74% of small businesses underinsured as cyber claims hit $264K

SAN FRANCISCO, Calif. — December 16, 2025 — The median small business holds $12,100 in cash reserves while the average cyber insurance claim now costs $264,000, creating what
MoneyGeek calls the "Insolvency Gap," according to a new analysis examining small business
cash flow and cyber risk exposure. The 22-to-1 gap between typical cash on hand and potential
cyber losses has widened 30% year-over-year as claim costs jumped from $205,000 in 2024 to
$264,000 in 2025, while 39% of small businesses now hold less than one month of operating
expenses in cash reserves.

"The gap between what businesses hold and what they risk has widened by $59,000 in one
year," said Mark Fitzpatrick, licensed insurance expert at MoneyGeek. "Without insurance, a
single bad day isn't an expense; it's a liquidation event. For just $125 per month, cyber liability
insurance transforms a business-ending $264,000 breach into a manageable monthly expense."

Key findings
● The Insolvency Gap: Small businesses hold a median of $12,100 in cash reserves
while facing average cyber claims of $264,000, creating a 22-to-1 mismatch between
available resources and potential losses.
● Worsening cash positions: 39% of small businesses now have less than one month of
cash reserves, up from 27 days of operating expenses historically, based on 2025
Bluevine data and JPMorgan Chase Institute's 2016 comprehensive banking study.
● Claim costs jumped 30% year-over-year: NetDiligence's cyber claim data shows
average small business incidents rising from $205,000 in 2024 to $264,000 in 2025, with
direct remediation costs averaging $79,000 and crisis services averaging $152,000 as
key components.
● Most businesses remain underinsured: 74% of small businesses carry inadequate
cyber coverage despite 92% having some form of business insurance, treating coverage
as a compliance checkbox rather than contingent capital.
● Affordable protection exists: Cyber Liability insurance costs roughly $125 per month
for standard-risk micro-businesses, bridging a $264,000 gap for less than the cost of
daily coffee.

Why the Insolvency Gap matters now

Cyber incidents now cost small businesses $79,000 in direct remediation and reach $264,000
when crisis services escalate, nearly 22 times the typical $12,100 cash buffer. Claims with
business interruption cost 650% more than those without, turning manageable incidents into
business-ending catastrophes for underinsured companies.

MoneyGeek's analysis of 2,400+ insurance quotes shows small businesses can secure
necessary coverage for less than the cost of daily coffee, with monthly premiums ranging from
$21 for General Liability to $125 for Cyber Liability.For $21 per month, a business can bridge a
$30,000+ liability gap; for $125 per month, comprehensive coverage across all four risk
categories costs $264 per month, or less than $9 per day.

Recent data reveals the cash crisis has intensified. While the 2016 JPMorgan Chase Institute
study showed businesses holding roughly 27 days of operating expenses in cash, Bluevine's
2025 Cash Flow Management Survey reveals 39% of small businesses now have less than one
month of cash reserves, and 38.7% cannot cover a month's operating expenses in an
emergency. If revenue stops today, these businesses close within weeks.

Cyber claim costs have increased 30% year-over-year. NetDiligence's five-year average stands
at $246,000, but recent incidents are reaching $264,000 as crisis services and business
interruption costs escalate. Coalition Insurance's direct incident data shows small business
cyber incidents average $79,000 in immediate remediation.

MoneyGeek's recent analysis of ACA marketplace insurers found denial rates averaging 19.1%
for in-network claims, demonstrating how coverage gaps persist even for insured families and
businesses. The same dynamic affects small business insurance: having a policy doesn't
guarantee adequate protection without understanding coverage limits and exclusions.

Three paths to insolvency

Three scenarios account for most small business failures due to the Insolvency Gap:

Cyber Attacks: The $264,000 Threat

While cyber insurance adoption has grown, 77% of small businesses still lack cyber coverage,
leaving the majority exposed. When a ransomware attack strikes a business with limited cash
reserves, Coalition Insurance data shows the average small business cyber incident costs
$79,000 in direct remediation. NetDiligence's analysis, which includes crisis services ($152,000
average) and business interruption, shows average claims reaching $264,000.

Either figure can be catastrophic for a business holding weeks of cash, not months. Cyber
Liability insurance (around $125 per month for standard-risk micro-businesses) covers not just
ransom payments but also forensics teams, legal counsel and breach notification costs that
small businesses can't afford to hire on retainer. The average claim of $264,000 would bankrupt
the typical small business. The insurance premium won't.

Natural Disasters: The Downtime Killer

40% of small businesses never reopen after a disaster. It's rarely the physical damage that kills
the business. It's the downtime.

71% of businesses lack Business Interruption Insurance, meaning they have zero revenue while
their building is being repaired. NetDiligence's 2025 analysis reveals claims with business
interruption cost 650% more than claims without interruption (a devastating multiplier for
businesses without coverage). A business might be covered by property insurance, but without
interruption coverage, there's no cash flow to pay rent, payroll or suppliers during the
months-long reconstruction.

A Business Owner's Policy bundles property, liability and business interruption coverage for
roughly $57 per month. It ensures a fire doesn't become a bankruptcy.

Liability Claims: The Everyday Risk

Only 8% of small businesses carry no insurance at all, but 74% are underinsured with major
coverage gaps. This false sense of security may be more dangerous than having no coverage
at all.

Yet the smallest businesses (those with revenue under $1 million) pay seven times more in tort
liability costs relative to revenue than businesses with $50 million or more in revenue. A single
customer slip-and-fall can trigger legal defense costs exceeding $12,000 before a judge even
hears the case.

Physical risks: General Liability coverage starts at $21 per month and covers customer
injuries, property damage and legal defense costs.

Professional risks: For service businesses like consultants and IT providers, Professional
Liability insurance covers negligence claims averaging $50,000 or more. Coverage costs
roughly $61 per month.

Insurance Is Contingent Capital

Every business day, small businesses close due to insurable events they couldn't afford. The
Insolvency Gap isn't a crisis. It's arithmetic.

In an era where cyber incidents cost small businesses $79,000 in direct remediation (and reach
$264,000 with crisis services included) while 39% hold less than one month of cash reserves,
the buffer is insufficient. The 650% cost multiplier for business interruption transforms temporary setbacks into permanent closures. Business owners must stop viewing insurance as a
regulatory box to check and start viewing it as contingent capital: the only financial instrument
that can turn a business-ending expense into a manageable monthly line item.

Methodology

MoneyGeek synthesized data from the JPMorgan Chase Institute's "Cash is King" report
(analyzing 470 million transactions from 597,000 small businesses, 2016), Bluevine's 2025
Cash Flow Management Survey (774 business owners surveyed September to October 2025),
NetDiligence's Cyber Claims Studies (2024 Report published September 2024 covering 2019 to
2023 incidents and 2025 Report published September 2025 covering 2020 to 2024 incidents,
analyzing 9,000+ and 10,402 claims), Coalition Insurance's 2025 claims data, Hiscox Global
Protection Gap Report 2025 (6,250 SME respondents) and NEXT Insurance's 2025 Business
Coverage Report.

Insurance premium data is based on MoneyGeek's business insurance analysis of 2,400+
quotes from major national carriers including The Hartford, Progressive and State Farm for sole
proprietors and small businesses across 20+ industries. For detailed breakdowns of small
business insurance costs across industries, see MoneyGeek's comprehensive cost analysis.
Statistical Note: This analysis compares median small business cash reserves (representing
typical resources) against average cyber claim costs (representing potential exposure), as
businesses encounter the full range of claim severity regardless of their typical cash position.
NetDiligence reports both a five-year pooled average ($246,000 for 2020 to 2024 data) and
year-over-year trending figures, with 2025 data showing recent incidents averaging $264,000 (a
30% increase from the 2024 baseline of $205,000). This study emphasizes current incident
costs to reflect today's risk environment. Cyber insurance premiums vary widely ($83 to $625
per month) based on risk profile. The $125 per month figure represents a typical cost for
micro-businesses with standard risk profiles.

Full Analysis: https://www.moneygeek.com/insurance/business/insolvency-gap/