If you don’t carry cyber insurance yet, you may want to reconsider. Statistics show that if you are an MSP owner, you probably already have it, with 91.7 percent of managed service providers (MSPs) carry cyber insurance specifically for their operations, underscoring its recognition as a key safeguard in the industry.
“Insurance is simply a tool to limit the harm of a large bill if something bad happens,” John Bambenek, President of Bambenek Labs, a boutique cybersecurity threat intelligence firm that provides services for customers worldwide. Bambenek compares cyber insurance to car insurance. “It is just a monthly expense… until a car accident happens.” MSPs will notice that if they provide services to anything other than the smallest and small to medium-sized businesses (SMBs), their customers will want proof of insurance before signing any contract.
“So the lack of cyber insurance will simply close the door on potential customers,” Bambenbek explains. As MSPs hold a trusted position as guardians of the galaxy, MSPs are not only targets themselves but also potential conduits for attackers seeking broader access. That’s why carrying cyber insurance is no longer a “nice to have” for MSPs—it’s an essential layer of protection.
The safety net MSPs need in the age of cyber threats
Being an MSP means walking a constant tightrope between innovation, service delivery, and risk management.
“Clients expect 24/7 uptime, quick responses, and robust security measures. But even the most security-conscious MSPs can fall victim to a cyberattack. Whether it’s ransomware, phishing, data breaches, or zero-day exploits, the threat landscape is evolving faster than many companies can adapt,” says Carlos Fuentes, a cybersecurity consultant in Houston. Fuentes adds that when things go wrong—and eventually, something will—cybersecurity insurance can be the difference between surviving an incident and going out of business.
“One of the biggest reasons MSPs need cyber insurance is because of the sheer volume and sensitivity of the data they manage. MSPs typically have access to multiple client networks, credentials, and sensitive business information. If a single breach compromises one endpoint, it could potentially cascade across several client environments,” Fuentes says, noting that in such a scenario, not only is the MSP liable for its own losses, but it could also face lawsuits, regulatory scrutiny, and reputational damage from affected clients. “Cyber insurance helps cover legal fees, data recovery costs, public relations support, and even lost income during downtime.”
The role of cyber insurance
Fuentes says it’s also worth noting that many MSPs serve clients in regulated industries like healthcare, finance, or legal services. “These sectors often have strict data privacy and security compliance requirements, such as HIPAA, GDPR, or PCI DSS. If an MSP suffers a breach that affects one of these clients, it could result in hefty fines—not to mention damage to trust and client relationships.”, adding that cybersecurity insurance doesn’t just provide financial support; it often includes access to compliance experts, breach response teams, and forensic investigators who can help contain the damage and navigate the aftermath.
He shares that you might think, “We already have solid security measures in place. We use endpoint protection, firewalls, and employee training—do we really need insurance on top of that?” The answer is yes, and here’s why: security tools and protocols are essential but not infallible.
“Threat actors are constantly developing new tactics to bypass defenses,” Fuentes says, noting that human error, such as clicking a malicious link or misconfiguring a cloud service, is still one of the leading causes of breaches. “Cyber insurance is your safety net when the unthinkable happens despite your best efforts.”
The rising threat of supply chain attacks
Another consideration is the rising trend of supply chain attacks. Threat actors are increasingly targeting MSPs to gain access to a wider range of businesses.
“We’ve seen this play out in high-profile incidents where attackers infiltrate a trusted service provider to distribute malware to end clients. In these cases, the MSP becomes the common point of compromise—and the one shouldering the legal and financial blowback,” Fuentes says, adding that cyber insurance helps MSPs respond quickly, notify affected parties, and cover the costs of any damage or lawsuits that arise.
Financial impacts
The financial impact of a breach can be staggering.
“For smaller MSPs, a single incident can easily cost hundreds of thousands—or even millions—of dollars in remediation, legal fees, client compensation, and business interruption. Without cyber insurance, many MSPs simply wouldn’t have the resources to recover,” Fuentes highlights, noting that insurance acts as a financial buffer, allowing the company to stabilize operations and focus on long-term recovery rather than immediate survival.
“But beyond the financial safety net, carrying cyber insurance can also enhance an MSP’s credibility. In a competitive market, clients are looking for partners who take security seriously,” Fuentes points out. He adds that having a comprehensive cyber insurance policy in place shows that your business is prepared, responsible, and committed to protecting your operations and theirs. It becomes a value-add that sets you apart from less-prepared competitors.
Fuentes states the question isn’t whether a cyber incident might happen—it’s whether you’ll be ready when it does. For MSPs, the stakes are uniquely high. You’re not just protecting your own business—you’re safeguarding your clients’ trust, data, and operations. Cybersecurity insurance is a practical, strategic investment that helps ensure you can meet that responsibility with confidence and resilience.
So if you haven’t already looked into cyber insurance, now is the time. Talk to a broker who understands the MSP space, review your current risk profile, and find a policy that fits your needs. In the world of cybersecurity, hope is not a strategy—preparation is.
Photo: sommart / Shutterstock
This post originally appeared on Smarter MSP.