The surge in cyberattacks (up 600% since 2020) has made one thing crystal clear: cyber insurance isn’t just another business expense—it’s a crucial shield for your company’s future. But what exactly is cyber insurance, and what does your business need to qualify? Let’s break it down.
What is cyber insurance?
Cyber insurance (also called cyber liability insurance) protects your business from financial losses caused by digital threats. Think of it as a safety net for when things go wrong in the digital world—from data breaches to ransomware attacks. Considering that 60% of small businesses close within six months of a cyberattack, insurance can mean the difference between recovery and closure.
First-party vs. third-party cyber insurance
Cyber insurance coverage typically falls into two main categories:
First-party coverage
This protects the insured company from direct expenses incurred due to a cyber incident, such as:
- Costs of forensic investigations.
- Data recovery and system repair.
- Business interruption losses.
- Crisis management expenses.
- Notification costs for affected customers.
Third-party coverage
This addresses liabilities and legal expenses related to claims made against the insured company, including:
- Regulatory defense expenses and fines.
- Litigation expenses.
- Settlements or damages resulting from lawsuits.
What does cyber insurance not cover?
Before relying on your cyber insurance policy, understand what it won’t cover. Here’s a quick guide to common exclusions:
| Category | What’s excluded | Recommended instead |
|---|---|---|
| Physical impact | • Bodily injury • Property damage • Equipment failure |
General liability or property insurance. |
| Security compliance | • Incidents due to missed updates • Failures to maintain security • Unimplemented required measures |
Documented security protocols and regular compliance checks. |
| External events | • Acts of war • Terrorism • Infrastructure failures |
Ask about “electronic terrorism” coverage add-ons. |
| Legal issues | • Patent/copyright claims • Contract disputes • Regulatory fines |
Specialized IP insurance or legal liability coverage. |
| Internal risks | • Known prior issues • Intentional employee acts • Lost/stolen devices |
Strong security policies and device management. |
| Improvements | • System upgrades • Security enhancements • Technology modernization |
Separate IT improvement budget. |
Key takeaways
- Review your exclusions annually and match them with other insurance coverage.
- Document all security measures to ensure claims aren’t denied.
- Consider additional coverage for critical gaps.
- Maintain strict security protocols and employee training.
Cyber insurance minimum requirements
Insurance providers have tightened their requirements as cyberthreats evolve. Here are the must-haves before you can get coverage:
1. Multifactor authentication (MFA)
This isn’t optional anymore—it’s a standard requirement. MFA adds an extra security layer by requiring multiple verification steps for system access.
2. Endpoint detection and response (EDR)
Think of EDR as your digital security guard, constantly monitoring every device connected to your network for suspicious activity.
3. Backups
Your critical data needs a secure, offline home. Regular backups stored separately from your main network are non-negotiable for most insurers.
4. Incident response plan
You need a documented strategy for handling cyber incidents. This plan should outline:
- Detection procedures
- Response protocols
- Recovery steps
- Team responsibilities
5. Network security controls
Basic security measures aren’t enough. You’ll need:
- Advanced firewalls
- Intrusion detection systems
- Regular security audits
- Continuous monitoring
6. Employee Training
Regular cybersecurity training helps prevent the most common vulnerability: human error.
How to lower your cyber insurance premiums
With premiums up 79% in recent years, here’s how to keep costs manageable while maintaining strong protection:
1. Partner with security experts
Who will you call if a breach does happen? Do you have a way to mitigate any damage and fix any exploited vulnerabilities rapidly?
If your firm or small business isn’t working with an outside partner to create an incident response plan, this is a good step to take to try to lower your premium. And, while you’re considering threat mitigation, make sure you have an ongoing monitoring service led by experts in place. This type of service helps prevent an incident in the first place without relying on your limited internal technology resources.
2. Create a culture of security
According to Verizon’s 2024 Data Breach Investigations Report, 68% of data breaches involved “a non-malicious human element, like a person falling victim to a social engineering attack or making an error.” Training staff on avoiding new and emerging types of attacks on a monthly basis reduces your business’s chance of experiencing a cybersecurity breach.
“68% of breaches involved a non-malicious human element, like a person falling victim to a social engineering attack or making an error.” Verizon’s Data Breach Investigations Report, 2024
3. Strengthen data protection
Having access to a separate, third-party backup service—something that provides full, searchable and granular data backup capabilities—is essential.
While many cloud application providers will offer some level of data replication as part of their service, it’s important to have your data fully backed up by a dedicated provider to ensure ongoing access to your data. Replication is not the same as having full backups.
4. Test your security posture annually
Regular security assessments are crucial for both reducing premiums and strengthening your overall security posture. Working with security consultants to conduct annual reviews can help identify new opportunities for premium reduction while building a stronger security culture.
Many cybersecurity firms offer free initial assessments to help businesses understand their vulnerabilities and develop more comprehensive protection strategies.
The bottom line
The question isn’t whether you need cyber insurance—it’s how to get the right coverage at the right price. By meeting the minimum requirements and implementing strong security measures, you’re not just qualifying for better insurance rates; you’re building a more resilient business.
Get your free security assessment today by contacting an account executive at 888.245.0292.