Cyber Insurance in 2026: 10 Steps to Prepare Your Business
Cyber insurance isn’t the easiest service to understand.
Unlike other forms of insurance, cyber insurance policies lack standardization and cover complex technical security features. Business owners who don’t fully understand their security posture can find themselves in over their heads when shopping for a policy.
In fact, a survey by Huntress found that 44% of businesses with fewer than 50 employees lacked cyber insurance. Among those respondents without coverage, 38% said that not understanding their coverage options was the main reason they hadn’t purchased a policy.
And cyber insurance isn’t getting any less complex. Modern threats, including AI-powered phishing, and evolving regulatory requirements mean policies have to adjust their rules and premiums to keep up.
In this blog, we’re breaking down cyber insurance, what insurers are looking for, and ten steps you can take to ready your business for an insurance policy.
Key takeaways
- Cyber insurance provides businesses with a financial safety net after a cyberattack or other covered security incident.
- Insurers look to cover businesses that demonstrate security best practices through tools such as MFA, backups, and endpoint protection.
- Preparing for a cyber insurance policy involves improving your security posture and implementing necessary security tools such as MFA, backups, security awareness training, and more.
- Managed service providers (MSPs) can help small businesses implement and maintain security tools and prepare for insurance applications.
- Businesses should discuss with an insurance agent to understand their coverage options, including first-party coverage, third-party coverage, or both.
Why Cyber Insurance?
Cybersecurity is never 100%.
Even if your company is outfitted with modern security tools, strict policies, all wrapped in a watertight response plan, something can still go wrong. Think of it like someone breaking into your house. You could have sturdy locks, security cameras, and even a backup generator in case of a power outage. But a determined, resourceful burglar could still find a way inside. Your security helps, but it doesn’t guarantee a break-in will never happen.
This isn’t an attempt to scare you. But it’s important to understand the seriousness of a cyberattack. At the end of the day, it’s a criminal attack against your company, and the consequences can be devastating. One source puts the realistic cost of a small-business cyber incident at $120,000-$1.24 million dollars.
Cyber insurance is a financial safety net for when your defenses fail.
And while no insurance policy can guarantee a full financial recovery, having the right coverage can help you manage the aftermath of a ransomware attack or a data breach.
What Insurers Look for Before Coverage
With that all said, what do insurers look for when deciding to cover a business?
First and foremost, they want to understand the cybersecurity risks they’re taking on. Insuring a company that lacks the proper security measures means inheriting that risk. And as cyber insurance claims climb – with a 20% increase between 2024 and 2025 – insurers want to make sure the businesses they represent have the appropriate security measures to reduce the chance of an incident.
That’s why insurers typically review a company’s security posture, request that they complete security-related questionnaires, and scan the business for vulnerabilities and misconfigurations.
In many ways, the process resembles a security assessment.
10 Steps to Get Ready for Cyber Insurance in 2026
Prepping for cyber insurance starts with implementing the right security controls. In that regard, getting your business ready for cyber insurance really isn’t much different than boosting your security posture.
Here are ten steps you can take before applying:
1. Enable Multi-Factor Authentication (MFA)
Enable multi-factor authentication on business emails, administrator accounts, VPNs, remote access tools, and cloud services.
2. Deploy Endpoint Detection and Response (EDR)
Install EDR on your business computers and servers so your security team can detect and respond to suspicious activity.
3. Configure and Test Your Backups
Maintain reliable backups for your important business data, and test your file restoration at least quarterly with documentation.
4. Create and Test an Incident Response Plan
Document how your business will respond to a cyberattack, including points of contact, who is responsible for containment, recovery, communications, and contacting your insurer. This plan should be tested and updated whenever your systems change.
5. Authenticate and Secure Your Business Email
Configure SPF, DKIM, and DMARC to authenticate your business email domain.
6. Review Access Permissions
Identify who has access to sensitive data and critical systems, removing unnecessary permissions in the process. Your employees should only have the access they need to do their jobs – known as “least privilege.”
7. Establish Patch Management
Establish a regular schedule for security updates and software updates with documentation.
8. Inventory Your Third-Party Vendors
Make a list of vendors that store or access your business’s sensitive information and systems.
9. Classify Your Sensitive Data
Identify sensitive data such as personal, financial, and confidential information your business handles. Note where that data is stored and how it is protected.
10. Train Employees on Cyber Threats
Provide your team with regular security awareness training that covers social engineering tactics such as phishing and how to report cyber incidents.
Understand Your Policy
It’s important to know what you’re going to be paying for. As recommended by the FTC’s cyber insurance guide, you should sit down with your insurer to clarify what policy will best fit your company’s needs.
That could include:
First-party coverage pays to fix your own network or systems impacted during a cyber incident.
Examples:
- Expenses needed to restore lost data or computer systems.
- Costs associated with ransom demands.
- Compensation for lost revenue while your systems are recovering.
Third-party coverage protects your business when a cyber incident at your business harms a third party, such as a customer, vendor, or partner.
Examples:
- Settlements and judgments.
- Regulatory fines and penalties.
- Attorney fees or court costs.
You may need one or both forms of coverage, and this will primarily depend on your industry, the data, and customers you work with.
Beyond first and third-party coverage, it’s important that you clearly understand what is covered in your policy and what security measures must remain in place to remain eligible for coverage. You should also ask about exclusions, coverage limits, and waiting periods.
The Final Step: Work with an MSP
Yes, we’re sneaking in an 11th step.
Not every small business will have the time and expertise to implement the necessary’s security features needed to receive cyber insurance. And even those that do may need help maintaining them in the long term.
That’s where a managed service provider (MSP) comes in.
A good MSP can both implement and maintain many of the security features needed for cyber insurance coverage. An MSP like The 20 MSP.
At The 20 MSP, we provide our clients with 24/7/365 threat monitoring, live support, backup solutions, employee awareness training, and much more. It’s the full security package, so businesses like yours don’t need to handle everything on their own.
If you need help readying your business for cyber insurance, reach out today. We’d love to help you prepare.
FAQ
Why does my business need cyber insurance?
Cyber insurance can help your business handle the financial impact of a covered cyber incident. The right policy can help pay for recovery costs, disruptions, and legal expenses.
What do insurers look for when insuring businesses?
Insurers assess how a business handles cyber incidents and look for businesses that demonstrate strong security maturity. They look for security features such as multi-factor authentication (MFA), endpoint security, data backups, employee training, and incident response planning.
If I have a strong security environment, do I even need cyber insurance?
Yes. Cybersecurity is never 100%, and there is always a chance that an attack hits your business. Cyber insurance acts as financial protection that complements your existing security posture.
How can an MSP improve my chances of getting cyber insurance?
An MSP can help implement and maintain security controls that insurers look for, like MFA, endpoint protection, cyber awareness training, and backups. An MSP can also help clarify questions regarding insurance policies and security features necessary during your insurance application process.
About The 20 MSP
As a leading provider of managed IT services, The 20 MSP serves thousands of businesses nationwide, including single and multi-location organizations, delivering white-glove service, secure and streamlined IT infrastructure, and 24/7/365 support. We believe in building lasting relationships with clients founded on trust, communication, and the delivery of high-value services for a fair and predictable price. Our clients’ success is our success, and we are committed to helping each and every organization we serve leverage technology to secure a competitive advantage and achieve new growth.
