In today’s economy, a large portion of a business’s value comes from assets you can’t touch — like intellectual property, customer data, brand reputation, and proprietary software. These intangible assets make up the lion’s share of the average value of a business, according to Forbes. The proportion can be even higher if you own a small business in startup mode. Insuring intangible assets can help small business owners protect their intellectual property. Let’s define what intangible property means, give examples of some intangible assets your company may already have, as well as outline how cyber liability insurance can protect your business. often represent the majority of a company’s market value and competitive advantage. Yet many businesses overlook the risks associated with them because they don’t behave like physical property.
What is an Intangible Asset?
Intangible assets are things of value that don’t have a physical form but contribute significantly to your business success. Examples include:
- Patents, trademarks, copyrights, trade secrets and other intellectual property
- Brand reputation and goodwill
- Proprietary software, databases and algorithms
- Customer lists and business methodologies
- Research & development and creative works
- Licenses, partnerships, and market rights
Some forms of these intangible items are known as capital assets and appear on a company’s financial statements, while others are not included. For example, a company may list a trademark or patent as an asset on its balance sheet. Because these assets can be difficult to value and defend, they present unique risks that traditional business insurance may not fully cover.
Why Is It Important to Protect Your Business?
Tech companies, like Apple and Google, have great amounts of intangible property to maintain. However, you don’t need to be a tech giant to benefit from protecting your company. If your company operates in a creative industry and decides to start selling clothing patterns that you designed and drafted, these patterns would be considered intangible property. You will need to protect them for the sake of your brand name and for legal and accounting purposes. Therefore, it is critical that your business takes great care to properly value your intellectual property, as it is considered an asset that must be accounted for on the company books.
Seven of the world’s 10 largest companies were built on a data-first business model. The Ontario Chamber of Commerce estimates that 70% of the value of companies listed on the TSX consists of intangible assets.
Reasons to Protect Your Business and Insure Intangible Assets
They Often Represent Most of Your Business Value
For many companies, especially in technology or creative industries, intangible assets make up the majority of overall value — sometimes more than 70-90% of a company’s worth.
Intangible assets are defined as property that is not physical in nature. However, damage to intangible assets, like brand recognition and reputation, can harm a business as much as the destruction of a physical asset. “On average, more than 25% of a company’s market value is directly attributable to its reputation in the marketplace,” says Lloyd’s Canada President, Marc Lipman. According to Lipman, intellectual property, human capital and brand/reputation are the three major categories of intangible assets. “Reputational risk is something that is going to have to become a mainstream insurance product,” he said.
In a separate interview with Canadian Underwriter, Maddi Brown, Intellectual Property Practice Leader with London-based CFC Underwriting, says brokers are beginning to advise their clients to look at insurance that covers intellectual property. Intellectual property coverage helps businesses defend themselves against patent, copyright and trademark infringement, as well as things like contractual indemnities, loss of intellectual property rights and loss of profit. “Clients want this cover,” Brown said. “They just don’t know it exists.”
According to a survey by ctvnews.ca, one quarter of Canadian companies have been victims of a cyber attack in 2021. It was also reported that $106 million was lost in Canada due to scams and frauds in 2020.
Loss or Misuse Can Be Costly
Damage to a brand’s reputation, theft of customer data, or a patent infringement dispute can lead to significant financial losses — often exceeding the cost of physical damage — and can interrupt growth, partnerships, or investor confidence.
Traditional Policies Often Don’t Cover These Risks
Standard commercial liability or property insurance focuses on physical assets and bodily injury. They typically do not include coverage for intangible assets. This means legal costs, defense fees, or loss of revenue related to IP disputes or cyber incidents may not be protected under a general policy.
Types of Insurance That Can Help Protect Intangible Assets
Intellectual Property (IP) Insurance
This type of coverage protects against legal disputes over Intellectual Property (IP) rights, including patents, trademarks, copyrights and trade secrets. It can help cover legal defence costs, enforcement actions, and settlements when someone infringes on your IP — or when you’re accused of infringing on someone else’s.
There are typically two forms included in IP insurance:
- Infringement Defence Coverage — covers legal expenses if you’re sued for infringing on others’ IP
- Enforcement/Abatement Coverage — helps cover costs to defend your IP rights against infringers
Cyber Liability Insurance
While often thought of in terms of data breach response, cyber liability insurance also plays a critical role insuring intangible assets such as customer data, digital operations and intellectual property stored digitally. In the event of a cyber attack, this coverage can help with notification costs, recovery efforts, and even business interruption.
Specialized Intangible Asset Protection
Some insurers offer tailored solutions designed to protect against financial loss from accidental or malicious damage to intangible assets — including internal threats and loss due to proprietary data being compromised.
When Intangible Asset Insurance Matters Most
You may want to consider intangible asset coverage if your business:
- Relies heavily on intellectual property or proprietary software
- Handles sensitive customer or employee data
- Operates in competitive markets where brand and reputation are key
- Has experienced or wants to manage risk of cyber incidents and litigation
- Is seeking funding, partnerships or investment where protection of assets increases credibility
Protecting Your Business: Final Thoughts
In a world driven by innovation and digital operations, intangible assets are no longer peripheral — they’re core to business value. Protecting them through appropriate insurance solutions such as intellectual property and cyber liability coverage can safeguard your company from costly legal battles, data breaches, and reputational harm.
Speak with your insurance broker to explore the right combination of protections for your business’s unique intangible asset portfolio.
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