You likely have 18 days of cash on hand, but most cyber insurance payouts take four to six months. This financial gap can bankrupt your business long before your claim is approved.
You run a successful business, and you worry about a breach stopping your operations. To manage this risk, you bought cyber insurance, thinking you were covered.
Sean Harris, Chief Security Risk Officer at ITS, notes that many small and mid-sized business (SMB) owners assume "I have insurance, it’s covered. Everything is fine.”
“But they do not really know the fine print of that insurance," he adds.
When a cyber incident hits, the claim process can take months. This leaves you in a deep financial hole to cover the costs of recovery. ITS helps close this cash flow gap by combining strong defense with better financial protection.
In this article, we cut through the confusion about cyber insurance and the real cost of a breach. You'll learn topics like:
- Why do cyber insurance claims get denied?
- How can my business stabilize its cash flow during an incident?
By the end of your read, you will understand the difference between delayed reimbursement and immediate financial protection. You will also learn how to build a security plan that helps you avoid choosing between recovery and payroll.
How Many Weeks of Cash Can Your Company Survive With If Operations Stopped Overnight?
Rob Schenk, Chief Security Officer at ITS, asks leaders this exact question because it goes right to the heart of the risk: cash flow and business continuity.
Several SMBs operate on thin margins. As Schenk stated in a recent webinar, "Most small and medium-sized businesses have around 18 days of cash on hand, basically one pay cycle."
Here’s what happens if you get hit with ransomware:
- Operations Stop: You can’t bill, ship, or have your employees work.
- The Clock Starts: You incur expenses immediately, such as forensic investigation and emergency recovery services.
- The Wait Begins: "Insurance claims can take four to six months to pay out. That is a long time to cover payroll, vendors, and recovery costs," Schenk warns.
That four- to six-month gap is an extinction event for a company with only 18 days of cash on hand. As Schenk notes, "If you can’t access your systems, you can’t bill, you can’t pay, and you can’t recover, that is not an IT problem. It is more of a business problem."
READ MORE: Everything You Need to Know About Ransomware: Before, During, and After an Attack
Why Do Cyber Insurance Claims Get Denied?
Traditional cyber insurance fails SMBs due to delay and denial.
The Denial Risk: Compliance vs. Readiness
Cyber insurance is based on an application in which you affirm that you have certain security measures in place (such as Multi-Factor Authentication, or MFA).
However, Sean Harris notes that insurance attestations and audits are a “point-in-time snapshot.” He adds, “We’re all humans. Things happen over time. There are all types of things that we have to continually check."
In other words, if you checked the MFA box a year ago, you still have to check whether MFA is enforced across all new cloud services, or whether a new employee bypasses it.
If a breach happens and the insurer finds that a key control was not fully working, your claim may be denied. Why? It’s because you failed to maintain continuous readiness.
The main difference between being compliant and having continuous readiness is as follows:
- Compliance: Checking a box on a form, often annually
- Readiness: Having continuous, real-time proof that your controls work as they should, every hour of every day
“The good news is that nobody expects anybody to be perfect. But you do have to show the evidence that you were making the best effort at any given moment,” Sean said.
Read More: Cyber Insurance and Compliance: What Business Leaders Need to Know
The Delay: The Marathon of Recovery
When a breach happens, you enter the “sprint” phase, which is the frantic first hours.
During this sprint, leadership has to make hard, fast decisions:
- Do we go straight to the insurance carrier?
- Do we hire a third-party forensic team first?
- Do we pay the ransom demand?
Harris says, "While you are making those decisions, nothing is operating, no money is coming in, nobody can work, and you’ve got leadership tapping on your shoulder."
All the while, the insurance payout is months away. As Harris reminds us, the process quickly becomes "a recovery that takes time. It’s a marathon."
READ: Things to Prepare for Cyber Insurance and Why They're Important
How Can My Business Stabilize Its Cash Flow During an Incident?
If cyber insurance has slow reimbursement, what is the option for quick cash flow?
The answer is the cyber warranty.
Dan Candee, CEO of Cork, describes cyber warranty in terms of a new-car warranty. If the engine fails, the manufacturer promises to fix it because they stand by their product. A cyber warranty works the same way.
“That’s very much how Cork operates,” Dan notes. “We stand by our technology, and we stand by our partners.”
When it comes to cyber insurance, Candee notes that the concept is similar to “when you drive that Cadillac down the road and somebody pops you at a stoplight. Somebody else is going to pay for that accident.”
Schenk further highlights the core difference: "Think of cyber insurance as a reimbursement strategy and cyber warranty as financial protection as a service."
Technology-First and Fast Cash
Cyber warranty is built on visibility. It involves advanced technology that constantly checks your systems and controls to provide you with proof of continuous readiness.
Candee uses a medical analogy involving a contrast dye in a heart procedure to describe the process: "You have to be able to see from the inside out, to that level, and that’s exactly how Cork is."
Because this technology provides real-time proof, the payout is fast. Candee says, "Within an hour, we are handing over a ten-thousand-dollar virtual credit card so our partner can instantly move." This covers immediate costs, such as payroll or emergency forensic analysis.
The goal of a cyber warranty is to reimburse SMBs the full recovery amount "within two weeks because it has to be less than that 18-day number," Candee states.
This fast money keeps your lights on and your employees paid while the long recovery plays out.
The Non-Negotiable Pillar of Preparation
Financial protection is vital, but it does not replace preparation. To lessen your risk and make any recovery easier, you must plan ahead.
Candee states, “If I would recommend one thing for every business owner or business manager, it would be to put business continuity as one of the pillars in next year’s strategic plan.”
This means preparing for a crisis by:
- Developing a Plan: Create a clear Incident Response (IR) plan that tells everyone who does what after an attack.
- Testing Your Plan: Run tabletop exercises to simulate a crisis. Harris describes these as “like Dungeons and Dragons, where you have the game master give you a scenario and say, ‘What are you going to do now?’”
- Involving Everyone: These tests must include the C-suite, legal, and HR. Harris states, “I have yet to come out of a tabletop where everything planned worked perfectly. That is why you have to do them.”
If you have a solid, tested plan, you reduce panic and strengthen the proof of continuous readiness needed by financial providers.
You can find resources on creating these plans from groups like the CISA (Cybersecurity & Infrastructure Security Agency), which offers guidance on incident response.
Watch: What is an Incident Response Plan (and Why You Need It)
Ready for Financial Protection That Keeps Up with Your Business?
Many SMBs learn the hard way that cyber insurance claims can be delayed or even denied if policy conditions are not met. More so, payouts often arrive long after cash flow is already under pressure.
Planning ahead with a strong incident response plan, clear documentation, and the right controls in place can improve your chances of a smooth claim and reduce the financial hit of an attack.
Intelligent Technical Solutions has been solving business continuity and financial risk problems since 2003. We specialize in helping you move past compliance to achieve the continuous readiness that prevents claim denial and unlocks fast warranty payouts.
Our certified experts assess your controls and provide the technical proof necessary to secure rapid financial protection. With over 20 years of experience protecting businesses, ITS has helped hundreds of clients stabilize their finances during a crisis.
Is your cyber insurance ready for a real breach? Schedule a meeting with an ITS expert today to find out if your business is truly protected. You can also take this 3-minute quiz to instantly assess your security.
To learn more about cybersecurity readiness, check out these resources from our Learning Center:
- The Next Phase of Ransomware Attacks and What You Can Do About Them
- 5 Things to Check to Get Cyber Insurance Approval
- How Effective is Your Incident Response Plan? [Checklist]
Frequently Asked Questions
Q: What is the biggest mistake SMBs make with cyber insurance?
A: One of the biggest mistakes is assuming a claim will be covered just because the premium is paid. Claims can be denied if an SMB misstates its security posture on the application or fails to maintain the required controls listed in the policy.
Q: How is a cyber warranty different from insurance?
A: Traditional cyber insurance often takes weeks or even months to fully pay out, while many cyber warranty programs are designed to release funds or provide response support much faster, sometimes within hours or days after an approved event.
Q: What is a tabletop exercise?
A: A tabletop exercise is a guided discussion where your team walks through a simulated cyber incident step-by-step. It helps leaders and staff understand their roles, practice decision-making, and spot gaps in their current plan before a real attack happens.
Q: Why are threat actors focusing on small businesses now?
A: Attackers target SMBs because they often have weaker security and fewer specialized staff than large enterprises. Automated tools let them run many smaller, repeatable attacks across several victims, which adds up to significant overall profit.
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