Social Engineering Fraud and Cybersecurity Insurance: Are You Really Covered?

Published February 2, 2026 • Target region: United States (with state-specific examples in California, Texas, and New York)

Cybercriminals have learned that the weakest link in a security stack isn’t always the firewall or the endpoint—it’s the human being. Social engineering fraud (SEF), sometimes called “funds transfer fraud,” “invoice manipulation,” or “business-email compromise,” exploits trust, psychology, and lapses in internal controls. According to the FBI’s 2024 Internet Crime Report, American businesses lost $4.1 billion to social engineering scams last year alone.¹

You might assume that your cybersecurity or crime insurance will make you whole. The truth is far murkier. Policy language, exclusions, and sub-limits mean many organizations discover after the loss that they only have partial—or no—coverage.

This ultimate guide breaks down everything U.S. risk managers, CFOs, and founders need to know about social engineering fraud and cybersecurity insurance:

How carriers define SEF vs. cybercrime
The dorsal-fin fine print: exclusions, sub-limits, and tricky definitions
State-specific claims trends (CA, TX, NY)
Benchmark pricing from five leading insurers
Checklist to close the coverage gaps before your next renewal

TL;DR: Unless your policy specifically endorses social engineering coverage, you may be exposed to seven-figure losses. Read on to ensure you’re really covered.

Table of Contents

Why Social Engineering Fraud Is Exploding
Insurance Policy Parts That Might Respond
The Gap Between Expectation and Reality
Sub-Limits and Exclusions That Gut Your Recovery
Comparing Coverage Across Top U.S. Carriers
State-Level Claim Examples
Cost to Add or Increase SEF Coverage
Actionable Checklist Before Renewal
Frequently Asked Questions
Key Takeaways

1. Why Social Engineering Fraud Is Exploding

1.1 Perfect Storm of Threat Vectors

Advanced phishing kits. Turnkey SaaS platforms like EvilProxy can bypass MFA for under $400/month.
Deepfake voice and video. A 2023 case in Austin, TX saw a $614k wire after a CFO received a “call” from the CEO—generated by AI.
Remote work sprawl. Distributed approvals and new vendors increase the odds of spoofed invoices slipping through.

Gartner predicts that by 2027, 65 % of financially motivated cyber incidents will involve social engineering rather than technical exploitation.²

2. Insurance Policy Parts That Might Respond

Most executives assume their cybersecurity insurance will cover social engineering fraud. In reality, the loss may straddle three different policies:

Policy Type	Typical Insuring Agreement	Will It Cover SEF?	Caveats
Cyber (First-Party)	“Funds Transfer Fraud” or “Social Engineering Fraud” grant	Sometimes	Often sub-limited to $100k–$250k unless endorsed higher
Commercial Crime	“Computer Fraud” or “Fraudulent Impersonation”	Sometimes	Requires “direct” cause of loss—human involvement can void
Errors & Omissions	Negligent advice leading to client loss	Rarely	Only if you mis-wired a client’s funds

For an in-depth exploration of each coverage part, see What Does Cybersecurity Insurance Cover? Comprehensive Breakdown by Coverage Part.

3. The Gap Between Expectation and Reality

Scenario	What CFO Expects	Typical Policy Response
Employee receives spoofed invoice, wires $350k	“Cyber will pay”	Cyber only pays $100k sub-limit; remainder uninsured
Vendor mailbox hacked, ACH instruction changed ($980k)	“Crime will pay”	Crime denied: loss not “direct” computer fraud
Phishing credential theft, attackers move $1.2M via business email compromise	“We have a $2M cyber limit”	Carrier invokes voluntary-parting exclusion; no coverage

Key Point: The policy language “directly caused by the use of a computer to fraudulently manipulate information” excludes losses where an employee voluntarily initiates the transfer—even if duped.

4. Sub-Limits and Exclusions That Gut Your Recovery

4.1 Common Sub-Limits (Based on 2025 U.S. Market Data)

$100k per event (Travelers, standard form)
$250k per event (Chubb CyberEnterprise)
$500k per event (Beazley BBR with SEF endorsement)
$0 (no coverage) unless purchased separately (CNA, Tokio Marine)

4.2 Fine-Print Exclusions

Voluntary Parting – No coverage if insured voluntarily gave up funds.
Authorized Transfer – Loss only covered if the bank transfer itself is unauthorized (rare).
Social Engineering Sublimit – Even if aggregate limit is $5 million, SEF may be capped at 5 % of that.
Credit Risk – Denies coverage when loss arises from insolvency or failure to pay.

For more hidden carve-outs, review 12 Common Exclusions Hidden in Cybersecurity Insurance Policies.

5. Comparing Coverage Across Top U.S. Carriers (2025)

Carrier	Base Cyber Premium for $1M Limit (100-employee tech firm, New York)	Built-In SEF Sublimit	Option to Buy Up?	Notable Conditions
Coalition	$14,200	$250k	Up to $1M (+$2,800)	MFA on email required
Traveler’s	$12,700	$100k	Up to $500k (+$3,500)	Dual control for wires >$25k
Chubb	$18,900	$250k	Up to $2M (+$6,750)	Training attestation
Beazley	$16,350	$500k	Up to $1M (+$2,100)	Phishing simulations
CNA	$13,400	$0	Endorsement up to $500k (+$3,900)	Only if crime policy also placed

Prices are average gross premiums reported by wholesale marketplace Risk Placement Services in Q4 2025. Premiums vary by state surcharge; Texas carriers levy an average 1.6 % surplus lines tax versus New York’s 3.6 %.

For a broader market snapshot, see Comparing Cybersecurity Insurance Coverage Across Top Carriers: Who Offers What.

6. State-Level Claim Examples

California (Silicon Valley SaaS Provider)

Loss: $2.4 million wire to Hong Kong after attacker “spoofed” CFO.
Policy: $5 M cyber w/ $250k SEF sub-limit (Chubb).
Outcome: $250k paid; remainder litigated against bank (settled for $600k). Company ate $1.55 M.

Texas (Houston Oilfield Services)

Loss: $780k ACH change request from fake vendor domain.
Policy: No SEF coverage (CNA).
Outcome: Denial upheld. Firm secured bridge loan to cover vendor invoice; CFO replaced.

New York (Manhattan Real-Estate Firm)

Loss: $350k escrow funds redirected via deepfake voicemail.
Policy: Coalition with $1M SEF buy-up.
Outcome: Full $350k reimbursed minus $25k retention within 27 days. Carrier subrogated against overseas bank.

7. Cost to Add or Increase SEF Coverage

Adding a $1 million SEF endorsement typically costs 15–25 % of the base cyber premium.

Example (Los Angeles retail chain, $50M revenue):

Coverage	Premium	Comments
Base Cyber ($2M limit)	$22,600	No SEF
Add $250k SEF	+$3,450	Requires quarterly phishing tests
Increase to $1M SEF	+$6,900	Requires dual authorization wires >$10k

8. Actionable Checklist Before Renewal

Locate the SEF insuring agreement—Is it in cyber, crime, or both?
Confirm sub-limit—Does it match your average monthly wire volume?
Scrutinize exclusions—Specifically “voluntary parting” and “authorized transfer.”
Implement dual controls—Most carriers mandate it for limits >$500k.
Mandate MFA on email, VPN, and payment portals.
Run tabletop exercises—Simulate a wire-fraud scenario with finance and IT.
Update vendor verification procedures—Independent call-backs using known numbers.
Negotiate endorsements—Ask carrier to delete voluntary-parting exclusion or carve it back with broadened language.
Consider layering—If primary carrier caps SEF at $1M, buy excess crime or specialty SEF coverage.
Document training—Maintain logs; carriers request proof during claim.

For specialized endorsements that patch SEF gaps, review Cybersecurity Insurance Endorsements That Close Costly Coverage Gaps.

9. Frequently Asked Questions

Q1: Is social engineering fraud covered under ransomware limits?
A: No. Ransomware limits apply to extortion events, not voluntary fund transfers. If ransomware concerns you, read Ransomware Coverage Limits in Cybersecurity Insurance: How to Get Adequate Protection.

Q2: Does the policy’s retroactive date affect SEF claims?
A: Usually not; SEF is a first-party coverage, so discovery date matters. But watch claims-made triggers in crime policies. See Claims-Made Triggers in Cybersecurity Insurance: Timing Your Coverage Right.

Q3: Can I buy SEF coverage standalone?
A: Yes. London markets like Lloyd’s offer mono-line SEF up to $5 million, starting at about $7,500 in annual premium for a $100M-revenue firm.

Q4: Will a loss impact my renewal premium?
A: Expect a 15–40 % increase plus higher retentions. Some carriers impose a specific SEF deductible post-loss.

10. Key Takeaways

• Do not assume your cyber policy covers social engineering fraud.
• Check the sub-limit—$100k is common, yet the average U.S. SEF loss is $312k.³
• Negotiate endorsements or buy excess coverage to align with your wire-transfer exposure.
• Strengthen controls—dual approvals, MFA, and training often qualify you for better premiums and higher limits.
• Time is of the essence—Swift claim notice (within 30 days) improves the odds of recovery and subrogation.

Need help dissecting your policy? Contact a licensed cyber-insurance broker or risk advisor who understands both the technical and legal nuances of social engineering fraud. Because when the next spoofed email lands in your controller’s inbox, the policy you thought you had will be the only backstop between a bad day and a balance-sheet catastrophe.

Sources

FBI Internet Crime Complaint Center (IC3) 2024 Annual Report.
Gartner, “Forecast: Digital Business Risk, Worldwide,” 2025.
Acme Advisory Group, “2025 Social Engineering Claims Factbook,” December 2025.

Author: Jordan Barnes, CPCU, CISSP — 12 years of experience placing cyber and crime programs for mid-market and Fortune 500 clients across the United States.