Anuj Kasera
By Anuj Kasera
Insurance agents are always trying to get the best policy for their customers and it is a delicate balance between costs and coverage. A cheap policy does not mean anything if it fails to cover you when needed. I regularly have this conversation with my customers, especially business owners as they try to reduce their expenses during these inflationary times.
One coverage that comes up is cyber insurance. Just recently, I was talking to a gas station owner about the need to have this policy as we were reviewing his coverage during renewal. So let us dig deeper into this coverage.
Compared to the regular insurance coverages like home or business insurance, cyber insurance is relatively new and increasingly important for businesses. Cyber insurance is a type of insurance policy that helps a business cover financial damage resulting from cyber-attacks or data breaches. This coverage is becoming more important as both the cost of data breach and number of cyber-attacks continue to rise. Initially, cyber policies were add-ons to traditional liability coverage for companies in the tech and security industries.
The pandemic and AI completely changed the dynamics of this coverage. Remote work and ease of hacking have dramatically increased the threat landscape.
Note that cyber insurance does not prevent cyber-attacks. It will cover financial damage resulting from a cyber attack on your business. This is especially important for businesses that store personal customer information like pharmacies or accept and retain customer financial information like hotels, online stores, and others.
Local businesses, like real estate professionals, who may store the customer information on their system, are also prime targets as they have access to financial data of their customers.
A massive May 2026 data extortion event on Canvas, the lead system used in most schools and colleges refocused the growing impact of cyber threat. Unfortunately, these attacks are not limited to big businesses. Cyber-attacks targeting small businesses are at all time high and now account for 43% of all attacks.
With AI-generated phishing and AI-generated malware, the number is only expected to increase. Gone are the days of the Nigerian prince reaching out via emails with spelling errors. Now, sophisticated AI malware which has access to your information available on the dark web, will be able to generate phishing attacks on your system and cause damage without you even realizing it.
Cyber insurance typically covers damage resulting from data breaches, ransomware attacks and phishing attacks. It also covers resulting expenses like data recovery efforts and lawsuits. As you can imagine, the costs can be substantial and are not covered by your regular business liability coverage, like errors and omissions or general liability. One of the biggest costs of cyber attack is the business disruption expense.
As we transition to cloud and most of our data is now stored online, the risk of getting attacked has increased.
Coverage is divided into two major parts: 1) First party losses – direct costs incurred by your business due to a cyber-attack event and 2) Third party losses – cost associated with claims from others impacted by a cyber attack at your company.
First party losses:
Major coverages include:
• Data restoration: Restoring or retrieving lost data
• System restoration: Repairing impacting software/hardware systems
• Ransomware payments: Money paid to release your data
• Notification costs: State mandated communication that must go out to each customer impacted
• Business interruption: Covering the impact on closed/reduced business
Third party losses:
• Lawsuits: Pays for defense costs for lawsuits brought against your company for negligence
• Fines and penalties: Pays for damages incurred by third parties
Cyber insurance is rapidly involving. Insurance companies are still trying to understand and learn about the impact of cyber-attacks. Note that unlike other regular offerings like auto or home insurance, cyber coverage may differ widely between providers.
Each insurer has its own policy and language. So make sure that you understand the coverages and limitations. Reach out to your agent if you have concerns or want to know more about this coverage.
Anuj Kasera is a long term resident of Charlotte, NC and owns an insurance agency, focusing mostly on home, auto and business insurance. He can be reached at anujkasera@gmail.com.
