Your cyber insurance policy might not cover what you think it does. Healthcare organizations often discover the gaps only after an incident — when the claim is denied or the payout falls far short of actual costs.
With the average healthcare data breach now exceeding $10 million, understanding what’s actually in your policy isn’t optional. It’s essential to protecting both your organization and your patients.
What Cyber Insurance Typically Covers
Most healthcare cyber policies include some version of these core coverages:
First-party coverage protects your organization directly. This typically includes breach response costs (forensic investigation, notification, credit monitoring), business interruption losses, data recovery expenses, and ransomware payments — though ransomware coverage is increasingly restricted or excluded entirely.
Third-party coverage protects you from claims by others. This includes regulatory defense costs, settlements from patient lawsuits, and penalties from HIPAA violations — though many policies cap regulatory coverage or exclude certain penalty types.
Where Healthcare Organizations Get Surprised
The gaps in cyber coverage often hide in the fine print:
Retroactive dates matter. If your policy has a retroactive date and the breach originated before that date — even if discovered later — you may have no coverage.
Dependent business interruption is often limited. If your EHR vendor goes down and you can’t bill or treat patients, your policy may not cover those losses unless you’ve specifically added that coverage.
Regulatory penalties vary by state. Some states prohibit insurance coverage for certain regulatory fines. Your policy may exclude these even if it appears to cover “regulatory actions.”
Social engineering attacks fall in gray areas. If an employee is tricked into wiring funds or sharing credentials, that may fall outside traditional cyber coverage — requiring a separate crime or fraud policy.
War exclusions are expanding. Insurers are increasingly invoking war or nation-state exclusions for attacks attributed to foreign governments, even when the target is a hospital.
What Insurers Now Require
Getting coverage — and keeping it — now requires demonstrating security maturity. Most carriers require evidence of:
- Multi-factor authentication across all remote access and privileged accounts
- Endpoint detection and response (EDR) on all systems
- Regular patching cycles with documented compliance
- Tested backup and recovery processes
- Security awareness training with phishing simulations
- Incident response plans that have been tabletop tested
Fail to maintain these controls, and your insurer may deny claims or non-renew your policy.
How to Evaluate Your Coverage
Before your next renewal, work with your broker and IT leadership to answer these questions:
- What’s your policy’s retroactive date, and does it align with your actual risk exposure?
- Are ransomware payments covered, and under what conditions?
- What’s the sub-limit for regulatory defense and penalties?
- Does business interruption coverage extend to vendor outages?
- What security controls are required to maintain coverage?
The Strategic View
Cyber insurance is a risk transfer tool, not a security strategy. It works best when paired with mature security operations that reduce the likelihood and impact of incidents in the first place.
Organizations that treat insurance as a checkbox often find themselves underinsured when it matters most. Those that integrate insurance into a broader risk management approach — with clear visibility into what’s covered and what’s not — are better positioned to weather an incident without financial catastrophe.
Need help assessing your security posture before your next renewal? We work with healthcare organizations to close the gaps that insurers — and attackers — look for first.
