Cyber attacks aren’t just a problem for big corporations. Every business, no matter its size, faces real cyber risks every day. A single data breach or ransomware attack can result in serious financial losses or even bankruptcy.
That’s why companies of all sizes need cyber insurance.
Cyber insurance plays a crucial role in protecting your business from its biggest threats.
In this article, we’ll walk you through what cyber insurance typically covers, where coverage can vary, and the common gaps business owners need to watch out for.
What Cyber Insurance Covers
Cyber insurance is designed to help protect your business against the financial impact of events like data breaches, ransomware attacks, and other types of cyber attacks. Coverage is typically divided into two main categories: first-party coverage and third-party coverage.
- First-party cyber coverage helps your business recover from direct losses, such as restoring damaged computer systems, covering lost income from business interruption, and notifying customers after a security breach.
- Third-party cyber coverage protects your business if others are affected by an incident by helping cover the costs of legal fees, settlements, and regulatory fines related to privacy violations.
Breaking it down even further, here are some instances that cyber insurance most commonly covers:
- Repairing or recovering systems damaged by a cyber attack;
- Replacing lost income due to business downtime;
- Paying legal fees and court costs if you’re sued;
- Covering regulatory fines for covered cyber incidents;
- Funding credit monitoring services for customers affected by a breach.
It’s important to remember that cyber insurance only covers specific, covered events listed in your policy (and every policy includes coverage limits). Working with an experienced agent can help ensure your policy offers the protection you need.
What Cyber Insurance Might Cover
While standard cyber insurance policies cover many common risks, not all protections are automatically included. Depending on your policy, you may need to add optional endorsements.
- Reputational Harm and Extended Business Interruption: Most policies cover lost income from immediate, direct disruption to your operations. However, longer-term revenue losses tied to reputational harm, such as customers losing trust after a cyber attack, may not be covered without an additional endorsement.
- Social Engineering Fraud: Losses caused by scams that trick employees into transferring funds or disclosing sensitive information are not always included in standard cyber insurance coverage. Specific protection for social engineering attacks is often available as an optional add-on.
- Contractual Liabilities: If a cyber incident causes you to breach a contract with a client, vendor, or business partner, standard coverage may not apply. Specialized endorsements are typically needed to address these types of risks.
Even with the right endorsements, no cyber insurance policy covers everything. It’s just as important to understand what your policy won’t protect against so you can plan ahead and avoid costly surprises.
What Cyber Insurance Does Not Cover
While cyber insurance offers critical protection, it’s important to know where coverage typically ends. Every policy has exclusions for risks or losses that insurance simply won’t cover, even if you experience a serious cyber attack.
Here are some of the most common cyber insurance exclusions business owners should be aware of:
- Retroactive Date Issues: Cyber insurance only covers incidents that happen after your policy’s start date. If a breach or attack occurred before you purchased coverage, it’s not protected.
- Illegal or Fraudulent Activity: Losses caused by your company’s own illegal acts, fraud, or intentional wrongdoing are excluded from coverage.
- Insider Negligence or Dishonesty: If an employee is involved in causing or assisting a cyber event whether intentionally or through gross negligence, coverage may be limited or denied.
- Property Damage: Cyber insurance protects digital assets, but not physical damage to your servers, computers, or other hardware. Physical losses typically fall under your commercial property insurance.
- Technological Upgrades: Policies cover restoring your systems to working order but not optional upgrades or improvements, unless they’re required for recovery and security.
- Intellectual Property Theft: Theft or loss of trade secrets, patents, or copyrighted materials is generally not covered by standard cyber insurance.
- Future Lost Profits: While business interruption losses are often covered, you can’t claim speculative profits you might have earned after an incident.
- Bodily Injury: If a cyber event results in physical harm to a person (rare, but possible), these claims are typically excluded.
- War and Acts of Terrorism: Many policies exclude losses tied to cyber warfare, terrorism, or attacks backed by foreign governments.
Understanding the exclusions in your cyber insurance policy is just as important as knowing what’s covered.
Taking the time to review your coverage now can help you avoid costly gaps later, and in some cases, even lead to stronger protection overall. For example, you may be able to strengthen your policy with endorsements or invest in stronger cyber security measures to close the gaps.
Protect Your Business with the Right Coverage
Cyber insurance is one of the smartest investments you can make to protect your business against today’s growing cyber threats, and it’s just as important to understand exactly what your coverage includes, where it might fall short, and what steps you can take to strengthen it.
At Harry Levine Insurance, we believe good insurance is about finding the right protection for your business. If you have questions about your cyber insurance coverage or want help identifying potential gaps, our team is here to help you build the strong, reliable protection your business deserves.
Comment (1)
Angelic Insurance
May 29, 2025Great article! In today’s digitally driven world, finding a reliable cyber insurance is essential for protecting businesses from data breaches, cyberattacks, and financial loss. Whether you’re a small business or a large corporation, a strong cyber policy offers peace of mind by covering recovery costs and legal liabilities. Thanks for highlighting these critical insights!