Businesses are no more immune to disaster than individuals are. That’s why organizations opt for insurance such as property, workers compensation and business disruption coverage. But, one of the most damaging events a business can experience is the loss or theft of sensitive information. This may be proprietary information about the organization itself, or personal details about its customers. Either way, a data breach can cause millions of dollars in damages.

It’s no wonder then, that businesses are talking more about data breach insurance. This coverage is designed to provide businesses with compensation for legal costs and other expenses incurred in the aftermath of a data breach, such as identifying the source of the leak and notifying those whose information may have been compromised.

But at the same time, insurance should not be considered a replacement for adequate preparation and security. You should already have other security measures in place. In fact, many businesses are subject to regulations that mandate security—for instance, some regulations require encryption of sensitive information, greatly reducing the losses when incidents do occur.

If your security measures are less than robust, however, consider for a moment what damage would be done if your customers’ personal information was exposed through a data breach. The insurance would help with some of the costs, such as contacting your customers to make them aware of the problem. But there’s more at stake than court fees and downtime of your network. The loss of trust is one thing that can’t adequately be measured or accounted for by an insurance policy. Once your customers feel betrayed, they will immediately look to your competitors, and they’ll tell their friends to do the same. This abnormal customer churn is the number one cost associated with a data breach, according to the U.S. Cost of a Data Breach study.

While the CFO may ask ‘wouldn’t insurance be cheaper,’ the organization needs to look at the cost of a data breach in terms of customer churn – in this case, mitigating the risk of a data breach is the better choice. Your best bet, then, is to ensure that you do everything you can to prevent such a breach from ever happening in the first place.

In order to protect your organization from data breaches that are becoming all too common these days, consider the following preventive measures.

• Assess risks by identifying and classifying confidential information
• Educate employees on information protection policies and procedures, then hold them accountable
• Implement an integrated security solution that includes reputation-based security, proactive threat protection, firewall and intrusion prevention in order to keep malware off endpoints
• Deploy data loss prevention technologies which enable policy compliance and enforcement
• Proactively encrypt laptops to minimize consequences of a lost device
• Implement two factor authentication
• Integrate information protection practices into businesses processes

These common sense measures will help reduce your chances of losing sensitive corporate information. With the right preparation, you may never have to find out just how effective data breach insurance actually is.