurance

Work with a trusted insurance broker who understands your industry. They can help you find a policy that covers your specific risks, including data breaches, business interruption, and third-party liabilities.

3. Keep Documentation Ready

Have records of your cybersecurity practices, risk assessments, and compliance efforts ready for audits or contract reviews.

Summary

While the DoD doesn’t require cyber insurance outright, having it can be a critical part of your overall cybersecurity and risk management strategy. It demonstrates to the government and your clients that you are serious about protecting sensitive data and managing potential threats.

As you prepare to work with the DoD, focus on meeting cybersecurity standards first. Then, consider cyber insurance as an additional layer of protection that can save your business from the financial fallout of a digital incident.

For more information, visit the Cybersecurity Maturity Model Certification Accreditation Body (CMMC-AB) and consult with specialized insurance providers who understand defense industry requirements.

Stay Informed, Stay Protected

Cyber threats are constantly evolving, and so are the requirements for working with government agencies. Keep yourself informed, invest in good cybersecurity practices, and don’t overlook the value of cyber insurance. It’s not just a policy; it’s peace of mind for your business and your customers.