Managed Service Provider (MSP) Insurance

Business insurance is often required by law for managed service providers, depending on specific factors. Even when not legally required, you may need certain policies depending on your clients, commercial space requirements, or loan providers.

Here are some examples of situations where MSP providers need insurance:

• You hire employees. Most states require workers' compensation insurance after hiring your first employee, including both part-time and full-time workers.
• You own company vehicles. Business vehicles in most states are required to carry commercial auto insurance. If you're using rented, leased, or personal vehicles, you'll need hired and non-owned auto (HNOA) coverage.
• You apply for a business loan or rent an office space. Many landlords and lenders require general liability insurance in order to sign a contract.
• Your clients or collaborators request coverage. Some clients and business partners may refuse to work with your business unless you carry certain types of insurance to protect both of your businesses from liability. E&O insurance, cyber liability coverage, and fidelity bonds are common requests from clients.

Having the right insurance policies can help you win contracts or gain certifications, such as the Cybersecurity Maturity Model Certification (CMMC). You may need a CMMC certification to work with government or Department of Defense contractors.

You can speak to a licensed insurance agent if you have questions about the best insurance policies for your MSP business needs.

There are two kinds of cyber insurance, both equally important for managed service providers:

• First-party cyber insurance: Protects against data breaches and cyberattacks that affect your MSP business directly, such as a DDoS attack that overwhelms your network or a data breach that exposes your clients' personal information, including email addresses or credit card numbers. This coverage is also called data breach insurance.
• Third-party cyber insurance: Helps pay for legal costs when a client blames your MSP company for failing to prevent a data breach or cyberattack at their business.

When you buy tech E&O, it includes third-party cyber insurance, along with errors and omissions insurance to protect against other lawsuits from dissatisfied clients. You can also purchase first-party coverage as a standalone policy or an endorsement to your general liability coverage or business owner's policy.

Managed service providers may need additional insurance policies to protect against other exposures:

• Intellectual property insurance: Protects against the legal costs associated with IP lawsuits resulting from claims that your business violated intellectual property laws.
• Business owner's policy (BOP): Combines a general liability insurance policy with a commercial property policy to cover many of the most common liability risks, as well as your business property.
• Business interruption insurance: Helps your MSP business recover financially from a temporary closure tied to a fire, storm, or other covered property claim. It's often included in your property insurance or BOP. This policy is also called business income insurance.
• Employment practices liability insurance (EPLI): Covers lawsuits related to violations of an employee's rights, such as wrongful termination or discrimination.
• Directors and officers (D&O) insurance: Protects your board of directors and other key decision-makers from legal fees resulting from claims of poor direction and mismanagement.
• Hired and non-owned auto (HNOA) insurance: Covers your business from vehicle accidents if you or your employees are using personal, leased, or rented vehicles.
• Electronic data processing (EDP) insurance: Provides protection for your electronic equipment, including storage devices and computers, if you experience data loss due to a power surge, fire, or covered natural disasters.
• Equipment breakdown coverage: Can be added as an endorsement to your commercial property policy, and protects your business from financial losses arising from the breakdown of specialized machinery and computers.
• Umbrella insurance: Extends your existing general liability, employer's liability, and commercial auto policies if a lawsuit or incident goes beyond the standard policy limit.

It's easy to save money on business insurance through a few simple steps:

• Shop around. Get quotes from several insurance companies to find pricing that matches your budget. TechInsurance makes this possible with one easy online application.
• Bundle policies. When you buy policies from the same provider, it's often possible to combine coverages for a discount. The most common bundles are a business owner's policy and tech E&O.
• Pay the annual premium. Insurers offer two options for paying your premium: monthly or annual. Paying the full annual amount usually costs less.
• Risk management. Avoid costly claims that can increase your premiums by reducing your risks. Eliminate clutter that could cause accidents and bodily injuries, use detailed written contracts, and include redundancy in your systems.
• Implement cybersecurity measures. Using safety measures, such as multi-factor authentication, to protect from digital vulnerabilities can keep your business safe from potential cybersecurity incidents.
• Personalize your coverage for your needs. Picking lower coverage limits or a higher deductible can reduce your premium. However, it's important that you pick a deductible you can afford to pay in the event of a claim.