In recent years, cyber insurance has become a popular tool for companies seeking assurance that an attack won’t financially devastate them. At first glance, it sounds appealing — you pay the premium, and in case of an incident, the insurer covers the damages. The reality, however, is more complex. Insurers cover only specific types of incidents and often require the company to prove compliance with certain security standards. Without that, a claim may be denied.

Many organizations don’t realize that cyber insurance doesn’t protect against reputational damage, prolonged operational downtime, or loss of customer trust. Insurers usually reimburse costs like data recovery, forensic analysis, or legal services — but they won’t bring back lost customers. Moreover, insurers are increasingly refusing payouts when companies neglect prevention, fail to update systems, or ignore basic security measures.

Cyber insurance can be a sensible supplement, but it will never replace a robust security strategy. Relying on it as a lifeline is risky — especially now, as policy conditions tighten and exclusions multiply. So it’s worth asking yourself: would your insurance cover your worst-case scenario?