The Best Cyber Insurance Policy Cover for Small Businesses 

1. Incident Response Costs: Separate Coverage Limits Matter

Cyber incidents are costly – not just in terms of lost data but also in handling the aftermath.

The average cost of a cyberattack for SMEs is $325k according to a report by NetDilligence, which includes expenses related to data recovery, legal fees, regulatory fines and reputational damage.

Incident response costs include retaining legal counsel, forensic investigation costs, credit monitoring, public relations and notification costs – which can quickly add up. A robust cyber policy should include a separate limit dedicated for incident response costs, ensuring that these expenses don’t deplete the main policy coverage.

“Without dedicated incident response coverage, small businesses risk exhausting their policy limits, leaving them unable to recover fully,” says Douek. “This feature provides peace of mind and ensures businesses can weather the storm of a cyberattack.”

2. No Widespread Event Exclusion: Essential for Cloud-Dependent Businesses

Cloud services have become indispensable for many small businesses – today, almost half of non-technical small businesses rely on cloud services. Yet some cyber policies exclude system failure losses linked to cloud failures if more than one party is affected.

“This means that if a widespread outage impacts cloud-based services like Microsoft Email and Sharepoint, Amazon, or Google Workplace, many policies may not respond to related losses,” Douek explains.

It’s critical to review policies for exclusions tied to widespread events. Comprehensive coverage should include business interruption losses, increased operational costs and data recovery expenses.

She recommends small businesses work with their insurance representatives to closely understand whether or not their policy provides this level of protection, and understand the risks of cyber incidents like the CrowdStrike Outage.

3. Ransomware and Cyber Extortion Coverage

Ransomware is one of the most disruptive and expensive cyber threats to small businesses. The US accounts for a staggering 59% of all global ransomware attacks.

Similarly, cyber extortion schemes deploying social engineering tactics are on the rise and small businesses are especially vulnerable. Companies with fewer than 100 employees receive 350% more social engineering attacks, such as phishing, than larger enterprises.

“It’s essential to ensure your business is covered for these types of cyberattacks, which are becoming more frequent and sophisticated thanks to AI, which makes these attacks scalable, highly convincing and much harder to avoid,” says Yoast.

“A strong cyber insurance policy should cover ransom payments (if legally permissible, negation costs, system restoration expenses, and legal and public relations support), as well as protection against financial fraud and crime like social engineering Douek says. These types of coverages will cover fraudulent funds transfers, business email compromise losses and spoofing schemes, which are becoming all too common.

“These coverages are essential because cyber extortion can cripple operations and tarnish a company’s reputation,” Yoast adds.

4. Risk Management and Post-Breach Support: A Comprehensive Approach

While many insurance policies focus on responding to incidents, small businesses benefit significantly from pre-breach services and risk management support. This includes access to cybersecurity expertise, training and proactive monitoring to predict and reduce the likelihood of a cyber incident.

“Small businesses often lack resources and budget to manage cybersecurity effectively,” says Yoast.

Around half of all small businesses don’t have a cybersecurity plan. Additionally, around 33% of small businesses use free cybersecurity tools rather than professional-level solutions.

“Choosing an insurance partner that provides both proactive risk management services and post-breach incident response ensures a more resilient business,” Yoast says.

“Post-breach support should include access to real-time assistance from experts who can guide businesses through containment, recovery and mitigation,” says Neal Jardine, BOXX’s Global Director of Cyber Risk Intelligence & Claims.

5. Data Recovery Costs: The 3 Rs – Replace, Restore, or Repair

Data recovery is critical after a cyberattack, yet not all policies provide comprehensive recovery options.

Jardine recommends businesses should look for coverage that includes the “3 Rs”:

Replace: For data that cannot be recovered from backups

Restore: From existing backups

Repair: For corrupted or damaged data

“Policies that prioritize the 3 Rs ensure businesses can quickly get back to operations, minimizing downtime and long-term impacts,” explains Jardine.

6. Retention Waivers with Breach Response

Small businesses need immediate support when a cyber incident occurs. Many standard policies with retention waivers incentivize early reporting by waiving deductibles for incidents reported within a specific timeframe.

“Timely reporting reduces damage and allows businesses to address threats quickly,” says Jardine. “That’s a great benefit. But one thing businesses should note is that often, standard ‘zero deductible’ policies automatically log a claim when clients seek help, which can impact a business’ claims record and erode their policy limit. So, look for policies that offer ‘no deductible, no claim required assistance’ – which means you have the benefit of expert breach response consult on a suspected incident without it impacting your claims record, as well as the waived retention fee when you swiftly report and choose to make a claim.

This proactive approach not only encourages swift action to contain cyber threats and reduce damages – but also protects a business’ long-term claims history and minimizes their financial stress.

7. Combined “Pay on Behalf of” and Reimbursement Coverage

Many cyber insurance policy wordings typically employ either “pay on behalf of” or “reimbursement” language, which may not cover the nuances of all cyber losses.

“Check to see if your policy integrates both methods, allowing for “pay on behalf of” or reimbursement coverage, whichever is better suited for your unique needs,” Douek explains. “This kind of dual approach gives you responsive and tailored financial protection, offering you what’s best in every scenario.”

Building a Cyber Resilient Business 

Making informed decisions when evaluating and investing in comprehensive insurance protection will ensure your small businesses can navigate today’s cyber threats confidently and securely. 

Because cyber insurance isn’t just about recovering from an attack – it’s about building digital resilience against the next one, Yoast says.