What is Cyber Insurance: Types, Coverage and Benefits

  • postauthorOnsurity Editorial
  • postdateJuly 10, 2024
  • postreadtime11 min read
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Cyber Insurance

India is digitizing swiftly. From e-commerce brands to online payment systems, everything is at a surge. According to a DSCI report, it is estimated that India’s rapidly growing digital ecosystem will contribute over 20% to the country’s GDP by 2026. However, with digital evolution, India has also emerged as the most targeted country in terms of cyberattacks, accounting for 13.7% of all attacks worldwide.

Indian government agencies witnessed a 95% increase in cyberattacks in 2022, as compared to the previous year. Industries including healthcare, education, research, government, and military sectors have emerged as the most vulnerable, followed by agriculture, logistics, transportation, the energy industry at large, high-tech enterprises, pharmaceutical companies, and medical equipment manufacturers.

As threats get more sophisticated, the importance of cyber insurance cannot be overstated. Cyber insurance not only offers financial protection against data breaches and ransomware attacks but also provides crucial support in navigating the complexities of cyber incidents.

In this article, we will discuss in detail about what cyber insurance is, why you need one, and what it covers and doesn’t cover. Let’s start with the basics first!

Also, Read: What is Directors and Officers (D&O) Liability Insurance?

What is Cyber Insurance?

Cyber insurance helps businesses in achieving financial recovery in the event of cyberattacks, data breaches, and other forms of cybercrimes. It pays for legal costs, data recovery expenses, and the costs of communicating with customers amongst other things.

With tightened regulatory requirements and growing awareness, more Indian businesses are recognizing the value of cyber insurance. This trend is important in ensuring that the nation’s burgeoning industries remain resilient and secure, creating a safer digital ecosystem for all stakeholders.

Evolution of Cyber Risk Insurance

In the fast-growing digital world, cyber insurance demand has seen a pivotal shift in how businesses protect themselves from the unseen risks of the internet. From its inception as a niche product to its current status as an essential cover, the evolution of cyber insurance is a testament to the growing recognition of cyber threats and the innovative solutions developed to counter them.

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evolution of cyber insurance

1. The Early Days: A Niche Market

The concept of cyber risk insurance first emerged in the late 1990s, a period when the internet was growing quickly, but the awareness of cyber threats was relatively low. Early adopters were primarily tech companies and financial institutions, who understood the potential risks associated with data breaches and cyber-attacks. Policies were rudimentary, often covering basic liabilities such as data loss and business interruption.

2. 2000s: The Digital Boom and Rising Awareness 

As the Internet became an integral part of business operations, the early 2000s saw a dramatic increase in cyber-attacks. Some high-profile breaches, such as those affecting Yahoo and TJX Companies, highlighted the severe financial and reputational damage that cyber incidents can bring. This period catalyzed the growth of the cyber insurance market, with more comprehensive policies emerging to cover a wider range of cyber risks, including legal fees, notification costs, and public relations expenses. 

3. The 2010s: Mainstream Acceptance and Expansion 

The 2010s marked the mainstream acceptance of cyber insurance, driven by regulatory changes and the rapid increase of cyber threats. The introduction of stringent data protection laws made it necessary for businesses to manage cyber risks proactively. Insurers responded by offering tailored insurance products, catering to diverse industry needs.

4. Cyber Insurance in India: A Growing Market 

India’s digital economy is rapidly expanding and is among the fastest-growing globally. However, this growth has led to an increase in cyber threats. According to a report by Invest India, the Indian cyber insurance market is expected to grow at a rate of 30% per year.

To address the rising need for strong cyber security measures, Indian insurers are now offering specialized policies. These policies are designed to meet the specific needs of Indian businesses, ranging from small enterprises to large corporations, and provide coverage for issues like data breaches and cyber extortion.

5. Today and Beyond: A Critical Component of Risk Management 

Today, cyber risk insurance is no longer an optional add-on but a very important component of a comprehensive risk management strategy. The insurance sector keeps growing and offering cutting-edge solutions to assist companies in mitigating and recovering from cyber catastrophes as cyber threats grow more complex.

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How Does Cyber Insurance Work?

Cyber insurance, a much-needed financial product in the digital age, protects businesses from financial losses due to cyber-attacks and data breaches. This specialized coverage helps cover costs such as legal fees, data recovery, and even public relations efforts to manage the fallout.

In India, the demand for cyber insurance is rising as companies become more aware of digital risks. With a surge in cybercrimes, Indian businesses are seeking robust policies to mitigate potential damages. Cyber insurance in India is evolving, offering tailored solutions to protect against ever-growing threats.

Why is Cyber Insurance Important for Your Business?

In this modern digital world, cyber threats are increasing, posing significant risks to businesses of all sizes. In this case, cyber insurance becomes a vital shield against these perils.

It goes beyond the protection of data breaches; it safeguards your business against financial losses arising from cyber incidents like ransomware attacks or system hacks. Investing in cyber insurance fortifies your resilience, ensuring operational continuity and mitigating potential liabilities. 

Types of cyber insurance coverage

types of cyber insurance coverage

1. Cyber Liability Insurance 

Cyber liability insurance is a critical coverage that protects businesses from the financial fallout of a data breach or cyber-attack. It covers legal fees, settlements, and regulatory fines, ensuring your company doesn’t face crippling costs due to compromised sensitive information or systems.

2. Network Security Insurance 

This coverage focuses on protecting your business from losses associated with network security failures. It covers incidents such as hacking, malware infections, and ransomware attacks. Network security insurance ensures your business can recover swiftly from cyber threats, covering the costs of investigation, remediation, and communication with affected parties.

3. Data Breach Insurance 

Data breach insurance provides financial support for businesses dealing with the aftermath of a data breach. This includes covering the costs of notifying affected customers, providing credit monitoring services, and managing public relations efforts. It helps maintain customer trust and minimizes reputational damage.

4. Business Interruption Insurance

When a cyber incident disrupts your operations, business interruption insurance steps in to cover lost income and extra expenses incurred while getting back on track. This coverage ensures your business can survive the downtime and continue to pay bills, employees, and other crucial expenses until normal operations resume.

Also, Read: D&O Insurance for Businesses

Who Needs Cyber Security Insurance?

In today’s digital age, cyber security insurance is essential for businesses of all sizes and sectors. From retail stores and healthcare providers to financial institutions and tech companies, any organization that handles sensitive data is at risk of cyber threats.

Small and medium-sized enterprises (SMEs), in particular, can benefit greatly from this coverage. They often lack the resources to recover from a significant cyber attack. Educational institutions, government agencies, and even non-profits are also prime targets for cybercriminals.

Investing in cyber security insurance can help protect your business from financial losses, reputational damage, and legal issues resulting from data breaches.

Key Benefits of Cyber Insurance

Here are some of the key benefits of cyber insurance:

  • Tailored Coverage: The policy is customizable to meet specific business needs, incorporating essential components as required.
  • Comprehensive Protection: It provides extensive coverage against various potential threats such as social media liabilities, cyber stalking, phishing, and cyber extortion.
  • Financial Safeguard: In case of a cyber-attack, the insurance covers defense and prosecution costs, alongside other related expenses. This ensures financial protection for the policyholder.
  • IT Consultant Services: The policy also includes coverage for expenses related to hiring IT consultants. They assess and quantify losses resulting from covered incidents, offering specialized services to mitigate cyber risks.

Quick Read: Commercial General Liability (CGL) Insurance

What is Covered in Cyber Insurance Policy?

1. Legal Representation Costs

Coverage for legal expenses incurred due to cyber incidents, including hiring lawyers and legal consultants to navigate regulatory investigations or defend lawsuits related to data breaches.

2. Malware Attack

Protection against damages caused by malicious software designed to disrupt or gain unauthorized access to computer systems, leading to data loss, system downtime, or other financial losses.

3. Identity Theft

Coverage for costs associated with identity theft events, such as unauthorized use of personal information or financial accounts resulting from a cyber incident.

4. Cyber Intrusion Losses

Compensation for financial losses incurred directly due to unauthorized access or cyber intrusion into the insured’s computer systems or networks.

5. Phishing

Insurance against losses resulting from fraudulent attempts to obtain sensitive information (such as passwords or credit card details) by posing as a trustworthy entity in electronic communications.

6. Cyberstalking

Coverage for expenses related to harassment or threats carried out through electronic means, including monitoring and legal actions taken to protect against cyberstalking incidents.

7. Cyber Extortion

Protection against financial losses resulting from threats of extortion involving the unauthorized disclosure, damage, or denial of access to data or computer systems.

8. Data Breach or Privacy

Coverage for costs related to the investigation, notification, and recovery efforts following a breach of personally identifiable information (PII) or sensitive data.

9. Computer Forensics

Reimbursement for expenses associated with conducting forensic investigations to determine the cause and extent of a cyber incident, aiding in recovery and mitigation efforts.

10. Reputational Damage

Compensation for costs incurred to restore the insured’s reputation or public image following a cyber incident that negatively impacts public perception or trust.

11. Fines and Penalties

Coverage for regulatory fines or penalties imposed due to non-compliance with data protection laws or regulations following a data breach or cyber incident.

12. Extended Reporting Period:

A provision allowing for the reporting of claims related to incidents that occurred during the policy period but were reported after the policy’s expiration, ensuring continuous coverage for events that may have occurred but were discovered later.

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What Does Cyber Insurance Not Cover?

  • Physical Injury, Disease, Disability, Sickness, or Death: Cyber insurance typically does not cover bodily harm or health-related issues resulting from cyber incidents.
  • Incidents/Litigations Prior to Policy Commencement: Events that occurred before the insurance policy came into effect are generally not covered.
  • Losses or Damages Caused by War or Government Actions: Damages arising from war, military actions, or governmental interventions are excluded from coverage.
  • Dishonest or Improper Conduct: Losses resulting from fraudulent, dishonest, criminal, or intentionally wrongful acts are not covered.
  • Contractual Liability: Financial liabilities that arise from a contractual agreement, unless specifically covered, are typically excluded from cyber insurance policies.

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Who is Covered Under Cyber Insurance?

1. Businesses

Cyber insurance typically covers businesses of various sizes and industries, protecting them from financial losses due to cyber incidents like data breaches and ransomware attacks.

2. Government Entities

Some cyber insurance policies extend coverage to government agencies and institutions, offering protection against cyber threats that could disrupt operations or compromise sensitive information.

3. Nonprofit Organizations

Nonprofits can also be covered under cyber insurance policies, safeguarding their operations and donor information from cyber risks.

4. Healthcare Providers

Healthcare organizations are often covered, ensuring patient data privacy and protecting against cyber threats that could impact medical services.

5. Individual Professionals

Certain cyber insurance policies may cover independent professionals such as consultants and freelancers, offering liability protection for services provided.

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What Factors Affect the Cost of Cyber Insurance?

 Here are certain factors that affect the cost of cyber insurance:  

  • Company Size: The size of the business significantly affects the cost, with larger organizations typically paying higher premiums due to greater exposure and more complex risk profiles.
  • Industry Risk: Industries with higher susceptibility to cyber threats, such as finance and healthcare, generally face higher insurance costs due to the increased likelihood and potential impact of cyber incidents.
  • Security Measures: Businesses that have robust cybersecurity measures in place, such as encryption, regular security audits, and employee training, often qualify for lower premiums.
  • Coverage Limits and Deductibles: Higher coverage limits and lower deductibles result in higher premiums, as they offer more extensive financial protection against cyber incidents.
  • Claims History: A company’s history of cyber incidents and insurance claims can influence premiums, with a higher frequency or severity of claims leading to increased costs.

Related Read: Cost of Health Insurance for Small Business Owners

How to Choose the Right Cyber Insurance Company for Your Business? 

Here are 5 points you must keep in mind while choosing the right insurer for your insurance requirements:

  • Coverage Needs: Assess your specific cybersecurity risks and determine the coverage required.
  • Policy Customization: Look for insurers that offer customizable policies tailored to your business size and industry.
  • Claim Settlement Experts: Choose insurers with expert teams and strong reputations for handling cyber claims.
  • Customer Support: Evaluate the quality of customer support and claims processing.
  • Cost vs Coverage: Balance the cost of premiums with the extent of coverage provided by different insurers.

Why Choose Onsurity as Your Cyber Insurance Partner?

  • Comprehensive Coverage: Onsurity offers robust cyber insurance that covers a wide range of risks, ensuring your business is protected against financial losses from cyber threats.
  • Tailored Policies: We provide customized insurance plans that cater specifically to the needs and size of your business, to ensure you get the right coverage at the best cost.
  • Rapid Response: With Onsurity, you can expect 24/7 claim support that minimizes downtime and financial impact.
  • Expert Guidance: Our team of cybersecurity and insurance professionals offers expert advice and guidance to help you understand and mitigate cyber risks effectively.
  • Value-added Services: Beyond insurance, Onsurity offers additional resources such as risk assessments to further enhance your business’s resilience against cyber threats.

Also, Read: Are Your Digital Assets Protected?


With technology advancing daily, the risks to digital security grow exponentially, making cyber insurance a necessity for safeguarding your business. By covering data breaches, cyberattacks, and other digital threats, cyber insurance ensures your operations remain resilient in the face of adversity. Stay ahead of the curve and protect your assets with a robust cyber insurance plan. Trust Onsurity to provide comprehensive coverage, allowing you to focus on what truly matters: your business.


1. What is cyber tech insurance?
Cyber tech insurance is a broader category that includes cyber insurance along with other coverages specifically tailored for technology companies. It covers risks unique to tech businesses, including errors and omissions, intellectual property infringement, and technology service failures.
2. Is cyber insurance available in India?
Yes, cyber insurance is available in India. Several insurance companies and brokers such as Onsurity offer policies tailored to businesses and individuals to protect against the financial impact of cyber risks, including data breaches and cyberattacks.
3. What class of insurance is cyber?
Cyber insurance falls under Liability insurance. It is a specific type of coverage designed to address the unique risks and liabilities associated with cyber threats and digital operations.
4. Is cybersecurity insurance worth it?
Cybersecurity insurance can be worth it, especially for businesses that handle sensitive data or rely heavily on digital operations. It helps mitigate the financial impact of cyber incidents, providing crucial support for recovery and compliance with regulatory requirements.
5. What types of cyber threats does cyber insurance typically cover?
Cyber insurance typically covers threats such as data breaches, ransomware attacks, phishing scams, business interruption due to cyber incidents, and liability for data loss or theft. It can also cover costs associated with extortion, fraud, and reputational damage.
6. How do insurance companies determine the cost of cyber insurance premiums?
Insurance companies determine the cost of cyber insurance premiums based on factors like the size of the business, industry, level of cybersecurity measures in place, past cyber incidents, and the amount of sensitive data handled. Higher risks and inadequate cybersecurity practices generally lead to higher premiums.
7. Does cyber insurance cover legal expenses in the event of a lawsuit resulting from a cyber incident?
Yes, cyber insurance typically covers legal expenses in the event of a lawsuit resulting from a cyber incident. This includes costs for legal defense, settlements, and regulatory fines associated with data breaches or other cyber events.
8. How can businesses ensure they are selecting the right cyber insurance policy and provider for their specific needs?
Businesses can ensure they select the right cyber insurance policy and provider by assessing their specific risks, understanding the coverage options, comparing policies from different providers, and seeking advice from insurance brokers or cybersecurity experts.  

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