This article was written and published after conversations and consultation with Matrix Internet CEO Jeff Sheridan. Matrix Internet are a European digital agency that offers services to both businesses and public institutions.

Before purchasing cyber insurance, following these steps can help you prepare for a meeting with a broker to make sure that the cover you purchase provides value for your company and suits your requirements. Cyber insurance is a vital risk management tool for SMEs, covering non-physical damage resulting from a cyber attack. Understanding your policy is crucial, as coverage is often contingent on your business’s existing security posture.

1. Understand what cyber insurance is and why you need it

Small and medium-sized enterprises (SMEs) should begin by understanding what cyber insurance actually covers and why it matters. Cyber insurance is designed to protect against non-physical damage caused by cyberattacks—such as data breaches, ransomware, or system outages. The scope and strength of your coverage will depend heavily on your existing cybersecurity posture. Insurers will assess how well you protect your systems before issuing or pricing a policy. For SMEs, cyber insurance functions as a financial safety net that can help absorb both the direct costs of an incident (known as first-party coverage) and the liabilities to others affected by it (known as third-party coverage).

2. Prepare for first-party coverage (your own costs)

Your first step is to ensure that your business is prepared to take full advantage of first-party coverage, which addresses the direct costs you face after a cyber incident. Start by accurately calculating your Business Interruption Value (BIV)—the amount of income you could lose if your operations were disrupted. This requires keeping your financial records current and readily available to substantiate any claims. Review whether your policy covers essential response costs such as incident triage, forensic investigations, and system restoration. It should also include customer notifications, credit monitoring services, and recovery work like restoring lost data or repairing damaged hardware. Many policies also extend to crisis communications or post-incident marketing campaigns to rebuild trust. In addition, you should check if your insurer covers ransom or extortion-related costs, while understanding that direct ransom payments may be restricted or legally complex depending on your jurisdiction.

3. Prepare for third-party coverage (liability to others)

Third-party coverage deals with the legal and regulatory liabilities that might arise when a cyber incident affects others outside your organisation. This includes coverage for regulatory fines—such as penalties for data protection or NIS2 compliance failures—as well as legal fees and compensation related to customer lawsuits. Your policy should also include coverage for damages caused to third-party systems through breaches in your own network or products. Notification costs, which cover the expense of informing affected customers or partners about a data loss, are another key element. Finally, make sure your insurer covers vulnerability remediation costs—the funds required to fix the core issue that caused the breach in the first place.

4. Review policy details before signing

Before committing to any policy, take the time to carefully review its conditions, exclusions, and limits. SMEs should compare multiple insurers and request tailored coverage that aligns with their risk profile. Pay particular attention to exclusions such as “war” clauses, which may exclude attacks linked to state-backed groups. Many insurers also require certain cybersecurity measures to be in place before the policy remains valid, such as multi-factor authentication, regular patching routines, and incident response planning. Check whether your policy offers retroactive coverage—this ensures that older, previously undetected vulnerabilities can still be covered. It’s equally important to verify your liability limits and any sublimits set for specific costs like business continuity or data recovery, ensuring they align with your potential exposure.

5. Manage claims and legal requirements

When a cyber incident occurs, the claims process can be complex. SMEs should confirm whether their insurance covers incidents caused by third parties, such as IT service providers, or whether they would need to pursue separate legal action. Be aware that paying ransomware demands may be illegal or strongly discouraged in your country, particularly within the EU, where such payments can breach anti-money-laundering rules. Always consult legal counsel and compliance officers before making any payment decisions. Under the EU’s NIS2 Directive, significant cybersecurity incidents must be reported to national authorities, and failing to do so could lead to serious penalties. You should also ask your broker about their claim acceptance rate and clarify whether the insurer requires pre-approval before you incur any incident response costs. Some insurers expect notification or authorisation before expenses are made, and proof of that approval must be retained for claim processing.

6. Plan your cyber insurance procurement strategy

As you plan your insurance purchase, consider how your policy can support business growth. Many procurement and tender processes—particularly for government or large enterprise contracts—require evidence of minimum cyber insurance coverage. Research the thresholds that apply in your country or your target markets, and select a policy flexible enough to update as requirements evolve. It pays to compare multiple brokers and obtain quotes, as cyber insurance prices have been decreasing thanks to greater competition. Improving your cybersecurity practices can also help reduce your premiums, since insurers reward businesses with lower risk profiles. Finally, you may wish to include “Betterment” coverage, which not only restores your systems after an incident but also funds upgrades to improve your defenses, such as enhanced firewalls or endpoint protection.

7. Maintain and improve your posture

Cyber insurance is not a one-off purchase—it requires ongoing attention and maintenance. Review your policy annually to ensure it still reflects your current risks, technologies, and compliance obligations. Keep detailed records showing that your business complies with all the insurer’s security requirements, as failing to maintain them can void your coverage. Integrate your cyber insurance policy into your broader risk management and compliance strategy so that it works alongside your other cybersecurity controls. Finally, treat feedback from your insurer as a valuable resource for strengthening your resilience, as demonstrating continuous improvement can both lower premiums and enhance protection in the long term.

You can use the template below when looking at insurers to compare coverage and costs.

Cyber_Insurance_Checklist_SME

Get more tools and advice to manage your cybersecurity by joining the DIGITAL SME ISAC! Open to all cybersecurity practitioners, the SME ISAC brings together knowledge, expertise and best practices to share tools, guidance and intelligence on the threats facing SMEs.