Cyber Insurance Readiness: Are You Covered or Exposed?

When it comes to cyber insurance, most business leaders assume they’re protected… until they try to file a claim. The truth is, cyber insurance has changed dramatically in the last few years. 

Carriers are tightening requirements, premiums are rising, and companies that once qualified for coverage are suddenly finding themselves denied or underinsured.

If you’re not sure where you stand, now is the time to find out. Because when a breach happens, and statistically, it will, the difference between being covered and being exposed comes down to readiness.

The New Reality of Cyber Insurance

Cyber insurance was once a safety net for when something went wrong. Today, it is an extension of your cybersecurity program. Insurers no longer take your word that your systems are secure. They expect proof.

Most carriers now require documented controls, such as:

• Multi-factor authentication (MFA) on all accounts
• Endpoint detection and response (EDR)
• Security awareness training for employees
• Regular patch management and backup testing
• Incident response and disaster recovery plans

If these elements aren’t in place, your renewal could be denied or your premiums could skyrocket. Some insurers are even sending detailed cybersecurity questionnaires or conducting their own risk scans before offering coverage.

This shift isn’t arbitrary. With the rise of ransomware and phishing attacks, insurers have seen a sharp increase in payouts. They’re protecting their risk exposure, and you need to do the same.

Common Gaps That Leave Businesses Exposed

At Preferred, we conduct Business Cybersecurity & Technology Reviews (BCTR) to assess how secure, compliant, and insurable an organization truly is.

Across dozens of SMB assessments, five gaps appear consistently.

1. No Unified Security Stack

Many businesses run fragmented tools, antivirus here, spam filters there, and outdated network hardware. Without integration and visibility, it’s nearly impossible to demonstrate coverage-worthy security maturity.

2. Weak Authentication Policies

Cyber insurers are laser-focused on MFA. Yet, many companies still don’t have it enforced across remote logins, email, or admin accounts. It’s one of the fastest ways to lose eligibility.

3. Unverified Backups

You might have backups, but are they encrypted, offsite, and tested regularly? If not, insurers may deem them unreliable, especially for ransomware recovery.

4. Untrained End Users

Human error drives over 80% of cyber incidents. Employees who fall for phishing emails, use weak passwords, or share credentials can void an otherwise solid insurance claim.

5. Missing Documentation

Insurers want to see evidence: policies, logs, and testing reports that prove you’ve implemented security best practices. “We think we have it” isn’t enough.

Why Insurers Are Asking for More

Carriers aren’t just being difficult. They’re responding to a market flooded with claims. A single ransomware attack can cost hundreds of thousands of dollars, from recovery to reputational damage. For small and mid-sized businesses, that’s often fatal.

But there’s a silver lining. Insurers are effectively setting the bar for modern cybersecurity.

Their requirements align closely with industry frameworks like NIST, CMMC, and ISO 27001. By meeting insurance criteria, you’re not just protecting your premiums; you’re improving your entire security posture.

The Cost of Being Unprepared

The risk of inadequate cybersecurity controls is reflected in real incidents and industry data.

Publicly reported ransomware cases, including high-profile disputes like the Sinclair Broadcast Group lawsuit against its cyber insurers, have shown how costly gaps in security and documentation can be. In that case, Sinclair sought tens of millions of dollars in losses after a ransomware attack, only to face coverage disputes when insurers scrutinized controls and policy requirements after the fact. While the scale was large, the underlying issue is common across organizations of all sizes: insurance coverage is only as reliable as the security posture behind it.

Industry research reinforces this pattern. According to aggregated data from insurers and incident response firms, ransomware and phishing-related incidents routinely cost small and mid-sized businesses $200,000 to $500,000 or more once legal fees, forensic investigations, regulatory notifications, downtime, and recovery are included. The average organization without mature recovery planning experiences three weeks or more of operational disruption following a ransomware attack.

Industry analyses consistently show that up to 40% of cyber insurance claims are denied, most often due to missing security controls, incomplete disclosures, or failure to follow required procedures. These denials frequently trace back to the same gaps: lack of MFA, unmonitored endpoints, untested or non-isolated backups, and insufficient documentation.

Carriers aren’t acting arbitrarily. As cyberattacks grow more frequent and more damaging, insurers are enforcing requirements more strictly and refusing to cover organizations that cannot demonstrate a mature, well-documented security posture. That’s why readiness (and not just having a policy) is now the deciding factor in whether a business can recover from a cyber incident.

From Risk to Readiness: Building a Cyber-Insurable Business

Getting insured and staying insured requires alignment between IT, leadership, and compliance. Here’s what readiness looks like:

1. Conduct a Cyber Insurance Readiness Assessment

Start by identifying what your insurer expects versus what you have in place. A structured review like Preferred’s BCTR evaluates your cybersecurity controls, documentation, and compliance posture so you can see exactly where you stand.

2. Close Control Gaps Quickly

Prioritize the basics: MFA everywhere, endpoint monitoring, data backups, and phishing training. These not only improve your insurability, but they also drastically reduce your real-world risk.

3. Document Everything

Keep written records of your policies, testing, and audits. If a claim ever arises, you’ll need to show when controls were implemented and how they were verified.

4. Treat Cyber Insurance as a Partnership

Your IT provider and insurer should work in sync. Preferred often collaborates with insurance carriers during renewals to provide control documentation, ensuring our clients don’t lose coverage over paperwork.

5. Review Annually

As threats evolve, so do insurer expectations. Annual technology and cybersecurity reviews keep your business and coverage current.

Compliance, Insurance, and Reputation: The Triple Connection

Clients, investors, and partners are evaluating how seriously the companies they work with protect sensitive information, and they expect clear evidence.

Many of our clients have secured new contracts specifically because they were able to show mature cybersecurity practices and valid insurance coverage. Their competitors could not offer the same level of assurance.

Compliance frameworks such as HIPAA, FINRA, and CMMC align closely with cyber insurance controls. When you meet these standards, you strengthen your eligibility for coverage, elevate your reputation, and reduce operational and security risks across the organization.

Cyber Insurance as a Strategic Advantage

Forward-thinking companies now treat insurance readiness as a competitive edge. When cybersecurity is aligned with business goals, you can:

• Negotiate better premium rates
• Reduce downtime and recovery costs
• Increase client trust and contract eligibility
• Create board-level visibility into risk management

This is where a proactive IT partner makes all the difference. At Preferred, we help organizations move from reactive fixes to a proactive, documented security framework that satisfies both regulators and insurers.

Our SmartSecure program, combined with 24/7 monitoring, compliance support, and annual BCTRs, ensures your business isn’t just insured; it’s resilient.

Are You Covered or Exposed?

If you’re unsure whether your current cybersecurity posture would satisfy your insurer — or if your policy would actually pay out after an incident — it’s time to get clarity. The peace of mind that comes from knowing you’re covered is worth far more than the premium.

A quick Cyber Insurance Readiness Review can reveal where you stand and what’s needed to protect your business, your clients, and your bottom line.

Get Cyber-Ready Today

Schedule your expert consult with Preferred today. We’ll help you identify vulnerabilities, document compliance, and strengthen your insurance eligibility so you can move forward with confidence.