If you have been following our TechWise blog for any amount of time, you already know how we feel about cyber insurance. While Exigent doesn't sell insurance, we consider it a crucial element of an effective, holistic approach to cybersecurity. It's also a perfect example of the shared responsibility model for securing our customers' businesses. This month, we're going to dive more deeply into what cyber insurance is, why it's critical to protecting your organization, and the best way to prepare your business to secure the correct cyber insurance for your small business.
Key Takeaways
- Cyber insurance is evolving and providers now require documented, proactive cybersecurity measures before issuing or renewing coverage.
- Preparation builds resilience. Meeting insurer requirements like MFA, backups, and incident response improves business continuity.
- Working with a trusted MSP helps businesses align operations, security, and insurance eligibility.
What is Cyber Insurance for Small Businesses?
Much like other insurance, cyber insurance is designed to go into effect when the worst happens – a data breach, network hack, etc. While your managed services provider (MSP) will likely work closely with you to mitigate the technical side of the attack, identifying the point of vulnerability, helping protect data, re-establishing operations, and more, your cyber insurance addresses the business side. Cyber insurance is designed to offset financial losses tied to cyber incidents — but it's not a blanket "everything is covered" policy. Understanding how coverage is structured helps you avoid unpleasant surprises when you need help most.
Most policies fall into three main categories:
First-Party Coverage
This is the "direct impact on your business" side of the policy. It can help cover costs such as:
- Forensic investigations
- Data recovery and restoration
- Ransomware or extortion response (depending on the policy)
- Business interruption and lost income
- Crisis communications and incident response services
In many cases, this is the portion of coverage that helps you keep the business running while you recover.
Third-Party Coverage
This covers claims made against your organization by others — customers, partners, or regulators — such as:
- legal defense and settlement costs
- regulatory notifications and penalties
- liability related to exposed personal or sensitive data
If your organization stores, processes, or transmits any sensitive customer or employee information, third-party coverage becomes especially important.
Crime Coverage
This is often overlooked, but it's increasingly relevant as business email compromise and fraud attempts rise. Crime coverage may help in situations such as:
- Wire transfer fraud
- Invoice manipulation
- Social engineering schemes
- Financial theft resulting from account compromise
And this is where businesses frequently learn a hard lesson: If your internal financial controls aren't strong, coverage may be limited. We will talk more about evaluating your business policies and operations to prepare for the best cyber insurance coverage in a later blog.
Determining if cyber insurance is worth it for your business is fairly simple. Hint: It is. But if you are skeptical, consider this question as a business leader: How much disruption can your business tolerate?
This isn't an "IT question." It's a business decision. Ask yourself:
- How long could we operate without our IT systems?
- What would downtime cost us per day?
- What's the reputational impact of a breach (particularly if customer data is exposed)?
- How much sensitive client and other personal data do we hold?
- What obligations do we have to customers and employees?
Your risk appetite should drive your coverage decisions — not the other way around. The truth is, almost no business can survive a cyber attack without significant revenue loss, and many lose customers permanently. The reputational impact of a cyber attack far exceeds that of a natural disaster or other unanticipated disruption because many customers expect businesses to take data protection and cybersecurity seriously.
The Bad News: Cyber Insurance is Increasingly More Difficult to Secure
A few years ago, getting cyber insurance often meant answering a form and signing a check. Now insurers want proof that your organization has an integrated, purposeful approach to cyber security and data protection.
They expect businesses to have controls in place before they'll offer coverage, and often require solutions such as:
- Multifactor authentication across email, remote access, and cloud systems
- Endpoint protection and active threat monitoring
- Secure backups protected from cyber attacks and routinely tested
- Patching and vulnerability management
- Employee security awareness training
- Well-documented and thorough incident response plans
Insurers are increasingly validating the truth of your answers, and often require comprehensive documentation that is validated by your MSP.
The Good News: Preparing for Coverage Makes Your Business Stronger
Many leaders see cyber insurance readiness as a frustrating checklist. But here's the reality: getting ready for cyber insurance requirements is one of the fastest ways to strengthen your business security posture. When you implement these controls, you:
- Build more stable operations
- Reduce the likelihood of downtime
- Create stronger protection against ransomware and fraud
- Ensure faster recovery if any type of disruption happens
- Earn confidence from partners, customers, and insurers
The best way to prepare a blueprint for improvements is to work with your trusted MSP. At Exigent, our Exigent Method revolves around an ongoing business technology strategy focused on continuous improvement. Evaluating and creating a plan to resolve and improve security protocols is built into that process. Remember, focus on this challenge as an opportunity, rather than a hassle, and you may be surprised at the additional value it delivers beyond securing cyber insurance coverage.
Get our guide to preparing for cyber insurance
Tips for Small Business Cyber Insurance Success
If you want cyber insurance to work as intended, here are the practices we recommend most:
- Don't treat cyber insurance as a replacement for cybersecurity. It's a financial tool, not a security strategy.
- Review your policy annually. Businesses change, systems change, and insurers adjust coverage terms frequently.
- Document your controls. Underwriting and claims may require proof.
- Test your backups and incident response plan. Most businesses believe they can recover — until they try.
- Work with a long-term partner. Cyber insurance readiness is not a one-time project. It requires ongoing alignment between policies, security controls, and business operations. Be sure to involve your MSP in the process, and keep your cyber insurance partner looped in at all times when it comes to disruption.
Cyber Insurance is Now Part of Business Leadership
Cyber threats aren't going away. And cyber insurance providers are making it clear: businesses that invest in stronger controls will have more coverage options and better pricing. Remember, if you're renewing a policy this year or applying for new coverage, the smartest first step is not shopping for quotes, it's evaluating your risk exposure — and building the operational foundation that makes your business insurable and resilient.
At Exigent, we help SMBs across New Jersey, New York City, Denver, and Los Angeles strengthen their risk posture through Assurance Managed Services and comprehensive cybersecurity solutions — with the white-glove service and long-term partnership mindset that growth-oriented businesses need.
If you'd like a practical way to evaluate where you stand, we recommend starting with a structured cyber risk assessment and readiness roadmap.
People also read:
Essential Elements of Incident Response Planning
