If I were starting an MSP over again, there are a handful of things I would do earlier and more intentionally. Insurance is one of them.
It’s not exciting. It doesn’t generate revenue. And it’s very easy to convince yourself that you’re “too small” to worry about it yet. But insurance is one of those foundational pieces that keeps a bad day from turning into a business-ending event. In other words, insurance helps you sleep at night.
In this edition of MSP Rebooted, I sat down with Jake Charen from Lakeside Insurance to talk through what insurance really looks like for a new MSP. Not from a fear-based perspective, but from a practical one. What do you actually need when you’re just getting started, and how does that change as you grow?
Start With the Contract, Not the Policy
One of the most important points Jake made is that insurance does not exist in a vacuum. Before you even talk about policies, you need to understand your Master Service Agreement.
Your MSA defines what you are promising to do for your clients. Insurance exists to protect those promises when something goes wrong. If your scope of work is vague or sloppy, insurance can get messy fast. This is also where things like requiring your clients to carry their own insurance comes into play. MSPs reduce risk for their clients every day, but that risk cannot live entirely on your shoulders.
If you’re early on, this usually means working with an attorney to get a solid baseline MSA in place. It will cost you some money. It is worth it. I have three attorneys / services that I recommend when it comes to getting help with your MSP contracts. I have them linked in this blog post.
The Core Insurance Stack for a New MSP
For a solo or very small MSP, there are a few policies that form the foundation.
The first is professional liability. Also known as Errors and Ommissions (E&O), and is often bundled with cyber insurance for MSPs. This is the coverage that responds when something you promised to do does not happen the way it should. Missed patches, configuration issues, or a breach that traces back to your environment all live here.
Next is general liability. This is the policy most people have heard of, but many don’t fully understand. It covers property damage or bodily injury caused by your business. That includes injuries that happen at a client site, not just in an office you lease. If you’re working from home and visiting clients, this still applies.
Finally, there’s auto-related coverage. Early on, that usually means personal auto insurance paired with hired and non-owned auto coverage on the business side. As you grow, this often evolves into business auto policies. The goal here is separating personal risk from business risk as much as possible.
None of these policies are outrageously expensive, especially when compared to the cost of even a single serious claim.
Hiring Employees Changes the Equation
The moment you hire your first employee, things change.
Workers’ compensation becomes mandatory. This covers injuries that happen while an employee is doing their job, whether that’s at your office, a client site, or on the road. Skipping workers’ comp is not an option. The fines alone can be devastating.
As your team grows, employment practices liability insurance becomes important. This is the coverage that deals with wrongful termination claims, harassment issues, and other employee-related disputes. Even when you do everything right, these situations are distracting, time-consuming, and expensive. Having proper coverage means you’re not navigating them alone.
Find Trusted Partners Early
One of the recurring themes in this conversation was the importance of trusted partners.
As an MSP, you are a trusted advisor to your clients. But you still need your own bench. A good insurance advisor. A solid attorney. A bookkeeper that knows the business. A CPA who understands service businesses. Possibly an HR partner as you grow.
Building relationships with trusted partners makes your life easier. When you are building your MSP finding these partners is a smart move.
Final Thoughts
Insurance is not about filing lots of claims or trying to “get your money back.” It’s about protecting yourself from the big, ugly, business-altering events that can derail years of hard work.
If you’re rebooting an MSP or building one from scratch, take the time to do this part right. Put the right coverage in place. Get your contracts tightened up. Build relationships with people who help you manage risk, not just react to it.
An ounce of prevention here really is worth pounds of pain later.
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