Commercial Cybersecurity Insurance: What Business Owners Need to Know

That’s why many businesses are buying separate cybersecurity insurance policies.

With ransomware attacks and data breaches surging, it’s more important than ever for businesses to take action today – before an attack occurs.

Today, we’re deciphering the world of commercial cybersecurity insurance claims.

Why It’s Important

Cybersecurity attacks are surging.

According to IBM, the average cost of a data breach is around $4.24 million.

Many businesses trust their commercial liability insurance policy to cover them.

Unfortunately, a standard commercial policy will not cover many costs associated with a cyberattack. Some policies even specifically exclude cybercrime damage. Many business owners assume they’re covered – only to realize, too late, that they’re not.

Making things worse, cyber claims are complex. Insurers often dispute them, limiting payout and compensation.

43% of Cyberattacks Target SMBs

Many business owners assume they’re not being targeted. Unfortunately, that’s not true.

Attackers are targeting more than just large corporations. They’re targeting small and medium-sized businesses – and everything in between.

According to one report, 50% of SMBs have been the victim of a cyberattack. Alarmingly, 60% of those victims go out of business. A single cyberattack could destroy your business’s finances, reputation, and protective moat.

SMBs are particularly susceptible to phishing attacks and ransomware. In fact, around 3 in 4 ransomware attacks target businesses with fewer than 100 employees. Many attackers target these businesses and charge a lower, more realistic ransom – say, between $5,000 and $10,000. Many businesses quietly pay this ransom.

Roughly 70% of ransomware attacks are motivated by money. However, some are done for espionage. If your business has sensitive data – from personal customer information to financial data and trade secrets – it could make you susceptible to a ransomware attack.

American businesses experienced an overall cyberattack rise of 146%, according to the 2025 Ransomware Report from Zscaler ThreatLabz. However, certain sectors are more susceptible to attacks than others. Healthcare, technology, and manufacturing businesses, for example, are more likely to be targets. Oil and gas companies, meanwhile, saw a 900% year-over-year increase in ransomware, per the 2025 report.

It’s not just about ransomware. Distributed denial of service (DDoS) attacks have surged. Experts blame rising geopolitical tensions.

According to a Hiscox survey in 2024, 67% of businesses reported an increase in cyber incidents over the past year. Alarmingly, the average organization reported 66 attacks per year – up from 63 the previous year. The survey covered 2,150 cybersecurity professionals in eight countries.

All of this adds up to a simple conclusion: cybersecurity incidents are becoming more common – and businesses can’t ignore commercial cybersecurity protection any longer.

Do You Need It? Do You Already Have It?

A standard business insurance policy doesn’t cover ransomware attacks or other cybersecurity incidents.

Most SMBs are unprepared for a cybersecurity attack – and have limited options for compensation after experiencing an attack.

You might have a standard commercial insurance policy. Many businesses carry a business owners policy, or BOP. This coverage can provide basic protection against cybersecurity attacks. However, this coverage may not be sufficient.

Here’s how standard business insurance covers (or doesn’t cover) cybersecurity incidents – and how standalone policies work:

• A standard commercial insurance policy covers certain liabilities and damages after a cybersecurity incident. However, some insurers exclude damages or require a standalone policy.
• Even if you have a commercial liability insurance policy or BOP, you may only be able to claim a limited amount of compensation through this policy.
• Many insurers now offer dedicated cyber liability insurance policies. Cyber liability insurance policies are specifically designed to cover the financial losses and liabilities associated with cyberattacks – including ransomware.
• For anywhere from $50 to $500 per month, cybersecurity insurance provides greater protection against cybersecurity incidents, compensating you for ransom payments, the cost of hiring security experts, and other damages incurred by your business after an attack.

How Cybersecurity & Ransomware Insurance Works

A cyber liability insurance policy, also known as ransomware insurance, covers the cost of making your business whole again after a cybersecurity incident.

What Cybersecurity Insurance Covers

A standard cyber liability insurance policy could cover things like:

• Ransom payments
• Costs of recovering data and restoring systems
• Legal expenses associated with cybersecurity incidents (say, lawsuits from angry customers or the cost of hiring a breach coach)
• Lost income and business interruption coverage
• Notification expenses (say, the cost of informing affected customers)
• Forensic investigation expenses (including the work needed to determine the source and extent of the attack)

Overall, the goal of cybersecurity coverage is to cover all costs associated with a ransomware attack or other cybersecurity incidents.

How Much Does Commercial Cybersecurity Insurance Cost?

The cost of commercial cybersecurity insurance varies based on company revenue, existing security controls, your industry, and many other factors.

Generally, however, the average SMB in the United States pays somewhere between $1,300 and $7,500 per year for a commercial cybersecurity policy ($108 to $625 per month).

How to Respond to a Cyber Incident

If your business has experienced a cybersecurity incident, then the next steps will impact your future.

Steps to take include:

1. Verify the Attack, Isolate, then Notify Important Parties

Once you verify a breach has occurred, it’s time to activate your business’s cybersecurity incident response plan.

Unfortunately, most SMBs don’t have a cybersecurity response plan. Just 14% of SMBs have established procedures for responding to a cybersecurity incident.

Early steps to take include:

1. Isolate the affected systems.
2. Contact necessary parties (like IT security professionals) to start the investigation and respond.
3. Contact your insurer to start the claim process.
4. Notify all necessary vendors and other parties.

Throughout this process, continue to collect details, document, and notify any impacted parties. The more documentation you have, the better.

2. Coordinate with Vendors, Investigators, Legal Counsel, & Law Enforcement

Your business or your insurer may have vendors in place to fix the security incident. Communicating with these vendors is key for reversing damage from the attack – and preventing the attack from occurring again in the future.

Some cybersecurity insurers, in fact, require you to use specific vendors when responding to a cybersecurity incident. Failing to use these vendors could impact coverage.

Some of the parties to contact during this step include:

• Legal counsel, like an attorney specializing in data privacy and cybersecurity
• Forensic investigators, who can identify the perpetrators and help your organization prepare for – and prevent – future attacks
• System recovery professionals, crisis communication experts, and other experts to limit business interruption
• Law enforcement, like the FBI’s Internet Crime Complaint Center (IC3)
• Public adjusters, who could help navigate the insurance claim, especially if your insurer is pushing back, dragging its feet, or denying or lowballing your claim

3. Document Everything

After coordinating with vendors in the immediate aftermath of the incident, the business should work closely with these vendors to ensure an accurate claim:

• Coordinate with your insurance company’s claims adjuster
• Work with vendors and other experts to accurately calculate the total expenses incurred through the cybersecurity incident
• Determine how your coverage applies to the incident
• Keep detailed records of all associated damage and restoration costs (vendor invoices, statements of work, IT receipts, business interruption data, and other recorded expenses)

4. Resolve the Claim

In a perfect world, your insurer applies coverage fairly and you receive full compensation based on the damage your business incurred.

In some cases, however, insurers may demand excess documentation. They drag their feet. They push back on certain damages. They blame you for certain aspects of the loss. All of these pushbacks can weaken your claim.

Avoid rushed settlements. Don’t let your insurer push you to a quick payout. In many cases, their first offer is lower-than-expected on purpose. They expect you to push back and negotiate.

Some businesses hire a public adjuster or attorney to help resolve a tricky cybersecurity claim – especially if the disputed amount is large.

Find a Public Adjuster

5. Take Steps to Prevent Future Incidents

After the claim has been resolved, some businesses take various steps to mitigate an attack in the future, including:

• Modifying (or creating) the cybersecurity incident response plan
• Updating or introducing new software
• Documenting remedial measures
• Adjusting policy coverage (say, for higher limits or broader coverage)
• Taking other steps to reduce the impact or likelihood of a future attack

Common Reasons for Commercial Cybersecurity Claim Denials

Cybersecurity insurance policies, like other insurance policies, contain exclusions. Insurers could use these exclusions to limit compensation.

Some of the reasons insurers deny cybersecurity claims include:

Reason #1: Lack of Adequate Security Protocols or Procedures

Insurers may deny cybersecurity claims for failing to meet security protocols and procedures.

A standard cybersecurity policy requires companies to take specific cybersecurity measures. If your business hasn’t implemented these measures, then you might not receive compensation after an attack.

Check your policy to determine if it requires you to have security protocols and procedures like:

• Multi-factor authentication (MFA)
• Regular software updates
• Employee training programs

Reason #2: Employee Negligence & Unapproved Third-Party Vendors

If employee negligence caused your cybersecurity breach, then insurance could reduce or deny your claim.

Negligence is the failure of an individual or organization to protect data. If an employee – or your business as a whole – was found to be negligent, then it could impact your claim.

Some examples of employee or third-party vendor negligence that could impact your cybersecurity claim include:

• Running outdated software
• Not subscribing to vendor security alerts
• Relying on manual updates
• Weak password policies
• Lack of employee training
• Poor mobile, remote device, or BYOD security policies

Reason #3: Ambiguous Policy Language & Other Exclusions

A commercial cybersecurity insurance policy could have ambiguous language. Insurers may use this ambiguous language to deny or reduce your claim.

Some policies use terms like “cyber event” or “data breach,” for example. Depending on how the insurer interprets these terms, your attack may or may not qualify.

Reason #4: Lack of Documentation

Your business may have legitimately experienced an attack. If you don’t have adequate documentation, however, then insurance won’t pay.

Your insurer may require detailed records showing:

• The best practices you took before an incident to avoid an attack
• The steps you took after an attack to limit damages or respond
• Evidence showing the exact damage to your business during the attack
• The date and time of the attacks’ discovery
• A comprehensive list of affected systems and data
• Demands of the attackers, if any

Reason #5: Taking Too Long to Report the Incident

Commercial cybersecurity policies, like all insurance policies, require you to report the incident within a specific length of time.

If you failed to notice or report the incident within that timeframe – say, within 30 to 60 days of the attack – then your insurer could deny or reduce your claim.

Reason #6: Other Exclusions

Check your cybersecurity insurance policy for other exclusions. Common exclusions that could impact your claim include:

• Unsecured remote access
• Lack of backups
• Lack of an incident response plan
• Pre-existing, unaddressed vulnerabilities
• Issues with third-party vendors
• Misrepresentation

Final Word: You’re Not Alone After a Cyber Attack

Cybersecurity claims are more common than ever – and they’re showing no signs of slowing down.

According to Cybersecurity Ventures, the annual cost of cybercrime is expected to reach $10.5 trillion by the end of 2025.

A cybersecurity incident can leave you feeling overwhelmed. Fortunately, business owners aren’t alone.

Dealing with a denied cybersecurity claim? Need help with a high-stakes claim? Whatever the situation, ClaimsMate has public adjusters specializing in commercial cybersecurity claims.

Schedule a Free Consultation

Contact ClaimsMate today for a no-cost consultation for your cybersecurity insurance claim.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.