Want to know how to protect your business from the next cyberattack?
Every business owner fears hackers, data breaches, and ransomware. Cyber threats only continue to grow in number and sophistication each year and a breach can destroy a business overnight. According to recent data, ransomware was involved in 44% of all breaches in 2024.
The good news?
Cyber insurance can protect your business from financial devastation. Cyber threats are evolving at a record pace, and the right coverage is no longer a nice-to-have—it’s a must-have.
In this guide, we’ll cover:
- Why Cyber Insurance Matters More Than Ever
- The Biggest Emerging Threats in 2025
- How Cyber Insurance Actually Works
- What Coverage You Really Need
Why Cyber Insurance Matters More Than Ever
Cyber insurance is your financial backstop when disaster strikes.
The problem: Most businesses don’t think they’ll be targeted. Small business owners think hackers only go after large corporations with millions in the bank. According to the latest research from Infrascale this is entirely false. Small and medium businesses are often the prime targets due to a lack of adequate security.
The second a cyberattack hits, the costs quickly add up. Business downtime, data recovery, legal fees, customer notifications, and fines from regulators pile up quickly. Without cyber insurance, those costs will sink you.
For this reason, the cyber insurance market is expected to reach $16.6 billion in 2025. Businesses are finally starting to realize just how much is at stake.
The average data breach is costing companies $4.45 million in damages. That’s $4.45 million. Even a “small” breach can run you hundreds of thousands of dollars when everything is considered.
Cyber insurance can cover these astronomical losses so you can keep your business afloat and recover.
The Biggest Emerging Threats in 2025
The threats keeping security professionals up at night are…
AI-Powered Attacks
AI has changed the game.
Hackers are using AI to create attacks that are faster, more sophisticated, and nearly impossible to detect using traditional security measures.
According to industry research, 61% of IT professionals think AI-powered threats will have the most significant impact on business in 2025. These attacks aren’t your grandfather’s cyberattacks.
AI enables criminals to automate phishing campaigns, locate vulnerabilities in milliseconds, and circumvent security measures that have been in place for years. Tasks that used to take weeks are now accomplished in minutes.
Scariest of all?
AI malware can adapt in real time. It uses your defenses against you, learning and evolving to change its attack vectors on the fly. Traditional antivirus can’t keep up with ever-changing attacks.
Ransomware Evolution
Ransomware has never been more vicious.
Ransomware attacks now use “triple extortion” techniques. No longer do hackers simply encrypt your files. Criminals will exfiltrate your data, threaten to leak it publicly, and even sometimes contact your customers directly.
The average ransom payment increased from $400,000 in 2023 to $2 million in 2024. That’s a 500% increase in just 12 months. Attackers know businesses will do anything to avoid losing their critical data.
Paying the ransom doesn’t even guarantee you’ll get your data back either. 40% of businesses that pay still cannot recover their systems fully.
Cloud Security Breaches
Businesses are moving to the cloud every day, creating new vulnerabilities and expanding the attack surface.
Cloud breaches occur when hackers exploit weaknesses in cloud storage and security measures companies use to protect their data online. These attacks can expose millions of customer records in seconds.
How Cyber Insurance Actually Works
Cyber insurance is pretty straightforward.
When you buy a policy, you’re buying protection against a specific set of cyber risks, similar to car insurance for your digital assets and operations.
If you suffer a cyberattack, you file a claim with your insurance carrier. They’ll investigate the incident and confirm it is covered under your policy and then help you respond to the attack and cover the costs.
Most policies will include:
- Incident response costs – Paying for forensic investigation of the breach
- Business interruption coverage – Making up for lost revenue while your systems are down
- Data recovery expenses – Restoring encrypted or corrupted files
- Legal and regulatory costs – Handling lawsuits and compliance fines
- Notification expenses – Notifying affected customers of the breach
Coverage and inclusions will vary wildly between providers. Some policies have gaping holes that leave you without protection when you need it most. That’s why it’s crucial to read the fine print.
What Coverage You Really Need
Selecting the right cyber insurance policy can be an overwhelming task. There are many options and seemingly endless technical jargon that can make you dizzy.
Start by asking yourself these questions:
What type of data does your business handle? Customer information, financial records, healthcare data all have different protection levels.
How reliant is your business on technology? If systems go down, your entire operation grinds to a halt. You need comprehensive business interruption coverage.
Core Coverage Areas
You need coverage for these areas as a minimum.
First-party coverage refers to protection of your own business. Costs for data recovery, system restoration, and lost income during downtime all fall under first-party protection.
Third-party coverage protects you from lawsuits. When a breach exposes customer data, those customers can sue you. Third-party coverage handles the legal defense and settlement costs.
Regulatory compliance coverage is also essential. You may face fines from regulators when a breach occurs. This coverage helps pay those penalties.
Policy Exclusions Matter
Pay close attention to what’s NOT covered.
Many policies exclude certain types of attacks or situations. Common exclusions include acts of war, prior known vulnerabilities you failed to address, employee theft, and cryptocurrency losses.
It’s important to know these exclusions so you aren’t caught by surprise when you file a claim.
Taking Your First Steps
The first step in getting cyber insurance is conducting a security posture assessment.
Insurance companies want to see you’re taking cybersecurity seriously. They’ll ask questions about firewalls, employee training programs, backup and recovery plans, and incident response plans.
The reality is:
Companies with good security practices will get better rates. Insurers will reward companies taking active steps to prevent breaches. Simple measures like multi-factor authentication and regular security audits can significantly reduce premiums.
Work with a specialized insurance broker. A cyber insurance broker understands the nuances between policies and can help you find the best fit for your needs.
Don’t wait until a breach happens to consider coverage. At that point, it’s too late. Cyber insurance will only cover future incidents, not past ones.
Final Thoughts
Cyber insurance is now table stakes for businesses of all sizes and industries. With emerging threats such as AI-powered attacks and ever-evolving ransomware techniques, the question isn’t if you’ll suffer a cyber incident—it’s when.
The right policy not only gives you financial protection but access to expert resources and support when you need them most. It will cover the costs of responding to a breach and help you recover more quickly.
Key takeaways:
- Cyber threats are only increasing in sophistication and scale every year
- The average breach costs millions of dollars
- Policy details matter; read the fine print
- Good security practices = better coverage and lower premiums
Don’t wait to act. Assess your current risks, evaluate your security measures, and talk to an insurance professional about your options. The cost of cyber insurance is small in comparison to a major breach.
