Ransomware Insurance: A Complete Guide to Coverage, Claims and Protection
Understanding Ransomware and Its Growing Threat
Ransomware can take several forms. In its most traditional guise it involves the use of malware that infiltrates a network and encrypts critical files. This could be business information such as databases or critical files that render a device unusable. The hackers then demand payment in order to grant businesses access to their data again.
Increasingly, however, these cyber attacks don’t end at simply encrypting files. In today’s environment, a more common goal for ransomware is extortion. This involves data exfiltration to remove sensitive information from a network, before hackers then demand further payments to prevent them publishing this stolen material online.
In fact, according to BlackFog’s research, 94 percent of ransomware attacks in 2024 involved data exfiltration, making this one of the biggest cyberthreats businesses face today. What’s more, the cost of these incidents continues to reach new highs, hitting an average of $4.88 million in 2024.
It’s therefore no surprise that ransomware has become one of the biggest causes of cyberinsurance claims.
The Growing Need for Cybercrime Insurance
Even if firms have effective ransomware defenses in place, there’s no such thing as a 100 percent guarantee of protection. If the worst does happen, being able to turn to cyberinsurance could be essential to minimizing losses and making a quick recovery.
The costs associated with ransomware are wide-ranging. In addition to direct ransomware payments themselves, expenses include lost business, recovery and data restoration efforts, the cost of investigating incidents and mitigating against future attacks, reputational damage and the potential for regulatory fines. Effective ransomware insurance can help meet many of these obligations.
However, the rise in ransomware is putting pressure on insurers as well. With more firms making claims, premiums are on the rise, while many providers are putting in place more exclusions. For example, while some policies will cover the cost of ransoms, others will not as this is likely to encourage future attacks.
Many policies also have clauses that set out minimum standards for cyberdefenses, such as the use of multifactor authentication and encryption, and will not pay out if they deem companies to have been negligent.
What Does Ransomware Insurance Cover?
What Does Ransomware Insurance Cover?
Comprehensive cyber insurance policies can protect businesses from a range of cyberthreats. As well as costs directly related to ransomware, they can provide financial support for many other security incidents. However, when it comes to ransomware specifically, there are a few common areas where they can help. These include the following:
- Ransom payment coverage: This covers the direct cost of ransom payments made to cybercriminals. While paying a ransom is often discouraged, some situations leave organizations with no alternative. As part of cyber extortion coverage, insurers may also provide expert negotiators to assess the demand, reduce costs and explore alternative recovery options. For instance, in one case, insurer Coalition was able to reduce an initial $1.5 million demand down to a more reasonable settlement, as well as covering the cost to the company.
- Business interruption losses: Insurance can help compensate for lost income or any additional operational costs incurred during downtime and data recovery. Some policies also cover losses from supply chain disruptions if a ransomware attack affects critical third-party vendors.
- Cyber forensics costs: This refers to the costs of investigating the incident to learn how the breach occurred, determine what data has been compromised and identify where any vulnerabilities lie. This support may also include advice on your legal and regulatory requirements as well as what steps to take to notify your customers of a data breach.
- Public relations and reputation management: Some coverage may include crisis communication services, public relations support and media management to help businesses reassure stakeholders and limit any long-term reputational damage.
Key Exclusions in Ransomware Insurance Policies
While cybercrime insurance policies can often assist with legal costs, they will not typically help with civil or criminal fines handed down by regulators. The Association of British Insurers, for example, lists this as one of the most common exclusions to policies, along with losses that are deemed to be due to cyberwarfare and any physical property damage caused by cyber breaches.
Other reasons why ransomware attack insurance claims may be denied include if the insurer believes that a business has not done enough to minimize its risk of falling victim to a data breach. This may include:
Poor cybersecurity practices leading to breaches: An insurer may reject a claim if an organization lacks basic defensive measures, such as multifactor authentication, endpoint protections or effective staff training. It’s important for firms to be able to prove what steps they have taken to avoid these issues. Negligent behavior by employees, such as handing over credentials to attackers, may also not be covered.
Pre-existing vulnerabilities: Policies will not usually cover breaches that occur due to known but unaddressed security weaknesses. For example, if a company has failed to apply available security patches, insurers may refuse to pay out. Businesses are expected to maintain best practices for cybersecurity updates to remain eligible for claims.
Attacks by insiders: Insider threats can be some of the most dangerous forms of data breach, as employees often know exactly where the most valuable data is stored and how to access it. However, these actions may not be covered by regular insurance policies – though this is not always the case.
How Much Does Ransomware Insurance Cost?
Cyber insurance and ransomware insurance specifically are tailored policies designed to meet the needs of the individual business, so the cost can vary widely. For small businesses, the median cost of cyber liability insurance is $145 a month, according to Insureon, but larger firms can expect to pay much more.
The key factors that can affect this include:
- Company size: The number of endpoints, the size of the network and the amount of data held all impact quotes.
- Turnover: Larger firms with more income present tempting targets to hackers, which can be reflected in premiums.
- Level of risk: Certain industries are more at risk of ransomware than others. According to our most recent research, the most likely targets are firms in the healthcare, education and government sectors, which accounted for 47 percent of attacks in 2024.
Key Features to Look for in a Ransomware Insurance Policy
As well as the base cost and any exclusions businesses need to be aware of, there are several things to consider when looking for a cyberinsurance policy. Comprehensive ransomware coverage is a must, but this is not the only factor to consider. Key questions to ask when looking for the best ransomware insurance policy options include:
Best Practices to Prevent Ransomware and Lower Insurance Costs
Ransomware insurance can’t protect from attacks – only help deal with the fallout. Therefore, it’s still vital to have a comprehensive plan in place for combating threats such as data exfiltration before they happen.
Not only does this help reduce the risk of falling victim to a ransomware attack, but being able to prove a firm has strong defenses in place can even help to ensure better insurance quotes. Here are a few essential ransomware attack prevention steps all firms need to take.