The amount of cybercrime has fundamentally changed the way organizations manage risk. Cyber-attacks are no longer a question of if but when, and businesses today must protect both their digital assets and their financial stability.
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For many, cyber insurance costs have become just as critical a line item as traditional insurance. Understanding the insurance cost drivers, coverage options, and ways to lower premiums can mean the difference between resilience and financial strain after an incident.
Key takeaways
Cyber insurance costs are increasing due to rising attack volumes, larger claims, and market price corrections.
The cost of cyber insurance varies depending on factors such as company size, industry, security posture, and claims history.
Cybersecurity insurance cost reductions are possible—especially with multi-factor authentication (MFA), endpoint security, incident response planning (IRP), regular training, and secure password management.
Cyber insurance is not a replacement for security. Instead, it is financial resilience alongside strong preventive controls.
What is cyber insurance?
Cyber insurance—also known as cyber liability insurance or cybersecurity insurance—is a specialized insurance policy designed to help organizations mitigate the financial impact of a data breach, ransomware attack, business email compromise, or other digital incident.
It typically protects against:
Costs of investigating and containing a breach
Ransom payments (where permitted by law)
Legal fees and regulatory fines
Public relations and customer notification expenses
Business disruption losses
Cyber policies generally include two key coverage categories:
1) First-party insurance coverage: Direct costs to your business, such as incident response, recovery, and ransom negotiation.
2) Third-party insurance coverage: Claims made by affected customers, partners, or regulators.
For many organizations, cyber insurance has become a baseline requirement for doing business, especially when signing enterprise contracts or compliance agreements.
What is the average cost of cyber liability insurance?
Cybercrime has rapidly become one of the world’s most expensive economic threats. According to the 2023 Official Cybercrime Report, global costs reached $8 trillion USD that year and are projected to reach $10.5 trillion USD annually in 2025.
This explosion in digital crime has had a direct impact on cyber liability insurance costs.
So, how much does cyber insurance cost in real life?
While pricing varies significantly by region, industry, and risk posture, small and mid-sized companies commonly see:
| Company size | Typical annual cyber insurance cost |
|---|---|
| 1–10 employees | $500–$2,000 |
| 11–50 employees | $1,500–$6,000 |
| 51–250 employees | $6,000–$25,000 |
| 250+ employees | $25,000–$500,000+ |
Larger companies or those handling sensitive data (healthcare, finance, legal, etc.) can pay considerably more due to increased liability and compliance requirements.
Simply put: the cost of cyber insurance has increased because the cost of cybercrime has surged, too.
The 5 major factors driving your cyber insurance premium
No two cyber insurance policies cost the same. Insurers look at multiple risk factors when calculating cyber insurance pricing. Here are the most influential:
Data volume and sensitivity
Companies that store personal data, medical records, or payment information face higher payout risks in the event of a breach, increasing cybersecurity insurance costs. Insurers increasingly monitor how data is stored, classified, encrypted, and backed up before assigning a cyber liability insurance quote.
Industry and company size or revenue
Regulated industries like healthcare, finance, and retail pay more due to their strict compliance obligations. Similarly, larger companies equate to larger attack surfaces and larger claims. The combination of sensitive data and strict regulatory penalties makes cyber liability insurance significantly higher for certain sectors.
Cybersecurity posture
Security maturity directly impacts pricing. Organizations without:
multi-factor authentication (MFA)
endpoint protection
network segmentation, and
password security controls
will face significantly higher cyber insurance costs. Many insurers now decline coverage outright when basic password and access controls are missing. Here's a comprehensive list of what insurers look for.
Policy structure and limits
Higher coverage ceilings, low deductibles, and additional incident response services increase premiums. Businesses with broader insurance coverage needs should expect higher costs. Organizations often opt for layered cyber liability insurance coverage to protect against both operational downtime and legal liabilities.
Claims history and internal exposure
Previous data breach claims, employee security incidents, or poor cyber hygiene signal a higher risk, often resulting in premium hikes or even denial of coverage. Insurers increasingly treat past incidents as predictors of future claims when pricing a cyber liability insurance policy.
Why have cyber insurance premiums fluctuated so dramatically?
The cyber insurance market has undergone extreme shifts driven by three converging factors:
1. Surge in cybercrime
The pandemic-era shift to remote work massively expanded attack surfaces. Unsecured home networks, exposed cloud resources, and weak authentication have led to an unprecedented volume of breaches. Insurance providers realized their existing cyber liability insurance pricing models were no longer sustainable in a perimeter-less world.
2. Insurers responding to losses
Claims soared, especially due to ransomware, prompting insurers to double premiums in 2022, tighten security requirements, and reduce coverage allowances. Many carriers also added stricter proof-of-security clauses to their cyber liability insurance contracts.
3. Market correction
Early cyber policies were underpriced. Today’s premiums reflect a long-overdue recalibration that aligns policy costs with real-world cyber risk. The result is a more mature cyber liability insurance market that rewards risk reduction and penalizes poor security hygiene.
How to get the best price: 5 ways to lower your cyber insurance cost
While premiums have surged, companies can substantially lower their cyber insurance costs by improving their security measures. Here are five insurer-approved strategies that directly impact pricing:
1. Implement mandatory security requirements
Multi-factor authentication (MFA) is one of the biggest premium reducers an organization can deploy. Many insurers now consider MFA non-negotiable.
2. Establish strong, air-gapped backups
Ransomware claims have been the single biggest driver of premium increases. Organizations with immutable, encrypted, and air-gapped backups are far less likely to pay a ransom, making them lower-risk clients for insurers.
3. Develop a documented incident response plan
A formal incident response plan demonstrates preparedness, shortens breach dwell time, and reduces the financial impact of a breach. Insurers reward organizations that can prove that their processes, teams, and escalation paths are pre-established.
4. Deploy advanced endpoint detection and response (EDR/XDR)
Modern cyber threats require automated detection and mitigation. EDR and XDR tools significantly improve response speed, reduce breach impact, and signal strong security maturity to underwriters.
5. Conduct regular employee cybersecurity training
Human error is responsible for the majority of breaches, especially phishing, credential theft, and business email compromise. Regular training makes your team a security asset rather than a vulnerability.
One of the most effective ways to reduce human-led breaches is by deploying a business password manager. NordPass Business empowers employees to generate, store, and share credentials securely, reducing the risk of password-related incidents.
What is not covered by cyber insurance?
Even the most robust cyber liability insurance policy has exclusions. Common non-coverages include:
Losses resulting from negligence (e.g., no MFA, weak access policies)
Insider fraud or intentional employee misconduct
Unpatched known vulnerabilities
IT maintenance failures that lead to downtime
Reputational damage without direct financial loss
War, state-sponsored cyberattacks (often excluded explicitly)
Cryptocurrency losses from uninsured wallets or exchanges
It’s also becoming standard for insurers to require proof of minimum security controls before approving a claim—especially in the event of ransomware, business email compromise, or a data breach.
How cyber insurance and strong password security work together
Insurers don’t just sell coverage—they assess risk. The more preventable the breach, the less likely the payout. Credential-based attacks are now one of the leading causes of cyber claims. Poor password practices can lead to:
Account takeover and system intrusion
Data breach or data theft
Business interruption
Denied insurance claims (if MFA, monitored access, or password controls were missing)
This is why many cyber policies explicitly assess identity and access security maturity during underwriting. Strong password governance isn’t just “good practice” anymore—it’s evidence that a breach wasn’t caused by negligence.
Tools like NordPass help organizations demonstrate enforced password policies, secure credential storage and sharing, controlled access during offboarding, audit trails, and usage visibility. These capabilities increasingly align with what insurers look for when deciding on coverage, approving premiums, and determining claim eligibility.
Final thoughts
Cyber insurance is essential, but it’s not a substitute for cybersecurity. It’s a financial safety net rather than a guaranteed payout. The organizations most likely to receive full coverage are those that prove security readiness before a claim ever happens.
Insurance protects your business after a breach. Strong credential and access security measures protect your business from avoidable breaches and help ensure that your insurance actually covers you if the worst happens.
Frequently asked questions
How much does cyber insurance cost for a small business?
Most small businesses pay between $500 and $6,000 per year, depending on data sensitivity and security maturity. However, companies handling regulated data should expect cyber liability insurance rates on the higher end of that range.
Does cyber insurance cover employee mistakes?
It can, but only if basic safeguards like MFA, access controls, and cybersecurity training are in place. Without those controls, cyber liability insurance claims tied to human error may be partially or fully denied.
Will cyber insurance cover a ransomware payment?
Many policies will, but coverage is shrinking. Insurers prefer businesses that can recover from backups instead of paying a ransom. Due to increasing regulatory pressure and the growing scale of cyber threats, ransom payments are also reviewed more strictly in cyber liability insurance claims.
Is cyber insurance mandatory?
No, not legally. However, for many organizations, it has become a contractual requirement, especially in enterprise, finance, healthcare, and government supply chains, where data breach risks are heavily scrutinized.
Can a cyber insurance policy replace cybersecurity tools?
No. Cyber liability insurance is a form of risk transfer, not risk prevention, and insurers are increasingly requiring proof of security controls before issuing or honoring a policy.