A strong cybersecurity poster should be multifaceted.

Defense-in-depth, zero trust, vulnerability management, multifactor authentication, and next-generation firewalls are all strategies that modern information security practitioners rely on to guard their organizations.

However, there’s an unfortunate truth about cybersecurity: it’s a game of probability. Should the odds ever turn in favor of the adversaries, your company needs cyber insurance as a final line of defense to guarantee its survival better.

“It’s essential to understand that in the rapidly evolving digital landscape, cybersecurity is not just a technology issue, but a critical business imperative.” ~Jeremy Wanamaker, CEO of Complete Network

Here, we’ll help you understand all the nuances of cybersecurity insurance costs. We explore the different types of policies and discuss key factors that influence premiums and deductibles while also providing actionable steps you can take to manage and reduce these costs.


What is Cyber Insurance, and Why is it Important?

S&P Global cites cyber insurance as the fastest-growing sector in the insurance market. Premiums in this space are on pace, reaching nearly $23 billion by 2025, up from $12 billion in 2022. Generally, cyber insurance falls into one of two major categories: first-party cyber insurance and third-party cyber insurance.

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What is First-Party Cyber Insurance?

First-party cyber insurance assists in addressing security incidents that directly target your business networks and systems.

  • Costs associated with recovering lost or damaged data
  • Notification of affected parties in the event of a data breach
  • Costs related to regulatory compliance and fines
  • Public relations campaigns to restore the company’s reputation
  • Credit monitoring services for individuals impacted by the incident
  • Expenses for hiring computer forensic experts to analyze the root cause
  • Paying ransoms to cyber extortionists to release the systems or data they’re holding hostage


What is Third-Party Cyber Insurance?

Whereas first-party insurance covers direct damage incurred by the policyholder, third-party insurance covers liabilities and losses claimed by external parties due to the fault or actions of the policyholder.

  • Insufficient security leading to unauthorized access of third-party systems
  • Mishandling or misuse of personal data, violating privacy regulations
  • Breach of cybersecurity-related contractual agreements with third-party entities
  • Failure to adhere to cybersecurity regulations
  • Extended periods of downtime impacting external business partners or clients
  • Inadequate protection affecting the security of partners or vendors
  • Negligence resulting in the compromise of confidential client data

How Much Does Cyber Insurance Generally Cost?

Most small to medium-sized business leaders are often pleasantly surprised to discover that cybersecurity insurance won’t break the bank.

However, that’s assuming providers don’t see your company and its people as high risk. On average, a typical US-based organization with a moderate level of cyber risk will pay an annual insurance premium of roughly $1,740 (or $145 per month) for $1,000,000 of coverage.

Of course, this figure varies from state to state and industry to industry. For example, a healthcare provider in Minnesota will tend to pay higher premiums than a plumbing contractor in New Mexico. Also, as hacks, breaches, and ransomware attacks continue to trend upward, premiums will continue to rise in concert. Some policyholders have seen increases as high as 80% from one year to the next as carriers adjust to changes in the cyber threat landscape.


Factors that Influence How Much Cyber Security Insurance Costs

This section examines the top factors and traits insurers will scrutinize to calculate your organization’s cyber-risk profile.

Cyber Hygiene

At the onset of the underwriting process, carriers will assess your cyber hygiene to evaluate the organization’s susceptibility to threats.

Broadly speaking, cyber hygiene refers to the set of practices and measures the organization employs to maintain a secure and resilient cybersecurity posture. Key factors include regular patching of software and systems, employee awareness training, effective access controls, incident response planning, and adherence to industry best practices and compliance standards.

Strong cyber hygiene implies a lower risk profile, thus influencing insurance costs favorably.

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Incident Response Planning

Incident response planning is a critical aspect of a company’s cybersecurity strategy. It demonstrates forward-thinking leadership and enables swift, organized, and effective responses to security breaches.

As such, organizations with well-developed incident response plans are often viewed as lower-risk clients, contributing to better terms and lower premiums.

Coverage Limits and Add-Ons

High coverage limits mean the provider may be liable for larger payouts in the event of a cyber incident. This heightened level of financial commitment naturally increases the overall cost of insurance. To boot, add-ons (also called endorsements or riders) will add to these costs.

Add-ons allow organizations to customize their insurance policies based on their specific cybersecurity needs and risks, tailoring coverage to address vulnerabilities or threats unique to a particular industry, niche, or region.


Key Factors Influencing Cyber Insurance Costs:

Factor Description Impact on Insurance Cost
Cyber Hygiene Assessment of the organization’s security practices, including software patching and employee training. Directly affects premiums
Incident Response Planning A measure of the organization’s preparedness and ability to respond to security breaches. Lower risk, lower premiums
Coverage Limits & Add-Ons The extent and customization of the insurance coverage. Higher limits increase cost
Claims History Past record of breaches and incident responses. Affects risk assessment
Vendor/Supply Chain Risks Exposure to third-party risks and vulnerabilities. Higher risk, higher cost

Claims History

Claims history serves as a foundational metric in the pricing dynamics of all insurance products, especially cyber insurance.

An organization’s claims history is essentially its track record of past breaches, incident response, and cybersecurity maturity. It provides insurers with valuable insights into the organization’s risk profile, management practices, and overall resilience against attacks.

Vendor / Supply Chain Risks

Vendor risk in the scope of the cybersecurity insurance landscape refers to the potential threats and vulnerabilities that extend to third parties beyond the organization’s immediate control. It’s common for companies to furnish contractors, vendors, or service providers with unfettered access to highly sensitive systems, data, or networks.

Cybercriminals are aware of this fact, which is why there has been an uptick in supply chain attacks recently. The Solar Winds hack of 2020 is a stark example of how impactful these attacks can be. From the carrier’s point of view, more vendors equals higher risk meaning increased insurance costs.


Tips for Managing Cyber Insurance Costs

Now that you know the average cost of cyber insurance for moderate-risk SMBs and understand the key factors that carriers consider in calculating this price, let’s explore best practices that showcase a mature and resilient security posture.

Use NIST as a Guideline

Using NIST 800-171 can help any organization boost its cybersecurity confidence. It’s a free and highly effective security framework from the National Institute of Standards and Technology, designed to strengthen the cybersecurity of organizations working with the federal government.

Despite the obvious differences between cyber insurance providers and the government, they both share a common goal of reducing security risks for the businesses they work with. By following cyber guidelines such as NIST 800-171, insurance companies are likely to see your organization as security-conscious and lower-risk.

Disaster Readiness and Backups

Demonstrating proactive risk management via effective offline backups and disaster readiness planning signals to carriers your commitment to delivering business continuity and minimizing potential financial losses caused by downtime and outages.

Insurers appreciate the foresight exhibited through robust preparedness, as it reflects a dedication to ensuring swift recovery, ultimately contributing to more secure and stable business networks and systems. As a result, organizations with a strong emphasis on secure backups and preparedness are perceived as ideal clients.

Always Configure Multi-Factor Authentication (MFA)

Whether guessed, brute-forced, or phished, passwords represent alluring targets for hackers since they grant direct access to vital systems. In fact, stolen or compromised passwords rank among the top sources of data breaches today. Yikes!

The solution to this problem comes in the form of Multi-Factor Authentication (MFA). MFA, as the name implies, requires a user to authenticate multiple forms of their identity before access is granted.

Common examples include entering a password plus a one-time pin, biometric scan, smart card, facial recognition, geofencing, or digital cert. Ultimately, MFA fortifies systems and networks by introducing an additional layer of security, hindering the vast majority of attacks rooted in compromised credentials.

Cybersecurity Insurance Costs

Get Help from a Veteran Cyber Insurance Team with Complete Network

Navigating the intricacies of cyber insurance is no task for the faint of heart. Instead of venturing into this terrain on your own, a more prudent approach is to engage the services of a reliable IT partner.

Trusted Cybersecurity Services Near You

The Complete Network team has decades of experience and knowledge in the cybersecurity field, helping organizations fortify their defenses against the ever-evolving landscape of modern threats.

If you’d like to learn how an IT partner can help you save on your cyber insurance costs, reach out today at 844 426 7844 or [email protected].

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