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  • 10 Practical Ways Startups Can Lower Cyber Insurance Costs

10 Practical Ways Startups Can Lower Cyber Insurance Costs

  • September 09, 2025
Author

Emily Bonnie

Senior Content Marketing Manager

Reviewer

Rob Gutierrez

Senior Cybersecurity and Compliance Manager, CISA, CCSK, CMMC RP

When you're a lean startup, you’ve got to make every penny count. One of the biggest cost centers for early-stage companies is insurance, particularly cyber insurance. When you compare small business insurance costs side by side, cyber insurance can account for 20% to 40% of a small business’s total commercial insurance spend.

The good news is that you can actively lower your cyber insurance costs without sacrificing the protection your business needs.

This guide will explain the different types of cyber insurance, how to balance your premium and deductible, and practical ways you can lower your costs while protecting your business’s financial and security health.

What is cyber liability insurance?

Cyber liability insurance is designed to protect businesses from the financial fallout associated with cyberattacks, data breaches, and other digital threats. Whether it’s covering the costs of notifying customers, legal defense fees, or damage to your business’s reputation, cyber insurance helps mitigate the financial risk posed by increasingly frequent and sophisticated cyber incidents.

No business is immune to the rising frequency and complexity of cyberattacks, and reports suggest small businesses may be more of a target than they realize. 43% of all cyberattacks are directed at small and medium-sized businesses, yet only 14% of SMBs are prepared to defend themselves. Cyber insurance ensures that you won’t be left to shoulder the full burden of recovery costs when an attack occurs.

What is and isn’t covered by cyber insurance?

Cyber insurance can cover a range of costs related to cyberattacks and data breaches, but it’s important to understand any exclusions or policy limits. Here’s a breakdown:

What’s covered:

  • Data breach costs: Notifications, credit monitoring, and public relations expenses.
  • Ransomware payments: The cost of paying ransomware demands (though some policies may have exclusions).
  • Legal defense fees: If your company faces lawsuits or regulatory fines due to a data breach or non-compliance.
  • Business interruption: Coverage for lost income due to system downtime.
  • Cyber extortion costs: If your business faces a cyber extortion threat (like a ransomware attack), your insurance might help cover the costs.
  • Forensics and incident response costs: Expert costs to investigate the breach and prevent future incidents.

What’s typically not covered:

  • Loss of future earnings: Many policies exclude coverage for potential long-term damage to your reputation or customer base.
  • Intentional breaches: Cyber attacks resulting from deliberate actions by employees or executives may not be covered.
  • Certain types of malware: Not all policies cover all types of malware, and certain exclusions might apply.

To secure cyber liability insurance, you’ll need to work with an insurance broker who specializes in cyber coverage. The broker will gather details about your business’s operations, the data you store, your existing cybersecurity measures, and your risk profile. From there, they’ll help you compare policies and find the right coverage for your needs.

How much cyber insurance coverage do you need?

Cyber insurance is a must for any business that stores, processes, or transmits sensitive data, including Personally Identifiable Information (PII), healthcare data (PHI), or payment card details. But even if you don’t handle highly sensitive data, your business may still be a target for cybercrime.

To determine how much coverage you need, consider the size and nature of your business:

  • Small businesses (<50 employees): Coverage limits of $1M to $2M in aggregate liability might be sufficient.
  • Medium-sized businesses (50-100 employees): Typically, $2M to $5M coverage will offer more comprehensive protection.
  • Larger SMBs (100-200 employees): Policies with $5M+ coverage will be needed as the business grows.

You’ll also want to check whether there are regulatory requirements for cyber insurance within your industry. For example, healthcare organizations subject to HIPAA may need specific coverage tied to patient data.

Types of cyber insurance policies

There are different types of cyber policies designed to meet various needs. Some policies focus solely on first-party losses, such as the costs incurred during a breach, while others also include third-party liabilities if customers or partners sue for damages related to a data breach. When you are evaluating your options, consider the kinds of incidents your business is most likely to face and the potential financial impact of those incidents.

For example, a policy that emphasizes first-party coverage might include the costs of forensic investigations, data restoration, and public relations responses. More comprehensive policies may also offer third-party liability coverage, which is important if you need to satisfy contractual requirements or if there is a significant risk that your data practices could lead to litigation. A careful evaluation of your business needs and risk profile, along with a discussion with your insurance broker, can help determine which type or types of cyber insurance you need.

Benefits of cyber insurance for small businesses

Cyber insurance offers much more than a financial safety net when a data breach occurs. It helps protect your business by ensuring that a significant cyber incident doesn’t drain your financial resources and jeopardize your operations.

Beyond mitigating the direct financial risk, having cyber insurance can enhance your business’s credibility. Many investors and partners view robust cyber risk management as an integral part of overall business health. This can be particularly important if you are raising capital, as some investors may require proof of cyber insurance as part of their due diligence.

Cyber insurance can also provide access to expert services. In the midst of a data breach, you might receive guidance on legal issues, help with crisis communications, and technical assistance in managing the incident. This kind of support can prove invaluable in containing the damage and restoring normal operations faster. Ultimately, by transferring some of the risks associated with cyber threats, you can focus on growing your business with a clearer mind.

How much does cyber liability coverage cost?

The average cost of cyber liability coverage for startups and SMBs varies based on factors like company size, type of business, and the specific risks associated with the data you manage.

For early-stage startups and small business owners, the annual premium generally falls into a few distinct ranges:

The industry you operate in also plays a critical role in pricing. Technology startups that handle customer data may have different pricing compared to fintech companies that manage financial transactions or healthcare startups that process sensitive health data.

  • Tech startups: For SaaS and tech companies that store customer data but generally have lower regulatory exposure than sectors like fintech or healthcare, premiums typically range from $1,800 to $5,000 per year for early-stage companies with lower policy limits. As the business scales and customer contracts require higher coverage, premiums can extend to $10,000 to $12,000.
  • Finance & fintech: Because fintech companies handle highly regulated financial data such as credit card numbers, bank account information, and payment processing data, cyber insurers typically view them as higher risk. Premiums for fintech companies often start in the $5,000 to $10,000 per year range for younger startups, with larger or more heavily regulated fintech companies paying $15,000 to $20,000 or more per year.
  • Healthcare startups: Healthcare organizations processing protected health information (PHI) must comply with HIPAA and are often a prime target for cybercriminals. Early-stage healthcare startups may see premiums of $5,000 to $10,000 per year, with growing companies or those with larger patient datasets paying up to $15,000 or more per year depending on coverage levels.

Balancing cyber insurance premiums and deductibles

Understanding how premiums and deductibles trade off against each other is key when selecting a cyber liability insurance policy — especially for startups and SMBs that need to manage cash flow carefully.

A lower deductible limits your out-of-pocket cost when a claim occurs, but it comes with a higher premium. But while higher deductibles lower the premium, you must ensure that you have sufficient cash reserves to cover the initial costs if a cyber incident does occur.

Here’s a simplified overview of how changing your deductible might affect your annual premium, assuming a $1M coverage limit and a reasonably strong security posture for a tech startup or small business:

Deductible Estimated Annual Premium Notes
$1,000 $4,000-$5,500 Low out-of-pocket cost, highest premium. Rare for cyber policies.
$5,000 $3,000-$4,000 A common deductible level for startups. Balanced risk sharing.
$10,000 $2,000-$3,500 Popular among SMBs wanting to lower premiums. Reasonable risk-sharing.
$25,000 $1,000-$1,800 Significant premium savings, but higher upfront cost during claims.

10 ways to lower your cyber liability insurance costs

Lowering the cost of cyber insurance isn’t only about finding a cheaper policy. There are steps you can take to reduce the risk of cyber incidents so that insurers see your business as a lower liability.

When managed well, the cost of cyber insurance becomes an investment in your overall security posture and financial protection. Here are practical and comprehensive strategies to bring down your premium while maintaining robust coverage.

1. Minimize data collection and retention

One of the simplest yet most effective ways to lower the cost of cyber insurance is to reduce the amount of sensitive information you store. The less personal information, payment data, or sensitive documents you retain, the smaller your data breach risk becomes.

For instance, by regularly purging obsolete data and archiving only what is necessary, you reduce the potential damage of a breach. In addition, employing techniques such as tokenization or pseudonymization adds an extra layer of security, making it more difficult for hackers and cybercriminals to extract valuable information. This approach not only lowers breach-related costs but also directly impacts your insurance risk rating, potentially resulting in more favorable premiums.

2. Strengthen risk management

A proactive approach to risk management can substantially influence your cyber insurance costs. Conducting regular internal risk assessments shows your insurer that you are actively managing and mitigating risks.

Maintaining a well-documented risk register, where every identified risk is linked to specific controls and mitigation strategies, can help demonstrate your commitment to security. It’s also important to have an up-to-date incident response plan that is regularly tested provides concrete evidence that you are prepared for potential breaches.

When insurers see that you are not only aware of your vulnerabilities but are also actively addressing them, they are more likely to offer reduced premiums due to the lower overall risk profile.

Recommended reading

10 Popular Risk Management Frameworks + How to Implement Them

3. Adopt strong security measures

Cyber insurers increasingly reward companies that demonstrate a robust cybersecurity posture. Implementing best practices such as:

  • Access management: Use multi-factor authentication for all critical systems and privileged accounts. Conduct regular user access reviews to ensure employees only have the minimum access necessary for their roles, and promptly remove access when employees leave or change positions.
  • Endpoint Detection and Response (EDR): Deploy modern EDR solutions that provide real-time monitoring, threat detection, and rapid containment of malicious activity across all devices on your network.
  • Firewalls and network security: Configure firewalls to block unauthorized inbound and outbound traffic. Use network segmentation to isolate sensitive data and critical systems, limiting an attacker’s ability to move laterally within your environment.
  • Patch management: Regularly apply software updates and security patches to address known vulnerabilities and demonstrate active vulnerability management.
  • Continuous monitoring: Implement continuous monitoring tools such as SIEM solutions, log monitoring, and automated alerting to provide real-time visibility into suspicious activity and system anomalies.
  • Third-party risk management: Maintain a vendor inventory, perform regular security assessments of third-party providers, and include strong contractual safeguards to ensure vendors meet your security standards.
  • Security awareness training: Conduct ongoing training and simulated phishing exercises to help employees recognize social engineering attacks, follow security best practices, and minimize human error.

While many insurers have minimum security requirements, exceeding those standards sends a strong message that your business is dedicated to protecting its assets, which can result in lower premiums for the cost of cyber insurance.

Cybersecurity Checklist for 2025

Regularly evaluating security controls and practices can help you take a proactive approach and ensure your organization is prepared for challenges in 2025 and beyond. Use this downloadable security checklist to assess your current security practices, close any gaps, and fortify against future threats.

4. Comply with industry standards and frameworks

Recognized cybersecurity frameworks such as the NIST Cybersecurity Framework, SOC 2 Type II, or ISO 27001 offer structured, comprehensive guidance on managing and mitigating cyber risks. Compliance not only boosts your internal security practices but also provides documented evidence for insurers that you are following industry best practices.

In some cases, insurance companies offer specific discounts for businesses that achieve or are in the process of achieving compliance. This alignment with widely accepted standards reassures underwriters that the risks associated with your operations are well managed.

If you’re not sure which cybersecurity frameworks are the best fit for your business, you can learn more about the most recognized standards and follow a decision tree here: Understanding Security Frameworks: 14 Common Frameworks Explained.

5. Provide evidence of employee security training

Human error remains one of the leading causes of cybersecurity incidents. By investing in comprehensive and ongoing security awareness training, you lower the chance of a breach due to phishing attacks or other social engineering tactics.

Implementing regular training sessions, conducting periodic phishing simulations, and tracking employee participation and performance all contribute to a culture of security. When insurers see that your workforce is well-informed and vigilant about cybersecurity best practices, they are inclined to view your business as a lower risk, potentially reducing the premium for the cost of cyber insurance.

6. Maintain an incident response plan

A well-crafted incident response plan can be a game changer when it comes to lowering the perceived risk of a cyber incident. Insurers appreciate businesses that not only have a response plan in place but also conduct regular tabletop exercises and test it at least annually.

A comprehensive plan that covers communication strategies, forensics contacts, and escalation procedures demonstrates that you are prepared to handle an incident swiftly and effectively. When an insurer sees that you can detect, respond to, and recover from a security incident quickly, it can lead to lower premiums and a more favorable underwriting process.

7. Adopt a GRC platform

Adopting a Governance, Risk, and Compliance (GRC) platform allows businesses to take a much more proactive and systematic approach to cybersecurity, which insurers increasingly reward. Rather than relying on manual processes, periodic check-ins, or spreadsheets that quickly become outdated, GRC platforms help you continuously monitor and manage your security program in real time.

From an insurer’s perspective, this continuous, automated oversight dramatically lowers uncertainty and reduces the likelihood of undetected vulnerabilities that could lead to costly claims. And the data backs this up: research by IBM found organizations that use security automation and AI are able to contain security breaches 108 days faster and save an average $1.8 million in data breach costs. 

Secureframe partners with Assured Insurance in the UK and built out a framework that helps their underwriters more accurately evaluate risk. This makes the insurance process more efficient for both insurers and policyholders, while also helping Assured’s customers qualify for lower premiums. Partnerships like this demonstrate how GRC automation platforms not only improve a company’s security posture, but also directly influence insurers’ confidence in providing better pricing. 

Recommended reading

What Is GRC Software and How Does It Work?

8. Check your cyber insurance claims history

Your claims history plays an important role in determining your cyber insurance premiums. If you have not had any previous claims, make sure this is well documented. A clean claims record signals that your business has strong preventative measures in place, which could qualify you for discounts on future premiums. Keeping detailed records of all cybersecurity incidents, even minor ones, and demonstrating how you addressed them can help maintain a favorable risk profile over time.

9. Bundle with your other business insurance

Many insurance providers offer discounts when you bundle your cyber insurance policy with other business coverage, such as general liability or Errors & Omissions. Bundling not only simplifies your insurance management but can also result in meaningful savings. When considering your overall insurance spend, it is worthwhile to ask your broker about bundled policies that might reduce the cost of cyber insurance while providing comprehensive coverage for your business.

10. Work with a broker who specializes in cyber insurance

Not all insurance brokers have the expertise to understand the unique needs of tech startups and SMBs. Finding a broker who specializes in cyber insurance is essential for obtaining the most favorable terms. An experienced broker understands how to accurately position your cybersecurity posture to underwriters and is familiar with various cost-saving programs for high-growth startups. They can shop around for the best insurance quotes and customize your policy to align with your business needs, ultimately helping to lower the overall premium for the cost of cyber insurance.

How Secureframe can lower your cyber insurance costs

Cyber liability insurance is one of the most important tools for protecting your business against the financial impact of a cyber incident, but premiums can add up quickly without a strong security foundation. The better your cybersecurity posture, the more leverage you have to reduce costs while still maintaining comprehensive coverage.

Secureframe helps businesses of all sizes strengthen their security posture, streamline compliance, and proactively reduce their cyber insurance premiums. By integrating directly with your tech stack, Secureframe automatically pulls data from cloud providers, identity and access management platforms, HR systems, endpoint protection tools, and more. This allows you to continuously monitor control performance and receive real-time alerts when issues arise. For example, if an administrator account is created without multi-factor authentication or a former employee retains access to sensitive systems, Secureframe immediately flags the risk so you can remediate it before it becomes a serious exposure.

In addition to continuous monitoring, Secureframe automates time-consuming tasks like recurring risk assessments, evidence collection, control testing, and audit preparation. Instead of rushing to assemble documentation once a year, your audit evidence stays complete and current at all times, giving you a real-time view of your organization’s risk posture rather than a static snapshot.

From an insurer’s perspective, this level of automation and oversight significantly reduces uncertainty and lowers the likelihood of undetected vulnerabilities. Companies that leverage Secureframe’s platform demonstrate stronger operational controls, faster detection and response capabilities, and a lower risk of prolonged or severe incidents. As a result, many Secureframe customers are able to qualify for preferred pricing with partner insurers like Assured Insurance, Vouch, 1Fort, and Fullsteam.

Schedule a demo to see how Secureframe can help you build a stronger security program and lower your cost of cyber insurance.

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FAQs

How much does cyber security insurance cost?

Cyber insurance costs vary based on the size of your business, industry, coverage limits, and security posture. Early-stage startups typically see annual premiums in the range of $1,000 to $3,000, while larger companies may pay significantly more.

Is cyber insurance worth it?

For businesses that store sensitive data or are subject to regulatory requirements, cyber insurance is a key component of risk management. It provides financial protection and access to expert services during and after a breach, which can be critical for business continuity.

How much cyber insurance should a small business have?

The amount of coverage a small business requires depends on the nature of its data and risk exposure. Many startups opt for policies in the $250K to $1M range, while more complex organizations may require higher limits.

What isn’t covered by cyber insurance?

Cyber insurance typically does not cover financial losses from property damage that is not directly linked to a cyber event or business interruptions unrelated to a breach. It is important to read the policy details carefully to understand any exclusions.

What does cyber insurance cover you for?

Cyber insurance covers a range of costs including data breach response, legal fees, regulatory fines, and sometimes even reputation management services. It is designed to protect your business from the financial fallout of cyber incidents.

Who should buy cyber insurance?

Any business that handles sensitive customer data or is digitally enabled should consider cyber insurance. This is especially true for startups, tech companies, fintech, and healthcare organizations.

How do I know if I need cyber insurance?

If your business stores personal data or if any breach of security would have a significant financial impact, you likely need cyber insurance. Additionally, customer contracts and regulatory requirements may mandate having such coverage.

How much is cyber insurance for small businesses?

For small businesses, especially those with 1 to 50 employees, premiums typically range from $1,000 to $3,000 per year, though the exact amount depends on your data exposure and industry.

10 Practical Ways Startups Can Lower Cyber Insurance Costs