Key Highlights
- As digital operations and AI adoption grow, cyber risk is outpacing many organizations’ ability to manage it.
- Cyber insurance for businesses is becoming more important, as general liability insurance doesn’t provide this coverage.
- Cyber insurance helps cover the costs of data breaches, ransomware, system damage, legal exposure, and business interruption for both first-party losses and third-party liabilities.
- Insurance carriers increasingly expect baseline security maturity and solid risk mitigation strategies.
As enterprises become more connected and adopt AI-driven operations, cyber risk is rising faster than many defenses can adapt. Threat actors are moving with greater speed and automation. For IT leaders, that evolution raises two fundamental questions: What exactly is cyber insurance, and does your organization really need it?
Yes, it’s likely you need it. Estimates suggest that more than 2,200 cyberattacks occur every day globally, according to “The Top 37 Cyber Crime Statistics You Need To Know In 2025” report from SpyHunter.
And in The Hartford’s “2025 Risk Monitor Report,” business leaders cite concerns about increased threats of data breaches, phishing scams, malware, and the potential financial and operational impact of a cyberattack. Respondents also said they need support to help them keep up with the ever-changing risks.
What Is Cyber Insurance?
Cyber insurance, also called cyber liability or cybersecurity insurance, is designed to limit financial loss and support recovery when an incident occurs. Just as auto insurance covers accident-related damage, cyber insurance helps pay for the business costs of a cyberattack.
A typical policy covers incidents such as:
- Data breaches.
- Ransomware and extortion.
- Phishing-driven compromise.
- System disruption or destruction.
- Theft or misuse of sensitive data.
- Liability for third-party data loss.
Coverage generally falls into two categories:
- First-party coverage: Direct losses to your organization, including system repair, data recovery, business interruption, forensics, legal fees, and customer notification.
- Third-party coverage: Liability for harm caused to customers, suppliers, or partners whose data you handle.
While coverage varies by provider, expenses commonly reimbursed include:
- Legal and regulatory costs.
- Forensic investigation and containment.
- Customer notifications and identity-repair services.
- System restoration.
- Lost income due to downtime.
- Liability for losses incurred by business partners.
- Public relations support.
Cyber insurance doesn’t replace cybersecurity controls or risk management. It’s financial protection that complements existing cybersecurity, resilience, and continuity planning.
“Cyber insurance isn’t just a safety net—it’s a strategic tool that helps businesses recover quickly and continue operations after an incident, explains David Drogin, Head of Americas, Cyber, at Mosaic Insurance. “It covers direct financial losses, like ransomware payments or business interruption costs, but also the often-overlooked expenses like customer notification, legal support, and reputational management.”
In today’s digital economy, being able to respond swiftly can mean the difference between a temporary disruption and a lasting crisis.
- David Drogin, Head of Americas, Cyber, at Mosaic Insurance
“In today’s digital economy, being able to respond swiftly can mean the difference between a temporary disruption and a lasting crisis,” he adds.
Also, it’s important to understand that general business liability insurance typically excludes cyber incidents.
Why Consider Cyber Insurance
Security breaches are becoming more frequent, more sophisticated, and more expensive:
• According to IBM’s Cost of a Data Breach report, the global average cost of a data breach reached $4.44 million in the 2024–2025 period, with costs for U.S. businesses significantly higher.
• The Huntress 2025 Cyber Threat Report found 27% of organizations face more than $500,000 in annual cyberattack losses, with healthcare ($7.42 million annually) and finance ($5.56 million annually) hardest hit.
• Fortinet’s 2025 Global Threat Landscape Report shows active scanning and automated exploitation accelerating at unprecedented levels.
AI is lowering the barrier to entry for attackers, enabling more convincing phishing, broader reconnaissance, and faster exploitation.
And it’s not just large enterprises under attack. Small- and medium-sized businesses can be especially attractive to threat actors because leaders sometimes think their company won’t be targeted because of their smaller size.
Do You Need Cyber Insurance?
The prevailing wisdom is that most organizations do need cyber insurance—especially those that collect, store, or process sensitive data. If your business manages customer information, payment data, supplier records, or operational systems that could disrupt service if compromised, you’re a likely target.
You might want to consider cyber insurance if your organization:
• Collects or stores customer, patient, financial, or other sensitive data.
• Relies on digital systems for operations or revenue.
• Works with large enterprises that require cyber coverage from partners.
• Would face significant financial or reputational harm from downtime or data loss.
What Cyber Insurance Might Not Cover
Most policies include exclusions from issues considered preventable, such as:
• Poor or missing security controls.
• Known but unremediated vulnerabilities.
• Prior breaches.
• Employee negligence or intentional insider actions.
• Costs to improve or harden systems post-incident.
How Much Does It Cost?
Costs vary by factors such as industry, company size, risk profile, annual revenue, claims history, and coverage limits and can range from a few hundred dollars to hundreds of thousands of dollars per year. Premiums rise with higher risk or broader coverage.
In 2024, the average amount businesses spent on cyber insurance was between $1,200 and $7,000 annually, with a median cost of about round $2,000 per year. Premiums rise with higher risk or broader coverage.
How You Can Lower Premiums
Cyber insurance carriers increasingly expect baseline security maturity and solid risk mitigation strategies. Steps you can take to help reduce premiums include:
- Regular cybersecurity awareness training for employees.
- Multifactor authentication. This includes making sure business partners with remote access also implement it.
- Secure backups. According to the 2025 Threat Report from Artic Wolf, reliable backups helped the recovery process in 68% of ransomware incidents, often removing the need for a payout.
- Prioritizing patches.
- Documented and tested recovery and incident response plans (ERPs). An outlined approach to dealing with a cyber threat head-on can help you, and they should involve all key people and the cyber insurance carrier.
- Strong access management. Give system and equipment access only to personnel whose job functions strictly require it.
- Email security controls.
- Consistent vulnerability remediation.
These controls, of course, also reduce the likelihood and impact of a breach.
Takeaways for IT Leaders
Cyber insurance is now often a critical component of enterprise risk management. It’s a financial backstop that helps organizations manage the costs and consequences of cyber incidents.
“Think of it as part of a company’s defensive architecture,” Drogin says. “Firewalls and monitoring systems defend against attacks, but cyber insurance ensures the business can recover if those defenses are breached. It turns catastrophic disruption into a manageable challenge, making risk not just something you avoid, but something you can strategically manage.”
As digital complexity expands, robust security paired with appropriate coverage is becoming less optional and more of a strategic requirement for resilience in an era of accelerating cyber threats.
About the Author
Theresa Houck
Contributor
Theresa Houck is an award-winning B2B journalist with more than 35 years of experience covering industrial markets, strategy, policy, and economic trends. As Senior Editor at EndeavorB2B, she writes about IT, OT, AI, manufacturing, industrial automation, cybersecurity, energy, data centers, healthcare, and more. In her previous role, she served for 20 years as Executive Editor of The Journal From Rockwell Automation magazine, leading editorial strategy, content development, and multimedia production including videos, webinars, eBooks, newsletters, and the award-winning podcast “Automation Chat.” She also collaborated with teams on social media strategy, sales initiatives, and new product development.
Before joining EndeavorB2B, she was an Industry Analyst at Wolters Kluwer in its human resources book publishing operation. Before that, she spent 14 years with the Fabricators & Manufacturers Association, Intl., serving as Executive Editor of four magazines in the sheet metal forming and fabricating sector, where she managed and executed editorial strategy, budgets, marketing, book publishing, and circulation operations, and negotiated vendor contracts.
Houck holds a Master of Arts in Communications from the University of Illinois Springfield and a Bachelor of Arts in English from Western Illinois University.
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