Is cyber insurance worth it? Pros, cons and what it really covers

In recent years, cyber insurance has stopped being a product reserved for large technology corporations and has become a priority on the agenda of small and medium-sized businesses too. Why? Accelerated digitalisation and increasingly sophisticated attacks have turned cybercrime into a multi-billion-dollar industry which, according to Cybersecurity Ventures, will cost the world more than $10 trillion a year by 2025.

But is cyber insurance really worth it? What does it cover and what doesn't it? Can a policy replace a good protection strategy? In this article we explain it without unnecessary jargon, but with the depth such an important decision deserves.

What is cyber insurance?

Cyber insurance is a policy designed to help companies mitigate the financial impact of incidents such as data breaches, ransomware, business interruption or lawsuits arising from failures to protect sensitive information. Unlike traditional insurance, it does not cover physical assets but digital assets, legal liability and recovery costs after an attack.

What does a typical policy cover (and not cover)?

The most common coverages include:

• Incident response costs, such as data recovery, forensic analysis and crisis communications.

• Third-party liability, for example if your systems leaked personal data of your clients or partners.

• Cyber extortion and ransomware, including the ransom paid (where legally permitted).

• Loss of income due to business interruption.

• Legal and regulatory costs, including administrative fines in some cases (although this varies greatly depending on local law and the policy).

What it usually does not cover:

• Damage caused by gross negligence or a total lack of basic security measures.

• Losses from phishing or financial fraud without proper validation.

• Costs of improving security after the incident (unless specifically agreed).

• Attacks classed as cyber "acts of war", which many insurers exclude contractually.

That is why it is key to read the small print and, even more importantly, not to think that having insurance replaces the need to protect your infrastructure.

Pros of taking out cyber insurance

1. Risk transfer: it helps you mitigate the financial impact of an incident that could paralyse your company.

2. Expert support at critical moments: many insurers provide incident response teams that work with you from minute zero of the attack.

3. Better processes: to obtain the policy, many insurers require certain security standards, which can become an opportunity to strengthen your internal controls.

Cons and associated risks

1. It is not infallible: a policy does not prevent reputational damage, loss of trust or operational paralysis. It only cushions the financial blow.

2. It can be expensive if you are not prepared: if your company does not meet minimum cybersecurity requirements (such as offline backups, MFA or automatic updates), the premium will probably be very high or you may even be rejected.

3. Not all policies are the same: the market is still maturing and there are big differences between insurers in terms of coverage, exclusions and conditions.

Is it worth it? It depends, but almost always yes… if done right

From our experience at Ciberseguridad 720, where we work mainly with SMEs in Spain and Latin America, we see more and more companies interested in this type of insurance. And it makes sense: a cyberattack is no longer a remote possibility but a statistical reality. In fact, the Hiscox Cyber Readiness Report 2024 states that 53% of small businesses suffered at least one cyber incident in the last year, and many of them had to stop operating for days.

But the key is to understand that insurance is the last resort. First you need an adequate security posture, with good practices, detection tools, backup systems and staff awareness. Only then can insurance be a true ally.

So how do I start?

At Ciberseguridad 720 we do not sell insurance. But we help our clients prepare to obtain it on fair terms. We carry out vulnerability assessments, help companies comply with frameworks such as ISO 27001, NIST or Spain's ENS, and support them so that cybersecurity is not an expense but an investment with a real return.

Before signing a policy, make sure you have a good diagnosis of your current situation. If you don't, let's talk. No commitment, no jargon and in full confidence.