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Why do MSPs need insurance?
Your clients rely on you to run their technology smoothly, but if something goes wrong, your business could take the blame. Insurance can cover legal costs if a client sues over downtime, or help pay for data breach recovery expenses. Some policies may be required by state laws or client contracts.
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Insureon helps managed service providers find insurance policies that match your unique risks.
Fill out one application to get multiple 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.
General liability insurance
This policy covers basic MSP business risks, such as client injuries and client property damage. Bundle it with property insurance for savings in a business owner’s policy.
BEST FOR
- Slip-and-fall accidents
- Damaged customer property
- Libel or slander lawsuits
Cyber insurance
Cyber insurance for MSPs helps defend against lawsuits around data breaches and cyberattacks by helping to pay for recovery expenses, lawsuits, and other related costs.
BEST FOR
- Data breach lawsuits
- Client notification expenses
- Fraud monitoring costs
Technology errors and omissions insurance
Technology E&O, also called professional liability insurance, covers legal expenses related to an MSP's performance. You can often add intellectual property and media liability coverage.
BEST FOR
- Failure to deliver promised services
- Accusations of negligence
- Work errors and oversights
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.
BEST FOR
- Car accidents
- Vandalism and theft
- Weather damage
Workers’ compensation insurance
Most states require workers' comp for MSPs that have employees. It also protects sole proprietors from work injury costs that health insurance might deny.
BEST FOR
- 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.
BEST FOR
- Unlawful data access by an employee
- Unauthorized money transfers
- Other employee theft or fraud
Looking for different coverage? See more policies.
How much does technology business insurance cost?
A managed service provider with only a few employees will pay lower average costs for insurance than a larger business.
Factors that insurance providers look at during underwriting to determine MSP insurance premiums include:
- Type of services offered, such as cloud services
- Business property and equipment
- Business size and annual revenue
- Number of employees
- Types of small business insurance purchased
- Policy limits, deductibles, and exclusions
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 agents work with top-rated U.S. insurers to find coverage that fits your MSP company, whether you work independently or hire employees.
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Common questions about managed service provider insurance
Review answers to frequently asked questions (FAQs) about MSP business insurance.
Why is business insurance necessary for MSP professionals?
Whether your MSP business is well established or you're just starting out, several types of insurance can help protect your business from financial loss.
Here’s a closer look at some key insurance products and why you should carry them:
- Technology errors and omissions insurance, sometimes called tech E&O or tech professional liability insurance, is a bundle of E&O with a cyber insurance policy. This coverage can help you with legal fees and court costs if a dissatisfied client sues you over your work performance or a third-party cyber incident. It covers the cost of customer notification, credit monitoring, legal defense, and fines.
- Commercial property insurance covers your business property and equipment if it's damaged, lost, or stolen at your fixed business address. This policy is often bundled with general liability insurance in a business owner's policy (BOP) to save money. Should your machinery or equipment suffer a mechanical or electrical failure, equipment breakdown coverage would provide the funds to repair or replace the damaged equipment.
- 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.
- Business income insurance, also known as business interruption coverage, offsets your lost net income when your business is forced to close because of a covered peril, such as property damage. These funds help you cover your normal operating expenses until you can resume business operations.
- Inland marine insurance is a “floater” policy, which simply means the coverage goes where the insured property (such as products, tools, and equipment) goes, whether in transit or stored at an off-site location.
- Employment practices liability insurance (EPLI) is a type of management liability insurance that protects your business from employee lawsuits over discrimination, unfair termination, or another violation of their rights.
- 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.
Are MSP companies required to have insurance?
Depending on where your business is located, some policies aren't required by law. However, managed service providers can protect their businesses and qualify for contracts and leases by carrying the right insurance coverage. For some MSP companies, workers' compensation and commercial auto insurance may be required.
Typically, service provider startups will apply for general liability insurance first. This policy helps cover common business risks such as customer injuries, damage to a customer’s property, and advertising injuries.
While it's not mandated for MSPs to carry insurance to be CMMC compliant, it can be a financial safety net and enable your business to take on more DoD contracts.
Even small businesses are vulnerable to the same exposures and lawsuits as larger companies. This is another reason why you should consider MSP business insurance.
In order to accept certain contracts, you may need to have a fidelity bond, which reimburses the client if one of your employees commits fraud, theft, or forgery.
Do MSP businesses need professional indemnity insurance?
Typically, MSPs aren't required by law to carry professional indemnity insurance, but it should be a key component of your business's risk management plan.
Professional indemnity insurance, also called professional liability insurance or errors and omissions (E&O) insurance, protects you in the event a client files a lawsuit against your MSP business for an error, mistake, or professional negligence. This type of coverage is sometimes referred to as software liability insurance for technology businesses.
You can bundle professional liability insurance for managed service providers with cyber insurance (also called cyber liability insurance or cybersecurity insurance) into a technology professional liability policy, which is more commonly referred to as tech E&O. This would be a more affordable insurance option than purchasing the policies individually.
How do first-party and third-party cyber insurance differ?
Cyber insurance provides coverage for incident response and its associated costs when you or your customers are affected by a data breach, cyberattack, ransomware, phishing, or other cyber threat. More specifically, there are two kinds of cyber liability 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 for your customers.
Third-party cyber insurance provides legal protection if a client blames your MSP company for failing to prevent a data breach or cyberattack at their business.
A tech E&O policy typically includes both types of cyber insurance, along with E&O insurance to safeguard your managed service provider business against other lawsuits from dissatisfied clients.
How can I save money on MSP business insurance?
There are many steps you can take to get affordable coverage that meets your MSP insurance needs.
Start by comparing free business insurance quotes from leading insurance companies through Insureon’s online application. If you're unsure what IT services or managed service provider insurance solutions you need, our licensed insurance agents can help make sure you get the right coverage for your budget.
Most small businesses can get insured and download a certificate of insurance within hours of applying for quotes.