In many ways, every company is a tech company in the modern business landscape. No matter the industry, all companies must use technology to communicate with customers, employees, and partners. Because of this, almost any company can become the target of a cyberattack or suffer from a data leak. Companies that handle sensitive information, such as personal identifying information (PII) and personal health information (PHI), are especially vulnerable.
According to IBM, the average global cost of a data breach in the last year was $4.8 million, with that number doubled for businesses in the U.S. and the healthcare industry. Small businesses are certainly not immune to cyber threats. The Identity Theft Resource Center reported that 80% of small businesses suffered a data breach in 2024, with an average cost of $500,000 in related expenses.
Bad actors increasingly find innovative methods to target businesses of all sizes, employing tactics like malicious AI attacks and deepfakes. These advanced strategies enhance the sophistication of cyber threats and make it more challenging for organizations to defend themselves.
Businesses need to stay alert and allocate resources toward strong cybersecurity tactics to defend against these changing threats. But even the most vigilant organization can fall behind the latest cyber hazards. The evolving threat landscape means that cyber liability insurance is necessary for most businesses, regardless of size.
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Common types of cyber threats
Most cyber insurance claims involve hacking, social engineering schemes, and malware. Phishing—fraudulent emails designed to fool employees into clicking a link that launches a piece of malware into a business network—remains one of the most common attacks.
Malicious AI can automate attacks, allowing cybercriminals to exploit vulnerabilities faster than traditional methods would permit. Deepfakes—hyper-realistic digital representations that can imitate individuals’ voices and appearances—pose a severe risk of fraud, misinformation, and identity theft. As businesses continue integrating more technology into their operations, the potential for these threats to disrupt workflows, compromise sensitive data, and damage reputations grows exponentially.
Kinds of cyber liability insurance
It is essential to understand the distinction between first-party and third-party cyber insurance.
- First-party coverage covers costs related to a breach directly for your company.
- Third-party coverage deals with expenses incurred from a partner company affected by a breach.
Different carriers may have categories or coverage types for network security, business interruption, errors and omissions, and media liability. Additionally, some carriers distinguish between data breach and cyber liability insurance, marketing the latter to enterprises and the former to small businesses.
What does cyber liability insurance cover?
Cyber insurance is designed to help a business recover from the potentially financially disastrous aftermath of a data breach. Cyber liability insurance typically covers at least some of the following as a core policy feature or an add-on:
- Data forensic investigations
- Litigation expenses
- Regulatory defense expenses/fines
- Crisis management expenses
- Business interruption costs
- Coverage for ransomware extortion
- Improving cyber defenses, post-attack
- Customer notifications (data breach notification requirements)
- Recovering personal identities
- Data recovery (cost of recovering compromised data)
- Repairing systems after a cyberattack
- Lost income due to a system outage
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Requirements and exclusions
Many carriers require an evaluation of your cybersecurity systems to qualify for cyber liability insurance. Meeting standards of cyber-hygiene—such as using strong passwords or switching to pass keys, implementing multi-factor authentication, and encrypting sensitive data—dramatically increases your chances of qualifying for cyber liability insurance, can lower your premium, and helps protect your data.
However, cyber insurance has some important exclusions. It does not cover other types of insurance costs, such as general liability (although cyber is sometimes available as an add-on to a general liability policy), employment practices liability, or professional liability.
Additionally, negligence in your cybersecurity practices from preventable means is not covered. Cyber insurance exclusions include human error, insider attacks, known vulnerabilities, and outdated systems.
How much does cyber liability insurance cost?
Small businesses can expect to pay between $100 and $200 monthly for cyber liability insurance, but that number can go higher or lower based on several factors.
- Business size and industry: More employees increase phishing risks by expanding the cyber-attack surface. Specific industries, such as healthcare and education, are targeted more by threat actors because of the sensitive data they must store.
- Annual revenue: Higher revenue may lead to higher premiums due to increased targeting by cybercriminals.
- Strength of security measures: Investing in security can lower premiums. Employee education and expert guidance are crucial.
- Policy terms: Coverage limits affect premium costs. Deductibles impact financial responsibility during a cyberattack.
Protecting your organization from the fallout of a data breach
Small businesses must take action to defend themselves against cyberattacks. Many of these defensive steps are a prerequisite to cyber insurance or help lower premiums. However, even the most prepared companies still face data breach risks. Insurance is crucial to cyber defense, helping your business increase security and prepare for the worst-case scenario.
McGowan Program Administrators offers comprehensive Cyber Liability Insurance explicitly designed for small- to mid-sized businesses. With coverage up to $2 million and a minimum premium of just $1,000, you can protect your organization without straining your budget. Our program includes first- and third-party coverage across 19 vital categories to protect your business from serious threats.
Take advantage of our free Cyber Health Score to assess your security strength and benefit from our valuable risk management solutions. Contact us to discover how our tailored approach can help safeguard your operations and provide peace of mind. Let McGowan support you in navigating the complexities of cyber risk management.
