Cyber insurance is a specialized type of insurance policy designed to help organizations manage the financial impact resulting from cyber-related incidents such as ransomware attacks, data breaches and other cyber threats. These policies typically cover a range of expenses such as:

• Data recovery
• Legal expenses
• Customer notification
• Reputation management in the event of a breach
• Investigating, containing and mitigating the damage

Cyber insurance policies and services vary by carrier and are often tailored based on the organization industry. Some insurers, for example, offer services like tabletop exercises and technology to their insureds to help mitigate cyber risk. The cost of a cyber insurance policy varies and depends on the retention and total coverage of the policy, as well as the strength of a company’s cyber risk management program.

Cyber insurance is increasingly relevant for any company that wants to protect its balance sheet against the costs associated with a cyber incident—reaching anywhere from thousands to millions of dollars. Cyber insurance is particularly essential for:

Data-Intensive Businesses

• Companies handling large volumes of personal or sensitive data—such as financial institutions, healthcare providers, retail businesses and tech companies—are prime targets for cyber attacks.
• Industries with regulatory obligations around data protection, like HIPAA in healthcare or GDPR for companies serving EU citizens, should consider cyber insurance to help cover legal and compliance-related expenses.

Small to Medium-Sized Enterprises (SMEs)

• SMEs may lack the robust cybersecurity infrastructure of larger corporations, making them attractive to cybercriminals.

Businesses Relying Heavily on Digital Infrastructure

• Organizations where operations rely on internet connectivity, cloud-based systems or digital platforms—such as e-commerce businesses or media companies—may face significant losses from downtime or data breaches.

Companies in Highly Regulated Industries

• Organizations in sectors like financial services, healthcare and education are typically held to strict data privacy and security standards, which means a cyber incident can lead to costly penalties.

Organizations with Limited In-House Cybersecurity Resources

• Organizations with smaller budgets or cybersecurity teams may lack the resources to monitor and respond to evolving cyber threats.

Supply Chain-Dependent Companies

• For organizations dependent on digital suppliers and partners, cyber insurance can help manage the risk of a partner’s cyber incident disrupting operations.

Any organization that relies on digital data or technology should consider cyber insurance in their risk management strategy.

Common cyber-related claims covered under a cyber policy include:

• Data breaches
• Ransomware attacks
• Cyber extortion
• Customer notification costs
• Forensic investigations
• Legal defense costs related to data breaches
• Business interruption due to cyber attacks
• System restoration costs
• Data recovery
• Reputational damage management following a cyber incident

Cyber insurance policies also have some coverage limitations that are important to note, including: 

• Exclusions: Cyber insurance policies may not cover certain types of losses, such as those caused by human error, prior breaches, insider attacks or known or preexisting vulnerabilities.
• Business interruption coverage: Business interruption coverage may only cover some costs associated with cyber attacks, and not every disruption may qualify for compensation.
• Data breaches: Cyber insurance typically covers sudden or unforeseen incidents, but gradual data breaches may fall outside of its coverage.
• Delay in discovering an incident: If a cyber attack goes undetected for too long, its costs might not be covered by the policy.
• Physical property damage: Cyber insurance typically doesn't cover physical property damage or bodily injury, which are often covered by other insurance policies.
• Acts of war: Cyber insurance policies may not cover attacks by nation-states or acts of war, which are too unpredictable and complex for standard cyber insurance policies.

It's important to note that cyber insurance is not intended to take the place of effective cyber risk management, but should complement your strategies to provide a true risk mitigation ecosystem.

Around 50% of US companies carry cyber insurance. While one of the “newer” lines of coverage in the long history of insurance, cyber insurance has been available in the marketplace since the late 1990s. The coverage offered today, however, is far more expansive than it was then and continues to expand as threats to businesses grow.

The process of obtaining cyber insurance should start with a conversation with an insurance broker and will involve the completion of a cyber insurance application. Cyber coverage is not like other coverages, making it critically important that businesses work with a broker that has invested in the expertise that cyber insurance demands. A specialty insurance brokerage like Alliant can help you understand your total cost of risk so you can make educated decisions as to how much coverage you need.

Our clients benefit from ongoing guidance on how to implement key controls to obtain the best policy terms and conditions. As underwriters have come to better understand the intricacies of cyber risk, including the tools and methods utilized by threat actors, they have adjusted the list of requisite technical and tactical policies, procedures and controls for cyber insurance. Alliant will help you adopt these core requisites, such as:

• Multifactor authentication
• Annual penetration testing
• Cyber training for employees
• Breach simulations or tabletops

Alliant Cyber not only helps procure the right insurance plan for your needs, but also ensures you have the guidance necessary to resolve complex claims. In the event of a loss, we will notice your claim to your cyber insurance carrier and work with the insurer to ensure that the claim gets paid. Our team of industry leaders will additionally connect you with service providers approved by your carrier, like law firms and digital forensics companies, to help investigate a cyber incident.