Why Businesses Need Cybersecurity Insurance

The threat of a cyber attack is always present, cybersecurity insurance is designed to protect your business in the event of a financial loss from a cyber incident.

A successful cyber-attack can take a huge toll on your organization. This may include data loss, business disruption, lost productivity, and reputation damage. These are some of the liabilities that may be covered by cybersecurity insurance.

Cybersecurity insurance is a contract that can help companies reduce the financial risks associated with internet-facing businesses. The insurance transfers some of the risk involved in doing business online from the customers to the insurance company. Cybersecurity insurance is a subset of errors and omissions (E&O) insurance which deals with faults and defects associated with the services of a company.

Most providers of cyber insurance sell the policies separately from other offers as it is relatively new.

What is Covered by Cybersecurity Insurance

The risks covered by cyber insurance is based on 3 basic principles:

  • Loss of revenue or income caused by business interruption or direct theft
  • Money spend on business recovery
  • Liability from lawsuits by victims of attack or regulatory fines


Traditional business insurance policies do not include cybersecurity insurance. This gave rise to the development of specific insurance to deal with cyber security threats. Depending on the policy, cybersecurity insurance may cover the following:

  1. Extortion demands via ransomware attacks.
  2. Compensating victims of privacy violations, data leak, or stolen identity.
  3. Cost of investigation and data recovery.
  4. Sending notification to customers in case of a data breach.
  5. Replacing or repairing compromised computer systems.

Basic cybersecurity insurance covers first-party losses only. A third-party coverage will require a comprehensive cybersecurity insurance package. Cybersecurity insurance may not cover security issues caused by poor configuration, attacks by insiders, or the negligence of not patching publicly known vulnerabilities.

Importance of Cybersecurity Insurance

Cyber insurance offers a safety mechanism for companies that want to transfer risk to a third-party so they are able to quickly access resources needed to manage an attack.

The loss or corruption of data can negatively affect a business in the area of customers and revenue loss or the exposure of third-party data. Cyber insurance coverage can support your business to deal with these liabilities.

Many costs arise from lawsuits following a cyber incident. More expenses are incurred for data breach investigation, public relations, and customer refunds. These costs can be partially or fully funded by cybersecurity insurance.

Responsiveness is important when dealing with an attempted or ongoing cyber attack. The right policy can provide a timely solution to your organization’s challenges and help it recover quicker from an attack at a lower cost. They may also provide resources to help businesses defend against cyber attacks and prevent them from becoming victims in the first place.

Insurers may require organizations to implement cybersecurity measures as part of contractual obligations. This will strengthen the defense of the target organization. Cybersecurity insurance policy assessment can also uncover the most vulnerable attack surface areas in an organization. With such information, management and employees can take necessary actions to reduce risks of attack such as organizing training on how to identify phishing emails.

Businesses with cyber security insurance will be more security conscious because they are expected to develop business continuity and disaster recovery plans.

Cyber insurance can kick in case of lost devices containing personal information. The insurer may recommend legal counsel to affected customers and also organize an incident response team.

A cyber insurer may reimburse your business for the cost of hiring forensic investigators to determine the extent of a data breach and the cost to customers. It could also cover the cost that may be incurred during the period of restoring a business from a cyber incident.

Cyber insurance will also give your company access to the service of security experts and risk management agencies.

How to Choose a Cybersecurity Insurance

Cyber insurance policies vary widely among providers since it has only been around for a short time.

Before a policy is activated, companies are subjected to a security audit by insurers or required to get official reports from trusted third-party institutions. This report will influence the type of coverage needed by a company.

You should thoroughly review the details of prospective cyber insurance policies to ensure that it covers all the peculiarities of your business.

Cybersecurity insurance can help protect your company in case of a cyber incident but you should not take it as the complete solution to cyber threats. Your goal as a business is to avoid filing cyber insurance claims by implementing the proper cybersecurity measures to defend your organization’s IT infrastructure.

To learn more about your IT security options, please contact us today.

Common IT Security Compliance Pitfalls and How to Avoid Them

June 17, 2025
Meeting IT security compliance standards is crucial for businesses that handle sensitive data, particularly in industries such as healthcare, finance, defense, and e-commerce. Regulatory frameworks such as HIPAA, CMMC, PCI-DSS, and GDPR exist to help ensure businesses protect customer information and maintain robust cybersecurity practices. Unfortunately, many organizations fall short of these requirements, often due to common, avoidable mistakes. These gaps can result in costly fines, data breaches, and reputational damage, which can significantly impact the business's bottom line and customer trust. 1. Failing to Conduct Regular Risk Assessments The Pitfall: Many businesses overlook the importance of conducting routine risk assessments. Without these, it’s challenging to identify vulnerabilities or evaluate whether your current cybersecurity controls meet compliance standards. How to Avoid It: Implement a regular risk assessment schedule. Work with a qualified IT provider to evaluate your systems, identify weaknesses, and document remediation plans. These assessments should be performed at least annually, or whenever significant changes to the system occur. 2. Inadequate Employee Training The Pitfall: Your employees are your first line of defense—and often your most significant vulnerability. A common compliance issue arises when businesses fail to train staff on cybersecurity best practices or on handling sensitive data appropriately. How to Avoid It: Invest in ongoing cybersecurity awareness training. Ensure employees understand how to recognize phishing emails, create strong passwords, and report any suspicious activity. Training should be updated regularly to reflect current threats and compliance requirements. 3. Improper Data Handling and Storage The Pitfall: Storing sensitive data in unsecured locations, failing to encrypt information, or retaining data longer than necessary are significant compliance risks. These practices are often flagged during audits. How to Avoid It: Adopt data classification policies that define how different types of data should be handled; encrypt sensitive data both at rest and in transit. Establish clear data retention policies and ensure that obsolete data is disposed of securely. 4. Lack of Incident Response Planning The Pitfall: When a security incident occurs, time is of the essence. Many businesses lack a documented incident response plan, or their existing plan hasn’t been thoroughly tested. This can lead to delayed responses, increased damage, and regulatory penalties. How to Avoid It: Develop a formal incident response plan that includes roles, responsibilities, communication protocols, and steps for containment and recovery. Run simulated breach scenarios with your IT team to ensure everyone knows how to respond effectively. 5. Using Outdated Software or Systems The Pitfall: Running outdated operating systems, software, or firmware is a common issue that can lead to compliance failures. Unsupported technologies are more vulnerable to exploitation. How to Avoid It: Keep all systems and applications up to date with the latest patches. Use automated tools to track software versions and receive alerts about end-of-life technologies. Schedule regular maintenance windows to apply updates and upgrades. 6. Insufficient Access Controls The Pitfall: Allowing too many employees access to sensitive data—or failing to revoke access when it’s no longer needed—can lead to data breaches and non-compliance. How to Avoid It: Implement role-based access controls and follow the principle of least privilege. This principle means that each user should have the minimum level of access necessary to perform their job. Regularly audit user accounts and permissions to ensure access is current and appropriate. Use multi-factor authentication (MFA) to add an additional layer of protection. 7. Neglecting Third-Party Vendor Risks The Pitfall: Businesses often overlook the fact that their compliance responsibilities extend to third-party vendors. If a vendor mishandles your data, you could still be held accountable. How to Avoid It: Vet third-party vendors carefully. Ensure they meet the same compliance standards as your business and include security requirements in your contracts. Conduct periodic audits or request compliance certifications from your vendors. 8. Failing to Document Policies and Procedures The Pitfall: Even if your security practices are strong, failing to document your compliance policies can result in audit failures. Regulators want to see evidence that you have formal processes in place. How to Avoid It: Create and maintain clear documentation for all compliance-related policies, including data protection, access control, incident response, and employee training. Make these documents easily accessible for audits and regularly review them to ensure updates are current. Conclusion Compliance with IT security standards is not a one-time project—it requires ongoing attention, regular updates, and a proactive approach to maintain effectiveness. By understanding and addressing these common pitfalls, your business can stay ahead of regulatory requirements, strengthen its security posture, and reduce the risk of costly incidents. This ongoing attention is crucial to maintaining your business's security and audit readiness. If you’re unsure whether your business is meeting current IT compliance standards, professional support can help. Contact SDTEK today to schedule a compliance assessment and learn how our IT services can keep your business secure and audit-ready. With our support, you can navigate the complex landscape of IT security compliance with confidence.

Why Cybersecurity and Business IT Support Are Crucial for Fort Wayne Businesses

April 9, 2025
In today’s digital-first world, cybersecurity isn’t just a luxury—it’s a necessity. Whether you run a small startup or a growing enterprise in Fort Wayne , protecting your business’s data, systems, and clients is essential for long-term success. From ransomware attacks to phishing scams, cyber threats are evolving every day, and the best way to stay ahead of them is by partnering with a reliable IT services provider that understands the unique needs of local businesses. Here’s why investing in professional business IT support is one of the smartest decisions Fort Wayne businesses can make—and how working with SDTEK helps protect your operations, your data, and your reputation.