Does Cyber Insurance Cover Ransomware? A Complete Analysis

Hackers have revealed the lucrative realm of extorting enterprises, especially those that manage sensitive data in sectors such as education and healthcare.

The U.S. Department of Justice recently disclosed a startling increase in ransomware attacks, soaring from 2015 to 2016 to an alarming rate of 4,000 attacks per day.

Enterprises falling victim to ransomware typically face a minimum of a week of downtime, resulting in a staggering financial toll, estimated to surpass $1 billion in the previous year alone.

Faced with these alarming figures, more organizations are contemplating the acquisition of cyber insurance as a protective measure.

However, it is crucial to note that while cyber insurance provides a degree of assistance, it cannot serve as a complete replacement for comprehensive information security measures.

Does Cyber Insurance Cover Ransomware?
mage source (Piktochart)

Cyber Insurance Coverage Can Be Expensive, Skimpy, and Uncertain

Cyber insurance is a new and uncertain realm for insurers and policyholders. Widespread internet access is recent, and the threat landscape changes daily.

Insurers lack historical data for accurate predictive models and struggle with technical expertise for future threat anticipation.

A lack of standardization makes coverage evaluations challenging for organizations.

Businesses are just realizing cyber threats and their risk environments, leading to a confusing marketplace with high-cost, limited policies.

Less than one-third of U.S. businesses, including 40% of Fortune 500 companies, have purchased coverage, indicating the challenges in this evolving landscape.

All Insurance Policies Have Exclusions

Does cyber insurance cover ransomware
Ransomware insurance, part of cyber coverage, protects against financial losses like ransom fees and business interruptions resulting from an attack. It’s commonly included in cyber liability policies, but coverage varies among insurers: Photo source (Sapling)

Cyber insurance, like other types, excludes certain things. For instance, it doesn’t cover ransomware linked to insiders like disgruntled employees or vendors.

If a policy lacks “extortion coverage,” ransomware won’t be covered.

Disclosing extortion coverage publicly invalidates the policy.

The legalities of cyber insurance change rapidly. Determining coverage can be tricky, leading policyholders to sue insurers for claim payment.

Read more: Is Kemper insurance going out of business?

How long can your systems endure being locked out?

Insurance doesn’t prevent catastrophes; it aids in recovery.

Cyber insurance cannot address the primary issue linked with ransomware, which involves enduring days, weeks, or months of system lockout.

In healthcare, not accessing medical records can harm or even kill patients.

Other industries may not deal with life-and-death, but halting operations until computers are back online can be crippling, especially for startups and small businesses.

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