Looking for the right cybersecurity insurance for your small and midsized business (SMB) but aren’t sure where to begin? As cyber threats grow in sophistication, many SMBs are turning to cybersecurity insurance to mitigate financial risk. But there’s a problem: most are going about it the wrong way.
Whether it’s misunderstanding coverage terms, skipping critical security controls, or assuming their insurer will cover every incident, these missteps can lead to denied claims and major setbacks when incidents occur. Let’s begin by breaking down what cybersecurity insurance really is.
What Is Cybersecurity Insurance & Why Do SMBs Need It?
Cybersecurity insurance is a specialized policy designed to help businesses recover financially from cyber incidents, such as data breaches, ransomware, and business email compromise. It can cover everything from legal fees, notification costs, system restoration, and loss of income due to downtime.
According to a report from IBM, the average cost of a data breach reached $4.9 million in 2024, showing a 10% increase from the previous year. With threats rising and budgets stretched, SMBs are a prime target – and often the least prepared.
But there is a way SMBs can prepare: with cybersecurity insurance, they are equipped with a financial safety net. But this is only truly effective if they understand how it works.
The Biggest Misconceptions About Cybersecurity Insurance
“If I have a policy, I’m fully protected.”
This is arguably the most dangerous assumption SMBs often make. Cybersecurity insurance doesn’t cover everything automatically – it’s a contract with specific terms, conditions, and exclusions that can significantly impact your coverage when you need it most.
What’s really covered varies widely. First-party coverage typically includes data recovery costs, business interruption losses, and regulatory fines. Meanwhile, third-party coverage handles lawsuits, liability claims, and customer notification costs. However, many policies exclude certain types of attacks, like those that exploit unpatched known vulnerabilities.
The fine print matters. Most policies include “duty of care” clauses that require you to maintain reasonable security standards. If you’re breached through an unpatched system or compromised credentials without multi-factor authentication, insurers may argue you were negligent and deny your claim entirely.
“Getting covered is simple – just fill out an application.”
Getting cybersecurity insurance isn’t as easy as you might assume. What used to be a straightforward application process has evolved into a rigorous evaluation that resembles a security audit.
Expect detailed questions about your network architecture, security tools, employee training programs, and incident response capabilities. Additionally, some insurers require third-party security assessments or penetration testing reports as part of the underwriting process.
Minimum security requirements are now standard, and most insurers won’t even consider coverage without these baseline controls:
- Multi-Factor Authentication (MFA) on all user accounts, administrative access, and remote connections.
- Endpoint Detection and Response (EDR) solutions with 24/7 monitoring capabilities.
- Regular, tested backups stored offline or in immutable cloud storage.
- Patch management programs with documented procedures for critical updates.
- Security awareness training for all employees, conducted at least annually.
- Incident response plans that are regularly tested and updated.
“Cybersecurity insurance will handle everything if we’re attacked.”
Many SMBs view cybersecurity insurance as a robust business solution that’s a complete solution. This misconception can lead to dangerous gaps in protection.
Insurance doesn’t prevent attacks; it helps with recovery. While your policy might cover the costs of incident response and data recovery, it won’t prevent the operational disruption, customer trust issues, or competitive disadvantages that come with a successful cyberattack.
Moreover, even with valid coverage, insurance payouts can take weeks or months to process. Your business still needs to maintain operations, pay employees, and cover immediate expenses during the claims process.
“One policy fits all businesses.”
SMBs often assume that cybersecurity insurance is a commodity product where one policy is much like another. But this couldn’t be further from the truth.
Industry-specific risks require tailored coverage. A healthcare practice needs coverage for HIPAA violations and patient data protection, while a manufacturing company might need coverage for operational technology systems and supply chain disruptions.
Business size and complexity also matter. A solo consultant needs different coverage than a 50-employee firm with multiple locations. Factors like annual revenue, data types, geographic presence, and technology dependencies all influence the appropriate coverage structure.
How SecureWon Helps SMBs Get It Right
At SecureWon, we’ve helped countless SMBs successfully secure and qualify for cybersecurity insurance through our IT support expertise. But more importantly, we help you maintain the cybersecurity standards insurers demand – and that your business genuinely needs. We offer:
- Readiness Assessments: We evaluate your current cybersecurity posture to identify gaps that could impact coverage or lead to denied claims.
- Security Control Implementation: From setting up MFA and EDR to configuring backup and recovery plans, we get your business aligned with insurance expectations.
- Ongoing Compliance Support: Insurance isn’t a one-and-done deal. We help you maintain controls that reduce risk and keep your coverage valid.
- Insurer Liaison: We help you navigate policy requirements, submit documentation, and ensure you’re not left exposed.
Get in Touch Today
Cybersecurity insurance is a critical tool for modern SMBs – but only if it’s approached the right way. Misunderstandings about what’s covered, what’s required, and how policies work can leave businesses dangerously exposed.
Get in touch for a review of your current posture, and let’s make sure you’re covered, protected, and confident.
