What Is Cyber Insurance and Why Does My Business Need It?

By McAdams Insurance Agency · August 2026 · 4 min read

Cyber insurance often gets dismissed as something only large companies need. In reality, small businesses are increasingly targeted — often because attackers assume smaller businesses have weaker defenses.

What cyber insurance actually covers

A typical cyber policy helps cover the costs of responding to a data breach or cyberattack — things like notifying affected customers, credit monitoring services, legal fees, ransomware payments, and the cost of restoring lost data or systems.

First-party vs. third-party coverage

First-party coverage handles costs to your own business — lost income from downtime, data recovery, and the breach response itself. Third-party coverage handles claims against you — for example, if a customer's data was exposed and they hold your business responsible.

Why small businesses are targeted

Attackers often specifically target small businesses because they tend to have fewer IT resources and weaker security systems than large companies, making them an easier target — not a safer one.

How to know if you need it

If your business stores customer data (names, payment info, health records), relies on email or online systems to operate, or would lose significant income from even a short system outage, cyber insurance is worth a serious look — regardless of your business size.