There’s always a risk of cyberattacks slipping through the most secure computer systems. Sometimes, it’s not the firewall that fails, but a trusted vendor who gets compromised. Or a team member who unknowingly clicks a seemingly legitimate link, giving attackers the backdoor they need. However it happens, the focus shifts from preventing the breach to limiting the fallout.
That’s where cyber insurance comes into play. While most businesses understand the need for firewalls, antivirus software, and backups, many overlook the financial safety net cyber insurance provides.
What is cyber insurance?
Cyber liability insurance is a form of protection that helps organizations address the financial impact of cyber incidents. These incidents might include a targeted ransomware demand, a significant loss of sensitive data, or a disruption in operations caused by malicious software.
Rather than preventing attacks, cyber insurance helps with recovery. It covers the costs associated with managing the aftermath of an incident, including legal expenses, recovering compromised data, loss of revenue, payouts for affected customers, public relations firm fees, and technical remediation.
What risks does cyber insurance cover?
Cyber liability insurance policies vary, but here are the most commonly covered risks:
- Data breaches and loss – Includes expenses related to identifying and investigating security incidents, informing impacted individuals, and recovering or reconstructing lost or compromised data.
- Business interruption – If your operations come to a standstill due to an attack, your policy can recover income lost due to the downtime.
- Cyber extortion – Cyber liability insurance offers financial support if your business is targeted by ransomware or similar extortion tactics.
- Legal fees and penalties – Cyber insurance covers costs associated with regulatory investigations, lawsuits, and noncompliance fines.
- Reputation management – Some policies include public relations assistance to help rebuild your brand’s image after a breach.
Who needs cyber insurance?
Cyber liability insurance isn’t just for tech companies. Any business that uses digital systems or stores private data is at risk, including:
- Small businesses that may lack the resources to recover from an attack on their own.
- Healthcare providers dealing with protected health information.
- eCommerce companies that process customer payments.
- Professional services firms handling confidential client data.
What do you need to get insured?
Before granting a policy, insurers will want to evaluate your cybersecurity framework and whether your business is actively working to mitigate cyber risk. Through this process, underwriters gain insight into your exposure level, which directly influences the premium you’ll be quoted. Here’s what they typically look for:
Cybersecurity measures in place
Insurers look for foundational protections such as firewalls, anti-malware software, endpoint protection, multifactor authentication, and proper access controls. Having these advanced protections in place demonstrates a proactive approach to securing your data, which can significantly lower your premium.
Employee training programs
Insurers place strong emphasis on employee preparedness, particularly in recognizing deceptive tactics such as phishing schemes or suspicious login attempts. A structured, continuous training program fosters awareness and caution, reducing the likelihood of internal mistakes that may compromise data security.
Incident response plan
Having a well-documented and thoroughly tested disaster recovery plan is essential for effectively responding to cyberattacks. It should include clear steps for threat containment and remediation, communication, recovery, and lessons learned. Insurers view this as a sign that your business is ready to respond to any incident, limiting potential damage.
Data backup protocols
Regular, secure backups are essential. Insurers want to know how frequently you back up data, where it’s stored (i.e., on site, off site, or in the cloud), and whether those backups are tested for reliability. These factors determine how quickly you can bounce back from data loss.
Vendor and third-party management
Many breaches stem from third-party vulnerabilities. Insurance providers evaluate how you manage vendor relationships, including contract reviews, security questionnaires, and periodic audits. A strong vetting process shows you’re aware of supply chain risks and you’re taking steps to manage them.
How to choose the right cyber insurance policy
Choosing a cyber insurance policy requires a close look at your business, your cyber risks, and the fine print of the policy. Here are key elements to consider:
- Scope of cyber insurance coverage – Examine exactly what the cyber insurance policy covers. Some may protect your business from data breaches, while others consider third-party vendor failures or social engineering attacks. Confirm whether your policy includes risks such as insider threats or accidental data loss. These are often the most probable cyber risks you’ll face.
- First-party vs. third-party coverage – First-party cyber coverage protects your own business from direct losses, such as revenue disruption and system recovery. Third-party coverage, on the other hand, helps with claims made against your business, such as lawsuits from affected clients or regulatory bodies.
- Policy limits and sublimits – Pay attention to the total limit of the policy and any sublimits that apply to specific incidents. For example, the policy might have a $1 million limit overall, but only offer $100,000 for ransomware-related losses. Make sure these limits are set in proportion to your potential liability.
- Response time and support services – In the event of an incident, every second counts. Some insurers provide access to 24/7 breach response teams, legal counsel, or IT forensic experts. These added services can be just as valuable as the financial coverage.
- Exclusions – Exclusions outline the scenarios in which coverage is not provided. Common exclusions might include damage from acts of war, the use of obsolete software, or mistakes made by employees. Knowing what’s excluded allows your business to plan around those gaps and avoid frustration when filing a claim.
Getting cyber and business insurance makes sense, but it’s not a one-size-fits-all solution. You must carefully assess your specific needs and risks before choosing a policy. Working with Dynamic Solutions Group’s security experts can help protect your business and ensure you have the right cyber insurance policy coverage. Contact us today to get the right insurance plan for your business and avoid costly oversights.
