What You Think Your Cyber Insurance Covers... Probably Doesn’t

If you’re like most small business owners we talk to, you probably have cyber insurance—or at least assume you’re covered by your general business policy. But here’s the truth: most policies are full of exclusions that can leave you exposed when it matters most.

Cyber insurance isn’t a silver bullet. It’s a safety net. But if you haven’t evaluated your policy with someone who knows how to align technical protections with carrier requirements, there’s a good chance that your claim could be denied when you need it most.

Let’s walk through what you need to know to avoid that outcome.

Why Cyber Insurance Matters Now More Than Ever

Hackers are shifting focus to small and mid-sized businesses. In fact, 43% of all cyberattacks now target businesses with under 500 employees. And the average cost of a breach for a small business? $2.98 million.

That’s not just a bill. That’s a potential business-ending event.

Good cyber insurance can help cover the financial damage, meet regulatory requirements, and support recovery.

But here’s the problem: most business owners don’t understand what their policy actually covers.

First-Party Coverage vs. Third-Party Liability: Know the Difference

First-party coverage protects your business directly. This can include:

• Breach response costs (investigation, legal guidance, customer notification, credit monitoring)

• Business interruption (lost revenue due to downtime)

• Cyber extortion (ransomware payments and negotiation support)

• Data restoration (recovery services and backups)

• Reputation management (PR firms, customer communication, brand protection)

Third-party liability kicks in when others are affected:

• Privacy liability (legal costs and settlements if customer data is exposed)

• Regulatory defense (responding to investigations or fines)

• Media liability (if content from a breach leads to defamation or copyright issues)

• Defense and settlement costs (lawsuits from clients, vendors, or partners)

What Your Cyber Policy Probably Doesn’t Cover

Here’s where it gets tricky. Many policies exclude the very things business owners think are covered:

• Negligence or poor cyber hygiene (like not using MFA or skipping software updates)

• Incidents in progress before policy activation (Already have a breach but don't know it yet? Then you are NOT covered!)

• State-sponsored attacks (some insurers label these "acts of war")

• Insider threats (malicious employee actions)

• Future lost business or long-term reputation damage

If you’re not actively documenting and maintaining basic cybersecurity protections, your claim could be denied.

Optional Coverage You Might Want to Add

Depending on your business type, you might want to consider:

• Social engineering fraud (phishing and fake wire transfer scams)

• Hardware "bricking" (when malware physically destroys devices)

• Technology errors and omissions (E&O) (especially for IT providers or SaaS firms)

How to Choose the Right Policy

• Assess your risk — What data do you store? Who has access? How tech-dependent are you?

• Ask smart questions — Does this cover ransomware? What about insider threats or phishing?

• Know your limits and deductibles — Can you afford the out-of-pocket cost?

• Read the fine print — Understand what’s excluded and when.

• Review annually — Threats evolve. Your policy should too.

Final Thought

Cyber insurance can be a powerful part of your risk management strategy—but only if you understand what it does and doesn’t cover.

At qnectU, we help business owners bridge the gap between technical readiness and insurance requirements, so they’re not left scrambling when something goes wrong.

Need help reviewing your policy or hardening your systems to meet insurance standards? Let's talk!

📅 Click here to schedule a quick 26-minute call today.

Article adapted with permission from https://thetechnologypress.com/decoding-cyber-insurance-what-policies-really-cover-and-what-they-dont/