In the wake of rising ransomware, data breaches, and third-party compromises, cyber insurance has become a standard checkbox for many organizations. And rightly so—when used properly, it helps businesses recover from security incidents, both financially and operationally.
But here’s the harsh truth that too few companies understand:
Cyber insurance doesn’t cover poor cybersecurity hygiene. And it definitely doesn’t cover human error.
That “safety net” you think you have? It may have way more holes than you realize.
Cyber insurance policies typically cover financial losses related to:
Sounds solid, right?
But those coverages come with very clear terms, exclusions, and conditions.
Spoiler: If your systems were compromised due to negligence, lack of controls, or avoidable human mistakes, your claim might be reduced—or denied entirely.
According to IBM’s 2023 Cost of a Data Breach Report, 74% of all breaches involved a human element—from misconfigurations and weak passwords to falling for phishing attacks.
And yet, many cyber insurance policies exclude:
A financial firm suffered a $2M loss due to a phishing scam that convinced an employee to wire funds to a fake vendor. Their cyber insurance claim was rejected—why?
Because they didn’t have dual-authorization procedures in place, and the employee bypassed protocol.
As the volume of claims increases, insurers are tightening requirements. Many now demand proof of controls before issuing a policy or processing a claim, including:
If you don’t have these in place, good luck getting a payout—especially if your incident stems from something easily preventable.
Common Exclusions in Cyber Insurance Policies
Here’s a quick list of common (and often overlooked) exclusions found in cyber insurance policies:
Pro tip: Always review your policy with a cybersecurity expert and a legal team. Small print matters.
So What Should You Do Instead of Just Relying on Insurance?
Insurance is a safety net, not a strategy. To truly protect your organization, you need layered, proactive risk management that accounts for people, process, and technology.
Make security part of your culture—not just your tech stack.
Train employees to recognize phishing, spoofing, and social engineering attempts regularly.
Stay on top of vulnerability management. Don’t let known issues stay open for months.
Enable MFA on all accounts—especially for admin access, email, and critical systems.
Use Intelligent Risk Management (iRM) platforms like IRMCloud to monitor, assign, and validate controls continuously—not just during audits.
Test your incident response plans with real-world scenarios involving both cyberattacks and human error. See how your team reacts—and learn from it.
Don’t let a vendor’s weak controls become your breach. Conduct third-party risk assessments and demand transparency.
Cybercriminals aren’t checking your insurance paperwork before they attack. They’re targeting your weakest link—often, that’s a distracted employee or a forgotten patch.
So while insurance might help you recover, it won’t prevent the loss of customer trust, brand damage, or boardroom embarrassment that comes with a major breach.
Cyber insurance may write the check—but it won’t stop the fallout.
Cyber insurance is important. But it’s not a replacement for strategy, ownership, and accountability. Especially not when human error is the most common cause of compromise.
You don’t want to find out during a breach that your “coverage” comes with strings attached.
If your risk strategy begins and ends with an insurance policy, it’s time to level up. Contact us to talk about how we help organizations build smarter defenses—against threats and their own blind spots.
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