Cyber Insurance Basics
Understanding cyber insurance coverage, what it protects, and how to choose the right policy for your needs.
What is Cyber Insurance?
Cyber insurance is a specialized insurance product designed to help businesses and individuals recover from cybersecurity incidents, data breaches, and other digital threats. It provides financial protection and support services to mitigate the costs associated with cyber attacks.
Who Needs Cyber Insurance?
Small Businesses
Businesses storing customer data, accepting online payments, or relying on technology for operations.
E-commerce
Online retailers handling payment information and customer personal data.
Healthcare Providers
Medical practices handling protected health information (PHI) under HIPAA.
Professional Services
Consultants, attorneys, accountants handling sensitive client information.
First-Party Coverage (Direct Costs)
Data Breach Response
Costs for forensic investigation, legal counsel, public relations, credit monitoring services for affected individuals.
Business Interruption
Lost income and extra expenses when operations are disrupted by a cyber attack or system outage.
Cyber Extortion
Ransom payments, negotiation costs, and related expenses from ransomware or blackmail attacks.
Data Recovery
Costs to restore, recreate, or recover data and systems after an attack or technical failure.
Notification Costs
Expenses for notifying affected individuals and regulatory bodies as required by law.
Third-Party Coverage (Liability)
Privacy Liability
Defense costs and damages from lawsuits alleging failure to protect personal information.
Network Security Liability
Claims arising from virus transmission, denial of service attacks, or unauthorized system access.
Media Liability
Coverage for defamation, copyright infringement, or other content-related claims on your website.
Regulatory Defense
Costs to defend against regulatory investigations and potential fines from data protection violations.
What's Typically NOT Covered?
- Pre-existing security vulnerabilities known before policy inception
- Intentional acts or fraudulent conduct by insured parties
- Intellectual property theft or trade secret loss
- Infrastructure failure (unless caused by cyber attack)
- Betterment costs (system upgrades beyond restoration)
- Reputation loss or loss of future business (unless specifically added)
- Acts of war or terrorism (in some policies)
Choosing a Cyber Insurance Policy
Assess Your Risk Profile
Evaluate data you collect, systems you use, and potential exposure to cyber threats.
Determine Coverage Needs
Calculate potential costs of breach response, business interruption, and legal defense.
Review Policy Limits
Ensure coverage limits are adequate for worst-case scenarios based on your business size.
Understand Deductibles
Balance premium costs with deductibles you can afford in the event of a claim.
Check Sub-Limits
Review sub-limits for specific coverages like cyber extortion or forensics that may be capped.
Compare Providers
Get quotes from multiple insurers specializing in cyber coverage, not just general carriers.
Security Requirements
Most cyber insurance policies require these minimum security controls:
Multi-Factor Authentication
MFA required on all remote access, email, and critical systems.
Regular Backups
Automated, encrypted backups with offline or air-gapped copies.
Endpoint Protection
Updated antivirus/anti-malware on all devices, EDR solutions for larger organizations.
Patch Management
Regular updates to operating systems, applications, and security software.
Email Security
Spam filtering, phishing protection, and email authentication protocols.
Access Controls
Principle of least privilege, regular access reviews, password policies.
Application Process
When applying for cyber insurance, be prepared to provide:
- Detailed information about your IT environment and security practices
- Types and volume of sensitive data you collect and store
- Revenue, number of employees, and geographic locations
- History of previous cyber incidents or data breaches
- Existing security controls, policies, and procedures
- Incident response and business continuity plans
- Third-party vendor security management practices
Cost Factors
Industry
Healthcare, finance, and retail face higher premiums due to sensitive data.
Revenue Size
Larger organizations typically pay higher premiums but may get better rates per dollar of coverage.
Security Posture
Strong security controls can reduce premiums by 20-40%.
Claims History
Previous cyber incidents increase premiums or may result in exclusions.
Typical Costs
Estimated Annual Premiums
- Small Business (< $2M revenue): $1,000 - $3,000 for $1M coverage
- Mid-Size Business ($2M - $10M): $3,000 - $10,000 for $2-5M coverage
- Large Business (> $10M): $10,000+ for $5M+ coverage
Note: Actual costs vary widely based on industry, security controls, and coverage details.
Filing a Claim
Immediate Notification
Contact your insurer immediately upon discovering an incident, typically within 24-72 hours.
Preserve Evidence
Document incident details, preserve logs, and avoid destroying evidence.
Follow Insurer Instructions
Use insurer's approved vendors for forensics, legal, and PR services when required.
Track Expenses
Maintain detailed records of all costs related to the incident for reimbursement.
Policy Maintenance
- Review coverage annually as your business and threats evolve
- Update insurer when making significant IT or business changes
- Maintain required security controls throughout policy term
- Conduct regular security assessments to maintain favorable rates
- Keep incident response plans updated and tested
Major Cyber Insurance Providers
Leading carriers offering cyber insurance:
- Chubb, AIG, Beazley, Coalition, At-Bay
- Travelers, Hartford, Hiscox, CNA
- Cowbell Cyber, Corvus Insurance, Resilience
Consult with an insurance broker specializing in cyber coverage for personalized recommendations.