In today’s digital economy, cyber-risks aren’t just a concern for large enterprises. A single incident—whether it’s a ransomware attack, data breach, or extended system outage—can cost a business thousands or even millions of dollars in lost revenue, legal fees, and reputational damage. According to IBM, the average cost of a data breach globally is USD 4.44 million
That’s where cyber insurance comes into play. In this post we’ll break down what cyber insurance is, who should consider it, what kinds of incidents it typically covers (and doesn’t), and how you can make sure your business qualifies and stays covered.
What is cyber insurance?
Cyber insurance (also called cyber liability or cyber risk insurance) is a policy that helps organizations shoulder the financial losses from incidents like ransomware, data breaches, and other cyber events—costs that traditional property or general liability policies usually don’t cover.
Think of it as a financial safety net after an incident, not a replacement for robust cybersecurity. It’s important to remember that insurance complements—rather than substitutes for—sound cyber risk management
Who needs it?
If you rely on digital systems, store customer/employee data, take payments, or depend on vendors and cloud services, cyber insurance is relevant. Heavily regulated industries and any business with sensitive data face higher exposure and stronger compliance needs.
- Small & Mid-Sized Businesses – Often perceived as “too small to target,” many small companies are actually prime targets for cybercriminals because their defenses are weaker and response plans less mature (CrowdStrike).
- Businesses in Regulated Industries – If your company handles sensitive data — such as healthcare, financial services, legal, or education — or must comply with standards like PCI, HIPAA, or GLBA, the risk of fines, litigation, and reputation damage is far higher.
That makes cyber insurance not just recommended, but essential (Fortinet).
What Does Cyber Insurance Cover?
Coverage varies by carrier and policy, but most cyber insurance includes two main categories: first-party coverage (your own losses) and third-party coverage (liability to others) (CrowdStrike).
Common First-Party Coverages
These cover the direct costs your business incurs after a cyber incident.
- Incident response & forensics to investigate and contain an attack.
- Legal counsel & regulatory guidance to comply with data breach laws and reporting requirements.
- Customer notification & credit monitoring if personally identifiable information (PII) is exposed.
- Cyber extortion or ransomware payments, where permitted by law and policy.
- Business interruption coverage for lost income and recovery costs while systems are down.
Common Third-Party Coverages
These apply when others—such as clients, partners, or regulators—are affected by your breach.
- Liability to customers or vendors for compromised data.
- Regulatory fines and penalties, depending on policy terms.
- Media, privacy, or defamation claims related to the incident.
What’s Not Covered (or Often Limited)
Not every cyber risk is included in a standard policy. Some areas may be excluded, restricted, or require add-ons, so it’s important to review the fine print with your broker.
- Known but unpatched vulnerabilities or negligent security practices
- Acts of war or state-sponsored attacks, which many insurers exclude or contest
- Social engineering or business email compromise (BEC), often covered only under separate or sub-limited terms
- Non-malicious outages or third-party service failures, which may fall outside policy definitions of a “cyber event.”
- How to make sure you’re actually covered (and claims don’t get denied)
How to make sure you’re actually covered (and claims don’t get denied)
Insurers increasingly require proof of controls up front and at renewal. Build these into your baseline:
Implement foundational control
- Multi-factor authentication (MFA) for users/admins
- Endpoint detection & response (EDR)
- Vulnerability/patch management
- Tested, offline/immutable backups and a disaster recovery plan
Assess and document your posture
Perform a security assessment and keep evidence (policies, screenshots, reports) to streamline underwriting and renewals.
Choose the right policy
Not all cyber insurance policies are the same — coverage amounts and fine print can vary widely.
When comparing options, make sure the policy matches your business needs by paying attention to:
- Coverage limits – the maximum amount your insurer will pay for a claim.
- Sub-limits – smaller caps for specific types of incidents, like ransomware or phishing scams.
- Exclusions – what isn’t covered, such as unpatched software or weak security controls.
Maintain controls over time
Don’t let MFA lapse or backups go untested. Weakening controls can impact renewals—or claims.
Have an incident response plan
Define roles, outside counsel, forensics, and communications in advance. Insurance helps fund response; your plan speeds recovery.
Quick checklist before you bind or renew
- MFA enforced for all users/admins and remote access
- EDR deployed and monitored on endpoints/servers
- Critical vulnerabilities patched within defined SLAs
- Backups: versioned, encrypted, off-network—and tested
- Email security and user awareness training (phishing/BEC)
- Documented incident response & disaster recovery plans
- Vendor risk/contract language reviewed (notification, liability)
(These are common control expectations in underwriting guides and can materially affect premiums and eligibility.)
Bottom line
Cyber insurance is an essential financial backstop—but it only protects what you’ve prepared for. Pair strong, verifiable controls with a policy tailored to your risks so you’re both protected and insurable.
Not sure if your business would qualify today?
CMIT Solutions of Northern Westchester & Putnam can perform a fast readiness check—verifying MFA, endpoint security, and recovery plans—so you know where you stand before renewal. Schedule a free consultation today or call us at (203) 443-1646
