Cyber insurance pays for costs when hackers attack your business. They steal your customer data or lock up your computers with ransomware, and suddenly you need computer experts, lawyers and customer notifications. This insurance covers those costs.
What Is Cyber Insurance?
Cyber liability insurance covers costs from ransomware attacks and data breaches that your general liability policy excludes.
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Updated: October 27, 2025
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Key Takeaways
Cyber insurance covers costs from hackers and data breaches when your general liability policy won't.
It pays for ransomware attacks and employee mistakes but excludes lightning damage and intentional theft.
Restaurants, salons and contractors need it most because they store customer data without dedicated IT support.
What Is Cyber Insurance?
Data Breach Insurance vs. Cyber Liability Insurance
These two insurance types have similar names but very different coverage:
Coverage Scope | First-party costs when your data gets stolen | Comprehensive cyber protection including data breaches |
Incident Types | Data theft and exposure events | All cyber incidents: ransomware, system failures, privacy violations |
What It Covers | Customer notifications, credit monitoring, forensic investigations | Everything data breach covers plus business interruption, ransom payments, third-party lawsuits |
Liability Protection | Limited to notification requirements | Covers lawsuits if clients sue you for failing to protect their data |
Business Interruption | Usually not included | Covers lost income from cyber incidents |
Cost | Lower premium (narrower coverage) | Higher premium but comprehensive protection |
Best For | Businesses only concerned about data theft | Most small businesses needing complete cyber protection |
OTHER BUSINESS INSURANCE YOU'LL NEED
Cyber liability insurance handles digital threats, but you'll need other type of coverage to protect against business risks your cyber policy won't address:
- General Liability Insurance: Covers customer injuries and property damage at your business location, everyday accidents that happen no matter how strong your cybersecurity is.
- Professional Liability Insurance (Errors & Omissions): Protects you when clients claim your professional advice caused financial harm, mistakes unrelated to data breaches or hacking incidents.
- Commercial Crime Insurance: Covers employee theft, check fraud and stolen cash, financial crimes that cyber policies ignore even though they often happen alongside digital fraud.
- Directors and Officers Insurance (D&O): Protects your leadership team's personal assets from shareholder lawsuits over business decisions, legal battles that cyber coverage specifically excludes.
- Employment Practices Liability Insurance (EPLI): Handles employee lawsuits over discrimination or wrongful termination, claims that drain bank accounts just as fast as cyber incidents but fall completely outside cyber coverage.
- Business Owner's Policy (BOP): Bundles property, liability and business income coverage at a discount, covering physical risks while your cyber insurance handles digital ones.
What Does Cyber Insurance Cover?
Cyber liability insurance pays for costs from hackers and data breaches, but won't cover a broken server or storm damage to your computers. The key difference is whether criminals caused the problem or something else did:
Hackers encrypt your files with ransomware | ✅ | A dental office loses access to all patient records and pays $15,000 for ransom and recovery services. |
An employee mistakenly sends customer data to the wrong email address | ✅ | An accounting firm accidentally emails tax returns to the wrong client and needs to pay for breach notifications. |
Cybercriminals steal credit card data from your website | ✅ | An online retailer discovers hackers accessed their payment system and must hire forensic experts and provide credit monitoring. |
Lightning destroys your computer server | ❌ | A restaurant's point-of-sale system gets fried during a thunderstorm, but physical damage isn't a cyber incident. |
Employee steals customer information for personal profit | ❌ | An HR manager sells employee records to identity thieves, but your policy excludes intentional criminal acts. |
Software malfunction deletes your customer database | ❌ | When software crashes, a marketing agency loses its entire client list, but technical failures aren't cyber attacks. |
A scammer tricks an employee into wiring money through fake email | ✅ | After receiving a convincing phishing email, a construction company employee transfers $25,000 to a fraudulent vendor. |
Your website crashes during routine maintenance | ❌ | A law firm's website goes offline for scheduled server updates, but planned downtime isn't a cyber incident. |
How Much Cyber Insurance Do You Need?
Focus on three key areas to find what works for your business:
Know your data risk
Think about what information hackers would want from your business. Credit card numbers and Social Security numbers create bigger problems than email addresses. Count how many customers would be affected and remember that you'll need to notify each one individually if something happens.
Understand the real costs
In addition to any ransom payments, you'll pay for computer experts to investigate, lawyers to handle legal matters and notifications to customers. A breach affecting 1,000 people can easily cost tens of thousands in required mailings alone.
Consider your industry
Some businesses face tougher rules than others. Health care and finance companies deal with strict regulations and bigger fines. If you handle client data professionally, you'll also need protection from lawsuits. Plus, many clients require specific coverage amounts before working with you.
Who Needs Cyber Insurance?
Cyber insurance isn't just for tech companies. You need it if you store customer information, even basic contact details. Hackers actually prefer targeting small businesses because you have weaker security than big corporations. Your restaurant's email list, salon booking system or contractor client database all contain valuable data cybercriminals want. Not sure if you need cyber insurance? If you handle credit cards, store personal information or maintain customer records, you're at risk.
Restaurants and Cafes
Online ordering systems, customer loyalty programs and payment processing create multiple attack points. Even your email marketing list has value to cybercriminals.
Salons and Spas
Appointment scheduling software, customer contact information and credit card payments stored on tablets or computers all need protection.
Contractors and Service Providers
Client contact lists, project details, invoicing systems and employee payroll information are prime targets for data thieves.
Retail Shops
Customer databases, payment processing systems and inventory management software contain sensitive financial and personal information.
Professional Services
Whether you're an accountant handling tax documents, a lawyer managing client files or a consultant storing business plans, sensitive client data creates considerable financial risk.
Cybercriminals know that a local business owner focused on serving customers usually lacks dedicated IT staff or advanced security systems. They can breach your systems faster and with less risk of detection than attacking a technology company with robust cybersecurity measures.
Plus, your business likely connects to larger networks through vendors, banks or clients, making you a stepping stone to bigger targets.
Cyber Liability Insurance: Bottom Line
Small business owners often assume cyber insurance is only for tech companies, but hackers also target restaurants, salons and contractors because they store valuable customer data without dedicated IT support. When these attacks happen, your general liability policy excludes digital incidents. Only cyber insurance covers the costs from ransomware attacks to employee mistakes.
Cyber Security Insurance: FAQ
Cyber insurance is worth considering, whether or not you're in the tech industry. Here are the most frequently asked questions about cyber insurance:
What's the difference between data breach and cyber liability insurance?
Data breach insurance focuses on first-party costs like customer notifications and credit monitoring after data theft. Cyber liability insurance is broader, covering data breaches plus third-party lawsuits if clients sue you for failing to protect their information. Most small businesses need comprehensive cyber liability coverage.
Is cyber insurance required?
Cyber insurance requirements don't exist for most states except for New York. However, there are requirements for companies to get the coverage type including two factor authentication, encrypted customer data and more.
How do I get business insurance that includes cyber coverage?
To get business insurance with cyber coverage, assess your current policies for gaps first. Many insurers offer cyber insurance as policy add-ons or standalone coverage. Start with your current agent because they understand your business and can bundle for savings. Compare quotes since business insurance costs vary by industry and risk factors.
What should I do immediately after a cyber attack to file a claim?
File a claim immediately because most policies require prompt notification. Document everything, from screenshots to evidence and avoid paying ransoms before contacting your insurer. Your cyber insurance provides 24/7 claims support with forensic experts, legal counsel and crisis specialists. A quick response reduces total costs and business disruption.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
He writes about economics and insurance, breaking down complex topics so people know what they're buying.