The great insurance lie: claims are being denied because of your application answers

One of the biggest complaints for small businesses is that insurance applications are not clear, and agents will not help besides “it depends”. The news has a constant parade of reports about denied claims, and agencies are marketing on the same fear. What is an honest but confused insurance buyer to do?

The good news is that denied claims for SMBs due to applications are few and far between in cyber insurance. There are a few reasons:

• “Contract of adhesion” in this case means that a boilerplate contract comes from the carrier. You are not able to negotiate terms, and the knowledge level of the insured versus insurer is drastically different. This places a substantial burden on the carrier in the event they wish to deny a claim.

• An extensive academic study was done on the topic and court rulings show a general rule of requiring both malicious and willful intent when lying on an application.

In reality, some cyber claims are denied, but typically for a lack of coverage. The vast majority are paid - CFC is one of the major carriers in the SMB space, and in 2025 paid 99.1% of cyber claims in full.

Insurance applications still must be answered truthfully and accurately, but based off real world data and claims experiences, your policy will pay out…assuming the coverage is there. In the event the application was found to be less than truthful, the end result is often that a carrier will non-renew the policy, forcing you to look elsewhere.