Cyber insurance for the self-employed – is it really necessary?

Running your own business online has plenty of benefits, but it also brings risks that are easy to overlook. If you’re self-employed = maybe working from home, freelancing, or selling through platforms like Shopify or Etsy – a cyber attack probably isn’t top of your worry list.

But that doesn’t mean you’re not a target. In fact, small business owners are often seen as easier targets, especially if they rely on email, cloud tools, or online payments to run their businesses. And while cyber insurance won’t stop an attack from happening, it can help pick up the pieces when things go wrong.

What does cyber insurance actually cover?

A good policy will cover the financial fallout of a digital incident. That might be a phishing scam, a malware infection, data theft, or even something as basic as accidentally emailing sensitive documents to the wrong person.

Most policies include:

• IT support to help recover your systems
• Costs related to legal advice or regulatory action
• Customer notifications and public relations help
• Loss of income if you can’t trade
• Claims made against you if someone else is affected

Some also include fraud response services or access to breach recovery teams. That can be a big deal if you don’t have in-house support.

Real scenarios

These aren’t far-fetched situations. Here’s what happens to real sole traders:

• A wedding photographer stores all bookings on one laptop, which is hit by ransomware. They miss jobs and lose deposits.
• A virtual assistant is tricked by a fake invoice scam and transfers money to a criminal.
• A nutrition coach sends a spreadsheet of client details to the wrong recipient by mistake, and those clients start asking questions.
• A small online seller gets their PayPal account hacked and is locked out for two weeks.

According to the Cyber Security Breaches Survey 2025, over 40% of UK small businesses reported cyber incidents last year, and this number is expected to continue rising.

Two recent Bytestart reports dig deeper:

• Half of UK businesses have already been hit by a cyber attack
• BT warns small firms are in the firing line

What’s not included?

Cyber insurance doesn’t fix everything. Most policies won’t cover:

• Fines from regulators like the ICO
• Damage to hardware devices
• Loss of intellectual property
• Scam payments where you willingly transferred money

And if you’ve failed to follow basic precautions – like ignoring software updates or using weak passwords – your insurer may not pay out.

Many policies require that you follow standard cyber hygiene, such as having antivirus software and two-factor authentication in place.

Do you need it by law?

There’s no legal requirement to have cyber insurance in the UK, even if you collect personal data or process payments. But that doesn’t mean it’s optional in practice.

Many clients, especially in regulated industries, now expect basic cyber protections as part of your agreement. Some will even ask for proof of insurance in their contracts.

It’s also worth remembering: if you’re handling personal data, you’re still legally responsible under UK GDPR. Insurance won’t make you compliant, but it can help you deal with the fallout if you make a mistake.

You can read more about your responsibilities on the ICO’s SME hub.

Where can you buy cyber insurance?

Several UK providers now offer cyber cover aimed at sole traders and small business owners. These include:

• Hiscox – strong standalone and add-on options
• Superscript – good for freelancers, creatives and digital businesses
• Markel – covers a wide range of trades and services
• PolicyBee – friendly interface, simple policies for sole traders

Expect to answer questions about your turnover, data handling and how you protect your systems.

What does it cost?

Most entry-level policies for sole traders start at around £6 to £15 per month. However, it depends on your trade, the amount of data you hold, and the level of cover you require.

You’ll pay more if:

• You store sensitive customer data
• You work in tech, finance or legal sectors
• You need cover for higher income loss or third-party claims

Some providers let you bundle cyber cover into public liability or professional indemnity policies, which can save money.

Do you actually need it?

That depends on how your business runs. If you use email, store files, or accept payments, you’re exposed in some way.

Ask yourself:

• Would you lose income if your systems went down?
• Do you keep client info, even just email addresses?
• Could someone hold you responsible if their data got out?

If the answer to any of those is yes, a basic policy might be a smart move. And it’s cheaper than trying to clean up the mess without help.

In summary

Cyber insurance is one of those things you don’t think about until it’s too late. And when a breach happens, it’s rarely about fancy hackers or state-level attacks. It’s much more likely to be a dodgy link, a lost laptop or a mistyped email.

If you’re self-employed and doing any part of your business online, cyber insurance gives you a backup plan. It won’t prevent problems, but it can limit the damage, keep your clients on side, and get you back to work faster.