MSP insurance that protects your business
Your clients rely on you to run their technology smoothly, but if something goes wrong, your business could take the blame. Business insurance can cover legal costs if a client sues over downtime, a security breach, or undelivered services. Some policies may be required by laws and contracts.
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Insureon helps managed service providers find insurance policies that match your unique risks.
Fill out our easy online application to get quotes from top-rated providers.
What types of business insurance do managed service providers need?
These insurance policies cover the most common risks faced by MSPs.
Technology errors and omissions insurance
Tech E&O is an insurance bundle that covers legal expenses related to an MSP's performance, including cybersecurity. You can often add intellectual property (IP) and media liability coverage.
- Service outages and downtime
- Negligent cybersecurity
- Failure to deliver promised services
Cyber insurance
Cyber insurance for MSPs helps pay for recovery costs and other expenses after a data breach or cyberattack. It's recommended for any business that stores personal information.
- Data breach investigations
- Client notification expenses
- Fraud monitoring services
General liability insurance
This policy covers basic third-party risks for MSPs, such as an accident that injures a client or damages their property. Bundle it with property insurance for savings in a business owner’s policy (BOP).
- Slip-and-fall accidents
- Client property damage
- Advertising injuries
Workers’ compensation insurance
Most states require workers' comp for MSPs that have employees. It also protects sole proprietors from work-related medical bills that health insurance might deny.
- Employee medical expenses
- Disability benefits
- Workplace injury lawsuits
Fidelity bonds
Fidelity bonds compensate your clients if an employee at your MSP company steals from them. Your clients might require you to purchase a bond.
- Employee theft of funds
- Fraud committed by an employee
- Unlawful data access by an employee
Commercial auto insurance
This policy covers the cost of accidents involving a vehicle owned by a managed service provider. Most states require this coverage for business-owned vehicles.
- Injuries caused by a company vehicle
- Property damaged by your vehicle
- Vehicle vandalism and theft
How much does MSP insurance cost?
A managed service provider with only a few employees will pay less for insurance than a larger business.
Average prices for tech companies include:
- E&O insurance: $67 per month
- Cyber insurance: $148 per month
- General liability: $30 per month
The following factors can affect premiums during the underwriting process:
- IT services offered, such as cloud services, cybersecurity, or IT infrastructure
- Business property and equipment
- Annual revenue
- Number of employees
- Policy limits and deductibles
- Endorsements and exclusions
- Claims history
How do I get MSP insurance?
It's easy to get managed service provider business insurance if you have your company information on hand. Our insurance application will ask for basic facts about your company, such as revenue and number of employees. You can buy a policy online and get a certificate of insurance with Insureon in three easy steps:
- Complete a free online application.
- Compare insurance quotes and choose policies.
- Pay for your policy and download a certificate.
Insureon's licensed insurance agents work with top-rated U.S. providers to find the right coverage for your small MSP company, whether you work independently or hire employees.
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FAQs about managed service provider insurance
Review answers to frequently asked questions about MSP insurance coverages and requirements.
Why is business insurance necessary for MSP professionals?
Whether you're a consultant, a startup, or a well-established firm with employees, mistakes made by MSPs can have a tremendous impact on your clients. If they end up losing money, the result could be a lawsuit against your business.
Errors and omissions insurance (E&O) protects against legal fees if a client sues your business over an error, oversight, or other professional negligence related to the services you offer. It's often required in contracts, as it protects your clients from potential losses related to service outages and mistakes in IT support.
Technology businesses can often bundle E&O with third-party cyber insurance in a package called tech E&O, which covers cybersecurity incidents as well. Even if your company wasn't at fault, a client might file a frivolous lawsuit in an attempt to recover costs from a data breach or other disruption.
You'll also need cyber insurance, or data breach insurance, to cover data breaches and cyberattacks at your company. It's a worthwhile investment for small businesses, who are often targeted because of their limited defenses. Cyber insurance helps pay for data breach investigations, ransomware attacks, and customer notification costs if client data was exposed.
Are MSP companies required to have insurance?
Business insurance requirements can come from your state, your clients, commercial landlords, and lenders.
Here are several situations where MSPs must have insurance:
- You rent an office or apply for a loan. You might need general liability insurance to sign a lease or get a business loan.
- Your clients require coverage. Clients may include tech E&O, general liability, or a fidelity bond in their contractual requirements to gain protection against financial losses related to your professional services.
- You have employees. Most states require workers' compensation for businesses that have employees.
- You have a company car. Similarly, you'll need commercial auto insurance to comply with state laws if your business owns a vehicle.
Even when it's not required, being bonded and insured can help your company win contracts and give you an edge over the competition. It also helps to be Cybersecurity Maturity Model Certification (CMMC) compliant, which may be necessary if you work with Department of Defense (DoD) contractors.
Will MSP insurance cover incidents caused by vendors or upstream providers?
MSPs often rely on third-party vendors, such as cloud providers, software vendors, and internet service providers (ISPs). If a disruption in their services affects your business and your clients, you could be held responsible for your clients' losses.
Standard insurance policies often won't cover third-party vendor disruptions that affect a client. Because insurance providers offer a variety of packages with different terms, you'll need to check with an insurance agent who knows your profession to make sure your policy includes everything you need.
An agent can help you add endorsements for this kind of coverage to your BOP, tech E&O, or cyber insurance policy. For instance, contingent business interruption (CBI) insurance and cyber business interruption insurance can help pay for interruptions in services after an initial waiting period, including incidents caused by third parties.
A detailed business contract or service level agreement (SLA) might include a description of any dependence on third parties and include a backup plan for outages and other disruptions. Keep in mind, you'll need to perform due diligence on any third-party vendor to ensure they are dependable and safeguarding data appropriately—otherwise, an insurer could deny a claim if due diligence wasn't performed.
Do MSP businesses need professional liability insurance?
Professional liability insurance is another term for errors and omissions insurance (E&O). You might also see it called professional indemnity insurance.
Professional liability provides crucial protection against client lawsuits, such as a claim that your MSP failed to meet industry standards. It's often bundled with cyber insurance in a policy called tech E&O, or technology professional liability insurance.
Tech E&O helps pay for legal defense costs in several scenarios, such as:
- A misconfigured firewall leads to a vulnerability and data breach
- IT support becomes unavailable, causing disruptions
- Downtime in cloud services causes client financial losses
It's important to know that professional liability / E&O is a claims-made policy. To collect on a claim, this type of coverage must be active both when the incident occurred and when the claim was filed. However, it is possible to set a retroactive date to cover incidents that happened before you had coverage.
Your clients may require you to carry a professional liability policy. Regardless, it's crucial to carry this coverage due to the high cost of a potential lawsuit.
How do first-party and third-party cyber insurance coverage differ for MSPs?
Cyber insurance provides coverage if your business or your clients are affected by a data breach, ransomware attack, phishing, or other cyber threat. Specifically, there are two kinds of cyber coverage you should consider for your MSP business:
- First-party cyber insurance protects your MSP business against data breaches and cyberattacks that affect you directly, such as a DDoS attack that overwhelms your network. This is crucial coverage if you handle personally identifiable information (PII) or other sensitive information.
- Third-party cyber insurance provides legal protection if a client blames your MSP company for failing to prevent a data breach or cyberattack that harms their business.
MSPs typically need both cyber insurance policies, as they're responsible for clients' systems along with their own.
What other types of business insurance do managed service providers need?
As part of a strong risk management strategy, MSP business owners should consider these additional types of insurance:
- Intellectual property (IP) insurance covers legal costs related to IP issues, such as a dispute over ownership of tech support software developed by a contractor.
- Business owner's policy (BOP) combines general liability coverage with commercial property insurance at a lower cost than purchasing the policies separately. It protects against common third-party claims and helps with disaster recovery after a fire or storm.
- Business interruption insurance protects against financial losses from a temporary forced closure due to a fire or other covered property claim. It's also called business income insurance.
- Employment practices liability insurance (EPLI) pays for legal costs related to violations of employee rights, such as unfair hiring practices or wrongful termination.
- Directors and officers (D&O) insurance protects your board members and officers from lawsuits related to the decisions they make on behalf of your firm.
- Hired and non-owned auto (HNOA) insurance covers auto accidents involving personal, rented, or leased vehicles used by your business.
- Equipment breakdown coverage provides funds to repair or replace damaged equipment that your MSP relies on.
- Electronic data processing insurance (EDP) covers electronic devices such as computers, storage devices, and the data they contain. Also known as computer coverage or data processing coverage, EDP insurance can help protect against data loss during a power surge, fire, natural disaster, or similar event.
- Commercial umbrella insurance provides additional coverage for liability claims made on general liability, commercial auto, or employer’s liability insurance, once the underlying policy's limit has been reached.
How can I save money on MSP business insurance?
It's easy to find affordable insurance with Insureon. Our easy online application lets you compare quotes from trusted providers to find policies that fit your budget and your business risks.
Other ways to save money on business insurance include:
- Bundle policies. You can often save money when you purchase two or more types of coverage in one package, such as a business owner's policy or tech E&O.
- Customize your coverage. Choose lower limits or higher deductibles to reduce your premium, but make sure your policy can still cover a potential claim.
- Focus on cyber risks. Cybersecurity controls, such as multi-factor authentication, protect your company from data breaches and other cyber incidents. Insurance companies often provide discounts for approved security measures.
- Avoid accidents and claims. Policyholders can prevent employee injuries and customer accidents that lead to claims by eliminating loose power cords and other tripping hazards in the office, and by providing ergonomic setups for employees.
Our agents can help you find the right insurance solutions for your budget and your needs, whether you provide IT support, handle cybersecurity for clients, or remotely monitor client systems.