Cyber Insurance: Is It Worth It? A CISO’s Guide to Maximizing Coverage
Cyber Insurance Won’t Save You from an Attack - But It Could Save Your Business. Here’s What You Need to Know.
Your company just got hit with a cyber attack: Customer data stolen. Operations shut down. Millions in ransom demanded.
You call your cyber insurance provider, expecting full coverage - Then you get the bad news. The policy doesn’t cover ransomware. You didn’t meet the insurer’s security requirements.
Finally, your claim is denied.
Now what?
Many companies buy cyber insurance thinking it’s a safety net. But if you don’t understand how cyber policies work, you might still be on the hook for millions.
So, is cyber insurance worth it? And how do you make sure you’re actually covered when disaster strikes?
What Cyber Insurance Actually Covers (And What It Doesn’t)
Cyber insurance isn’t magic. It won’t make an attack go away. But it can help pay for the damage.
What’s Typically Covered?
Incident Response Costs → Forensic investigations, legal fees, PR crisis management
Data Breach Costs → Notifying customers, offering credit monitoring
Ransomware Payments → If allowed by law
Business Interruption → Lost revenue from downtime
Regulatory Fines → GDPR, CCPA penalties (if included in policy)
What’s Usually NOT Covered?
Pre-existing vulnerabilities → If you failed to patch a known issue
Negligence → If you ignored basic security controls
Lost future revenue → Business damage beyond downtime
Reputational harm → Loss of customers due to breach fallout
Some companies assume they’re covered until they realize the fine print says otherwise.
The fix? Get the right policy and make sure you actually qualify for coverage:
Step 1: Know What Type of Cyber Insurance You Need.
Not all cyber insurance policies are the same.
There are two main types:
First-Party Coverage → Covers your company’s direct losses
Third-Party Coverage → Covers legal claims from customers, vendors, or partners
Which one do you need?
If your company handles customer data: Get Third-Party Coverage (protects against lawsuits). If a cyber attack could shut down operations: Get First-Party Coverage (pays for downtime costs). If you store financial or medical records: Get coverage for regulatory fines (GDPR, HIPAA).
But be careful: Some policies don’t include ransomware payments. If you want coverage, you need to request it.
Step 2: Meet the Security Requirements (Or Your Claim Will Be Denied)
Insurance companies don’t pay out for companies with bad security. If you don’t meet minimum cybersecurity standards, your policy is useless.
What insurers look for before approving a claim:
Multi-Factor Authentication (MFA) → Required for remote access & privileged accounts
Regular Patching & Vulnerability Management → No coverage for ignored security updates
Incident Response Plan → Must show you have a plan for handling breaches
Endpoint Detection & Response (EDR) → Helps detect threats early
Access Controls → Least privilege & Zero Trust measures
But what happens if you don’t meet these standards? Your insurer can deny your claim - no matter how much you paid in premiums.
Fix this before an attack happens.
Step 3: Watch for Hidden Loopholes in Your Policy
Cyber insurance policies are full of fine print.
Read carefully for these hidden clauses:
“War Exclusions” → Some insurers won’t cover attacks from nation-state hackers.
“Failure to Maintain Security” → If an attack exploits an unpatched system, you might not get paid.
“Acts of Employees” → If an insider causes the breach, your policy might not apply.
“Retroactive Coverage” → Some policies only cover incidents after a certain date.
Ask your insurer exactly what they cover and what they don’t - before you sign anything.
Step 4: Calculate Your Cyber Insurance Coverage Needs
How much should you insure? Here’s a simple way to estimate:
Cyber Risk Exposure = (Estimated Attack Likelihood) x (Financial Damage of an Attack)
But how does translated into the real world? Here’s an example:
Likelihood of a ransomware attack → 20% per year
Estimated downtime cost → $10M
Regulatory fines & legal fees → $5M
Total exposure: $3M risk per year
How much cyber insurance should you buy? At least $3M in coverage - but more if you handle sensitive data.
Step 5: Negotiate Your Cyber Insurance Premiums
Cyber insurance costs are skyrocketing. In the past 5 years:
Premiums have increased 300%
Ransomware claims are up 400%
Some companies are getting denied coverage entirely
But you can lower your premiums if you prove strong cybersecurity measures (MFA, EDR, Zero Trust). I also recommend to document and showcase your history of low incidents, because fewer breaches euqals to lower risk.
And in general, demonstrate an active risk management process and strong incident response processes are a gamechange in negotiating premiums down.
You might also talk to an insurer who won’t cover ransomware payments. Then ask for higher business interruption coverage instead.
The Bottom Line: Cyber Insurance is NOT a Replacement for Cybersecurity
Cyber insurance won’t stop a breach.
But if used correctly, it can save your company from financial disaster. Get the right coverage for your business needs. Meet all security requirements - before disaster strikes. Watch for exclusions that could leave you unprotected. Negotiate your policy to maximize coverage at the lowest cost.
Because at the end of the day, a good cybersecurity strategy prevents attacks.
A smart cyber insurance policy ensures your business survives when they happen.
Absolutely worth it.