Cyber insurance explained: Shield against online fraud and ID theft
New Delhi, Feb 3, 2026
It gives access to legal, forensic and recovery support, not just money reimbursement, say experts
As India’s digital economy grows, households and individuals face rising threats from cyber fraud. From UPI scams to identity theft, cyber incidents can hit both wallets and peace of mind. Cyber insurance is increasingly being recognised not just as a financial safety net, but as a comprehensive support system for victims.
Common cyber frauds targeting individuals
Experts say the typical cyber fraud in India often begins with social engineering, vishing calls(fraudulent phone calls from scammers pretending to be trusted entities), phishing links( fraudulent URLs designed to trick into visiting a malicious website), or SIM-swap attacks.
Rushik Patel, associate director at EDME Insurance Brokers Ltd., notes, “Victims are frequently tricked by fake refund requests or lose mobile network access after SIM cloning. Fraudsters then move money out using OTPs, with losses ranging from Rs 20,000 to several lakhs. Recovery is difficult without insurance, especially if reporting is delayed.”
Ankit Gupta, business head for cyber insurance at Policybazaar, adds, “A common example is a UPI phishing scam. Victims share OTPs under pressure and lose amounts between Rs 20,000 and Rs 2 lakh in minutes. SIM-swap frauds can drain accounts over hours, with banks taking months to refund, if at all.”
Narendra Bharindwal, president, Insurance Brokers Association of India, said most real-world claims arise from routine digital transactions gone wrong rather than sophisticated hacks, with UPI and bank impersonation frauds often leading to multiple rapid debits and losses ranging from Rs 30,000 to Rs 5–10 lakh, and recovery stretching over months.
Tanuj Gulani, president at Prudent Insurance Brokers, said most household cases start with social engineering, where fraudsters pose as police, bank or tax officials and extract OTPs or credentials, with recovery chances falling sharply if reporting is delayed by even a few hours.
Other patterns include fake social media profiles, online stalking, fraudulent loans, and compromised e-commerce accounts. According to Vibu Dwivedi, vice-president at Anand Rathi Insurance Brokers, “Cyber fraud constantly puts individual privacy at risk. Incidents range from identity theft to fraudulent transactions and cyberstalking, often requiring FIRs and police intervention.”
What cyber insurance actually covers?
Many consumers assume cyber insurance covers all online frauds, but experts caution this is rarely true. Common exclusions include voluntary sharing of OTPs or passwords, prior-known circumstances, investment losses, and intentional or malicious acts. Delays in reporting incidents or incomplete documentation often result in partial or rejected claims.
Rahul Jajoo, advocate at Delhi High Court, explains, “Coverage is contingent on prompt reporting to banks and police, maintaining minimum digital hygiene, and adherence to policy terms. Claims are frequently denied due to delayed notifications or social engineering exclusions.”
Bharindwal said claims are frequently reduced or rejected due to voluntary OTP or password sharing, reporting delays beyond 24–48 hours, social engineering exclusions, and sub-limits on UPI and phishing losses, creating a gap between what buyers expect and what policy wording actually allows.
Beyond reimbursement: Holistic recovery support
Cyber insurance goes beyond simply reimbursing stolen money. Policies often provide legal assistance, IT forensic support, identity restoration, counselling, and liaison with banks.
Aashwyn Singh, senior associate at SKV Law Offices, emphasises, “Professional case managers coordinate with banks and credit bureaus, accelerating recovery and reducing stress. For many, these services matter more than the payout itself.”
Gulani said policies also help with forensic validation of unauthorised transactions, credit monitoring, identity restoration and legal guidance in privacy breach cases, services that individuals would otherwise struggle to arrange independently.
Insurance can also offer wage-loss compensation, reputation management, and guidance to secure compromised devices, turning an overwhelming cyber incident into a structured recovery process. With increasing dependence on UPI, digital wallets, and online platforms, such support helps households regain trust in digital systems.
Is cyber insurance worth it?
Experts recommend cyber insurance for anyone conducting frequent digital transactions, managing online income, or sharing devices with family members. Sum insured should reflect transaction volumes, device usage, and potential exposure. Over-insurance is rare, while under-insurance can leave users vulnerable.
[The Business Standard]
