Why Your Small Business Needs Cybersecurity Insurance
By Dave Warner, Systems Engineer at Corporate Technologies KC
Imagine this: Overnight, your business is hit with a data breach. You wake up to panicked texts and emails from your IT staff, your CFO and your HR director. Employee data and customer data have been stolen, and now you’re facing regulatory fines and potential lawsuits from customers and employees.
Scary, right? It’s a sobering thought, but most companies are just one stroke of bad luck away from a cyber attack. And, of course, AI is playing a role, both in attacks and protection from them.
Consider the statistics:
- Less than half (47%) of small to midsize businesses have implemented new systems or technology to improve cybersecurity in the last year. (Verizon Small Business Survey 2025)
- Only 56% of SMBs say they train their employees on cybersecurity safety. (Verizon Small Business Survey 2025)
- One in six breaches are AI-driven — a number we expect to see rise quickly. (IBM Cost of a Data Breach Report 2025)
- Lost business — including system downtime, lost customers and reputational damage — makes up 31% of the cost of a data breach. (IBM Cost of a Data Breach Report 2025)
That’s why protecting yourself from cyberattacks is so important. But if one does occur, having cybersecurity insurance in place can be a big relief.
Who should be covered by a cyber insurance policy?
Long story short: Just about every company should make sure they’re covered. Even if your business is small, you could face tremendous costs, fines and lost revenue from a cyber attack. In fact, smaller businesses are often more vulnerable because they don’t have the same robust protections as larger enterprises. Most (74%) allocate less than 10% of their total business budget to cybersecurity.
But putting your head in the sand won’t solve your cybersecurity challenges. Of course, the best practice is to have the proper protections in place to prevent an attack. But the next-best practice is to have cyber insurance to help you recover.
More and more businesses are getting cyber insurance — policies increased by 34% year over year in 2025, according to Fitch Ratings. But the report also notes that smaller companies aren’t as likely to have a policy as larger, more complex businesses.
What kind of cyber insurance coverage should a business have?
Cyber insurance protects your business in a variety of ways. According to the Federal Trade Commission, you should look for a policy that includes coverage for attacks:
- On your data on your networks
- On your data held by vendors or other third-party providers
- Originating worldwide (not just the United States)
The coverage you choose should include a “duty to defend” clause, which means the insurance company will work to defend you in a lawsuit or regulatory investigation.
The FTC recommends protecting your business with both first-party coverage and third-party coverage. First-party coverage takes care of your business’s costs to recover. Third-party coverage protects your company from liabilities stemming from damage to other individuals or businesses. It should cover costs related to:
- Payments to affected customers
- Expenses from disputes or lawsuits
- Defamation and copyright or trademark infringement
- Litigation and responding to regulatory inquiries
What about AI?
AI, as usual, is both the problem and the solution. AI and automation in security solutions helped bring down the average cost of a breach globally by 9% last year, according to IBM. But AI is also making it easier than ever for criminals to concoct convincing phishing attempts and access systems with weak passwords.
The cyber insurance industry itself is starting to take note of the benefits and increased risk with AI. A 2025 report from Delinea said that 86% of companies surveyed reported that insurers offered them premium reductions or credits for their use of AI in defense, such as AI-powered threat detection and monitoring tools. (They often give discounts for working with an MSP, too.)
At the same time, more than 90% of those surveyed by Delinea have seen AI exclusions being added to their policies. The top exclusions included AI model error or failure (54%), third-party and vendor AI services issues (53%), and prompt injection (47%).
Exclusions like these make understanding your cyber insurance options (and shadow AI use in your organization) even more important.
Overwhelmed? Corporate Technologies can help
If you need help selecting the right cyber insurance, Corporate Technologies has several providers we can connect you with to make sure you’re protected. We can even help you fill out the crazy-long forms involved.
Want to make sure you’re covered from every angle? Our team has the experience and availability to help your Kansas City business prevent an attack — or respond if you’ve already been hit. Let’s set up a time to talk about cybersecurity.