Key Business Risks:

1. Lost Business

HealthTech and MedTech companies face a uniquely high bar for credibility. Hospitals, clinics, healthcare networks, and government agencies expect you to show proof of not only innovation but stability, risk management, and compliance. But when cash flow is tight, many founders opt for the bare-minimum insurance just to satisfy initial investors or contract demands. Even worse? Once set up, they renew year after year without updating coverage to match company growth.

As you expand, raise capital, bring on additional staff, and sign larger contracts (perhaps with hospitals or pharmaceutical companies), you’ll encounter clients that demand much higher insurance limits. If you wait until the last minute to upgrade, you might struggle to secure a provider who’s comfortable with your niche risks, like FDA-regulated devices or software classified as a medical device.

Unfortunately, many companies underestimate just how tough it is to secure the right coverage. If your current insurer can’t match your evolving needs, it could take weeks to find a new provider, apply, and negotiate pricing. A new policy might not even cover prior work. And while you scramble for new coverage, clients or partners might walk away, unwilling to wait. That means you won’t just lose time—you could lose key deals, funding, or revenue streams you need to keep your business growing.

2. Contractual Liability

Tech companies move fast—but in healthcare, you’re not just scaling to win market share; you’re scaling under the watchful eye of investors, hospitals, and health authorities. Clinical trials, pilot programs, and early-stage partnerships expose you to liabilities you may not even realize you’re carrying.

And with rapid innovation comes the risk of overpromising. To win contracts, you might push the boundaries of what your product can deliver, whether it’s an AI-driven diagnostic tool, a wearable health monitor, or an EMR (Electronic Medical Records) integration platform.

But what if you can’t deliver? What if regulatory delays slow you down? What if clinical trial data can’t support the claims you made to a healthcare partner? Or what if integrating your health platform with hospital systems turns out to be more complex than expected? Even if you worked in good faith, clients or partners could still sue for breach of contract or failure to meet agreed-upon functionality or performance standards. In healthcare, where delays or errors can ripple into patient care, those lawsuits can escalate quickly, and they’re rarely cheap.

3. Defective Products

Unlike a social app or payment platform, HealthTech operates in a space where a bug, error, or failure can affect lives, not just profits. If your medical device malfunctions or your software’s clinical decision support feature leads to a misdiagnosis, the legal, financial, and reputational fallout can be catastrophic.

As the provider, you’re not just responsible for building your tech; you’re also responsible for keeping it running and for any disruptions that arise. For example, if a software failure in a hospital leads to treatment delays or a faulty wearable misreads patient vitals, you could face lawsuits over negligence, lost revenue, or even injury and harm. Or if a wearable device malfunctions and causes a serious burn to a patient’s skin, you could be sued for endangering patient safety.

To be clear, the fact that your software contains a defect doesn’t automatically mean that you’re negligent. In order for a lawsuit to be successful, a client would have to prove that your actions fell short of your standard of duty as a tech firm (i.e. failing to test your product thoroughly or neglecting to inform clients about a known issue) and that your services weren’t performed as promised.

RELATED: Tech Firms & Bug Bounty Hunters: Where does your liability end?

4. Onboarding

HealthTech and MedTech firms are highly dependent on specialized talent to meet demanding client and regulatory expectations. But qualified developers, engineers, regulatory experts, and clinical advisors are in short supply. Retention is just as tough; once you find the right people, holding onto them is a challenge, as they’re constantly pursued by competitors. And in this space, retention isn’t just about stability; it’s essential for maintaining continuity in product or service development, protecting your firm’s intellectual property, and ensuring consistent, knowledgeable support for clients and partners.

If you can’t find the right talent in time, you’ll have to hire what’s available and train on the fly. But in fast-moving healthcare environments, you may not have robust onboarding processes or fully documented procedures. And without formal training, new hires can make costly mistakes, especially when handling sensitive patient data, device calibrations, or regulatory filings.

Errors, even unintentional ones, can snowball into compliance breaches, delayed product launches, unhappy partners, and potentially major lawsuits over errors, omissions, or regulatory non-compliance. Just as critically, these missteps can seriously damage your company’s reputation, especially in a sector where trust, safety, and credibility are everything.

RELATED: How much will a bad hire really cost your business?

5. Cyber Risk

Healthcare is a goldmine for cybercriminals. HealthTech firms manage massive amounts of sensitive patient data, and any breach, ransomware attack, or accidental disclosure can land you in legal hot water fast. Smaller players or start-ups who can’t afford robust cybersecurity teams or continuous monitoring are particularly at risk. While large healthcare networks can invest heavily in cyber defences, smaller companies may not even realize they have vulnerabilities until a cyberattack exposes them.

But no matter how strong your safeguards, it only takes one malware attack, misconfigured cloud setting, or phishing scam to break through. And even if you can fix things internally, rebuilding systems is costly and disruptive. Shutting down operations, especially in healthcare, can harm patients, disrupt hospitals, and damage your reputation.

Even worse, a cybercriminal might discover a vulnerability and exploit it before you can act, encrypting or stealing sensitive health data and demanding a ransom. After a breach, you’re not just facing IT recovery costs, but potential lawsuits, regulatory penalties, and reputational harm for exposing protected health information (PHI). Affected patients, partners, or healthcare providers could sue you even if you weren’t technically “at fault” for failing to safeguard critical data.

RELATED: The Consequences of a Breach: Can your business survive a cyberattack?

6. Employee Allegations

Tech firms are known for having a more casual or unstructured work culture that’s hard to replicate. But informal environments, while great for innovation, come with employment-related risks, especially if you don’t have a formal HR team or legal department.

Here’s why: in young firms with fewer than 50 workers, responsibilities and processes—safety, HR, and more—are less defined. Folks are wearing multiple hats, and there isn’t always a dedicated person for a specific task. Business Owners are committed to their cause and expect the same from their employees; work-life balance may go down the drain. And depending on your size, you may even be operating out of a smaller space, with lots of personalities in the mix.

No matter how tight-knit your staff is, you might just be one inappropriate comment away from a claim. Even if you run things by the book or have strong oversight over your staff, there are opportunistic folks out there who might see this as a chance to take advantage of your company or right a perceived wrong in their compensation plan. And the more employees you bring on, the more risks you’ll have.

RELATED: What does turnover have to do with business liability?

High-Growth Firms Think Ahead:

As a Business Owner, you might be used to taking risks. But operating without insurance, or without enough insurance, is one risk you can’t afford. Whether you’re at fault or not, you’ll still have to defend a lawsuit, tying up valuable resources that could be better spent growing your business. And lawsuits aren’t just costly or inconvenient; they can also tarnish your reputation and scare off potential investors, clients, and partners.

Ultimately, insurance isn’t a luxury or an expense that you can delay; it’s a business investment that’ll help you work towards long-term stability and success. After all, you have to spend money to make money—and that includes making sure your company is well-protected in case of an emergency or a legal hazard, whenever it happens.

With a solid policy right off the bat, you can proactively plan for insurance costs and claims instead of reallocating funds or scrambling for coverage when you need it most. You can respond to lawsuits quickly and effectively without losing momentum. And you’ll have a safety net that inspires lender trust and strengthens your chances of finding the right partners for sustainable growth.

The Right Coverage for Your Needs:

The right policy will help you avoid financial strain and ensure that legal action won’t jeopardize your company, your standing, or your financial well-being. At the very least, every HealthTech and MedTech firm should have the basics:

• Professional Liability Insurance: Protects your business from accusations of errors, omissions, or negligence committed within the scope of your professional activities. Learn more.
• Commercial General Liability (CGL) Insurance: Protects your business from third-party claims of bodily injury, property damage, and reputational harm caused by your professional activities or company operations. Learn more.
• Property Insurance: Protects your commercial property from damage or loss and will cover the costs of repairs or replacement for contents, equipment, and furnishings. Learn more.
• Cyber Insurance: Protects your business and offsets your losses in the event of a breach, like if your company’s information is stolen or exposed by a hacker, or accidentally released by an employee. This coverage includes coverage for both first-party expenses (costs incurred by your business following a breach) and third-party events (costs incurred by a third-party who was affected by the breach). Learn more.

Additionally, as a business leader, you’ve probably invested a lot of your personal resources in your business. If things go south, you may have to pour more money into the firm to keep it afloat. Or you could be held liable for any financial losses. Either way, both your personal and corporate assets could be at stake. You should also consider:

• Directors & Officers (D&O) Insurance: Protects your business leaders and board members if they’re personally sued for any actual or alleged wrongful acts in managing the company. It also comes bundled with Employment Practices Liability (EPL) Insurance to protect your organization from claims made against you by employees, such as discrimination, harassment, wrongful termination, and more. Learn more.

How We Can Help You:

Every Medtech and Healthtech firm is unique, and the right insurance solution depends on your size, operations, the markets you serve, regulatory pressures, and more. But with complex products, sensitive data, evolving innovations, and strict compliance requirements, you need more than just a standard policy. You need a partner who understands the fast-moving healthcare technology landscape.

That’s why it’s not enough to work with just any tech-focused broker—you need a risk advisor who understands the unique challenges of the HealthTech and MedTech space. At PROLINK, we’ve developed a dedicated Technology vertical with experienced advisors who speak your language. Our team stays ahead of emerging threats, legislations, and innovations that could impact your business. With deep industry insights and over a decade of supporting tech firms, we’ll keep you resilient in the face of change with insurance and risk management solutions tailored to your strategic objectives and budget.

As you grow to new levels of sophistication, we’ll help you reassess your needs and readjust your strategy to scale with your leadership, people, and processes. That way, you can work to control your exposures—and your costs—long-term. You can focus on what’s most important: your business.

To learn more, connect with PROLINK today.