Small Businesses Have $12,100 to Cover $264,000 Cyber Claims

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The numbers don't add up for small businesses: The median business holds $12,100 in cash reserves. The average cyber insurance claim now costs $264,000. That's a 22-to-1 mismatch between available cash and insurable risk.

MoneyGeek calls this the "Insolvency Gap,” the chasm between what businesses hold and what they risk. It's widening rapidly. The 2016 JPMorgan Chase Institute study showed businesses holding roughly 27 days of operating expenses in cash. More recent 2025 data reveals the situation has worsened: 39% of small businesses now have less than one month of cash reserves, while NetDiligence's cyber claim data jumped nearly 30% year-over-year from $205,000 (2024 report) to $264,000 (2025 report).

Though 92% of small businesses now carry some form of business insurance, 74% remain underinsured with large coverage gaps. The result: Small businesses are treating insurance as a compliance checkbox rather than what it actually is, contingent capital that can transform a $264,000 liquidation event into a $125 monthly expense.

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THE PROBLEM, THE RISK, THE SOLUTION

The Cash Crisis:

  • Median small business historically held $12,100 in cash reserves (27 days of expenses)
  • 39% of small businesses now have less than one month of cash reserves
  • 74% of small businesses are underinsured with large coverage gaps
  • Only 8% remain completely uninsured, but coverage gaps leave most exposed

The Cost Surge:

  • Average cyber claim for small and medium-sized businesses (SMEs) is $264,000 (nearly 22x the typical historical cash buffer)
  • Cyber claims up 30% year-over-year (2024 baseline: $205,000 → 2025: $264,000)
  • Small business cyber incidents average $79,000 in direct costs
  • Claims with business interruption cost 650% more than claims without

The Affordable Bridge:

  • General Liability: $21/month closes a $30,000+ lawsuit gap
  • Cyber Liability: $125/month closes a $264,000 breach gap
  • Professional Liability: $61/month closes a $50,000+ negligence gap
  • Business Owner's Policy: $57/month closes a six-month revenue gap

The Insolvency Gap Explained

A small business with $12,100 in the bank gets hit with a cyberattack. Coalition Insurance's direct incident data shows small business incidents average $79,000 in immediate remediation costs. On paper, the business is underwater by nearly $67,000.

In reality, it often closes within 90 days.

That $79,000 covers only immediate incident costs and doesn't account for the full scope of cyber incident expenses. When NetDiligence's analysis includes forensics, legal fees, regulatory costs and business interruption, cyber incidents average $264,000. This wipes out typical cash reserves nearly 22 times over. Crisis services alone (forensics, legal counsel, breach notification and public relations) average $152,000 for SMEs. Claims with business interruption cost 650% more than those without, turning manageable incidents into business-ending catastrophes.

According to the JPMorgan Chase Institute's 2016 analysis (the most comprehensive banking study of small business cash flows), the median small business holds an average daily cash balance of $12,100, representing 27 days of buffer. More recent 2025 data from Bluevine shows 39% of small businesses now have less than one month of cash reserves, and 38.7% cannot cover a month's operating expenses in an emergency. If revenue stops today, these businesses close within weeks.

Meanwhile, the cost of a cyber claim has increased 30% year-over-year. While NetDiligence's five-year average stands at $246,000, recent incidents are reaching $264,000 as crisis services and business interruption costs escalate:

  • 2024 Data: $205,000 average SME claim (NetDiligence 2024 Report)
  • 2025 Data: $264,000 average SME claim (NetDiligence 2025 Report)

The gap between what businesses hold and what they risk has widened by $59,000 in one year. Without insurance, a single bad day isn't an expense. It's a liquidation event.

How Much Does It Cost to Close the Gap?

The Insolvency Gap is big, but the cost to bridge it is surprisingly low. MoneyGeek's analysis of 2,400+ insurance quotes shows small businesses can secure necesssary coverage for less than the cost of daily coffee. Costs shown represent typical premiums for standard-risk profiles; actual rates vary by industry and risk factors.

Customer slip-and-fall lawsuit
$30,000+
General Liability
$21
Data breach or ransomware
$264,000
Cyber Liability
$125
Professional negligence claim
$50,000+
Professional Liability
$61
Fire with extended downtime
6 months revenue
Business Owner's Policy
$57
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MONEYGEEK EXPERT TIP

For $21 per month (just 70 cents per day), a business can bridge a $30,000 liability gap. Comprehensive coverage across all four risk categories costs $264 per month, or less than $9 per day.

Understanding general liability insurance is the first step toward closing these coverage gaps.

Three Paths to Insolvency

Three scenarios account for most small business failures due to the Insolvency Gap:

  1. 1
    Cyber Attacks: The $264,000 Threat

    While cyber insurance adoption has grown, 77% of small businesses still lack cyber coverage, leaving the majority exposed. When a ransomware attack strikes a business with limited cash reserves, Coalition Insurance data shows the average small business cyber incident costs $79,000 in direct remediation. NetDiligence's analysis, which includes crisis services ($152,000 average) and business interruption, shows average claims reaching $264,000. Either figure can be catastrophic for a business holding weeks of cash, not months.

    Cyber Liability insurance (around $125 per month for standard-risk micro-businesses) covers not just ransom payments but also forensics teams, legal counsel and breach notification costs that small businesses can't afford to hire on retainer. The average claim of $264,000 would bankrupt the typical small business. The insurance premium won't.

  2. 2
    Natural Disasters: The Downtime Killer

    40% of small businesses never reopen after a disaster. It's rarely the physical damage that kills the business. It's the downtime.

    71% of businesses lack Business Interruption Insurance, meaning they have zero revenue while their building is being repaired. NetDiligence's 2025 analysis reveals claims with business interruption cost 650% more than claims without interruption (a devastating multiplier that transforms a manageable incident into bankruptcy). A fire might be covered by property insurance, but without interruption coverage, there's no cash flow to pay rent, payroll or suppliers during the months-long reconstruction.

    A Business Owner's Policy bundles property, liability and business interruption coverage for roughly $57 per month. It ensures a fire doesn't become a bankruptcy.

  3. 3
    Liability Claims: The Everyday Risk

    Only 8% of small businesses carry no insurance at all, but 74% are underinsured with major coverage gaps. This false sense of security may be more dangerous than having no coverage at all.

    Yet the smallest businesses (those with revenue under $1 million) pay seven times more in tort liability costs relative to revenue than businesses with $50 million or more in revenue. A single customer slip-and-fall can trigger legal defense costs exceeding $12,000 before a judge even hears the case.

    Physical risks: General Liability coverage starts at $21 per month and covers customer injuries, property damage and legal defense costs.

    Professional risks: For service businesses like consultants and IT providers, Professional Liability insurance covers negligence claims averaging $50,000 or more. Coverage costs roughly $61 per month.

Insurance Is Contingent Capital

Every business day, small businesses close due to insurable events they couldn't afford. The Insolvency Gap isn't a crisis. It's arithmetic.

In an era where cyber incidents cost small businesses $79,000 in direct remediation (and reach $264,000 with crisis services included) while 39% hold less than one month of cash reserves, the buffer is insufficient. The 650% cost multiplier for business interruption transforms temporary setbacks into permanent closures. Business owners must stop viewing insurance as a regulatory box to check and start viewing it as contingent capital: the only financial instrument that can turn a business-ending expense into a manageable monthly line item.

Methodology

MoneyGeek synthesized data from the JPMorgan Chase Institute's "Cash is King" report (analyzing 470 million transactions from 597,000 small businesses, 2016), Bluevine's 2025 Cash Flow Management Survey (774 business owners surveyed September to October 2025), NetDiligence's Cyber Claims Studies (2024 Report published September 2024 covering 2019 to 2023 incidents and 2025 Report published September 2025 covering 2020 to 2024 incidents, analyzing 9,000+ and 10,402 claims), Coalition Insurance's 2025 claims data, Hiscox Global Protection Gap Report 2025 (6,250 SME respondents) and NEXT Insurance's 2025 Business Coverage Report.

Insurance premium data is based on MoneyGeek's business insurance analysis of 2,400+ quotes from major national carriers including The Hartford, Progressive and State Farm for sole proprietors and small businesses across 20+ industries. For detailed breakdowns of small business insurance costs across industries, see our comprehensive cost analysis.

Statistical Note: This analysis compares median small business cash reserves (representing typical resources) against average cyber claim costs (representing potential exposure), as businesses encounter the full range of claim severity regardless of their typical cash position. NetDiligence reports both a five-year pooled average ($246,000 for 2020 to 2024 data) and year-over-year trending figures, with 2025 data showing recent incidents averaging $264,000 (a 30% increase from the 2024 baseline of $205,000). This study emphasizes current incident costs to reflect today's risk environment. Cyber insurance premiums vary widely ($83 to $625 per month) based on risk profile. The $125 per month figure represents a typical cost for micro-businesses with standard risk profiles.

About Nathan Paulus

Nathan Paulus headshot

Nathan Paulus is the Head of Content at MoneyGeek, where he conducts original data analysis and oversees editorial strategy for insurance and personal finance coverage. He has published hundreds of data-driven studies analyzing insurance markets, consumer costs and coverage trends over the past decade. His research combines statistical analysis with accessible financial guidance for millions of readers annually.

Paulus earned his B.A. in English from the University of St. Thomas, Houston.

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