Do Consultants Need Insurance?
The short answer: yes. Although not all consultant insurance is mandatory, it is highly recommended. Consultants can and will experience unexpected setbacks, which can cost their company and their client’s company a lot of time and money. If this happens to unnerve a disgruntled client, it could lead to a stressful and costly lawsuit. To ease this anxiety, there’s consultant insurance.
Read on to find out why consultants need insurance and what type they need. Because when it comes to a particularly dissatisfied client, excuses like “the dog ate my financial report” just won’t cut it.
Why Do Consultants Need Insurance?
Whether you run a consulting firm or work independently, you may think your work is mistake-proof. However, there are infinite scenarios where something could go wrong, and you will be happy to have the benefits of consulting insurance coverage to help. Although insurance may seem like an expensive luxury, it is absolutely essential. Here are some reasons why:
- Peace of Mind – Your goal, first and foremost, should be to do a good job. But if you get stuck worrying about lawsuits, you will never take the sort of risks that make for a strong consultant. Consultant insurance gives you the breathing space you need to focus on your job without fear.
- Protects from Client Lawsuits – It really cannot be said enough: mistakes happen. Unfortunately, however, clients will never be satisfied with that notion. For that reason, consultants are at risk of lawsuits all the time. Even if you put your best foot forward, should your technical or business insights backfire, you will be glad you had insurance to back you up.
- Required by Contract – If you have employees, almost every state requires you to have some form of consulting insurance. Failure to cover your employees can result in burdensome fines and even jail time.
What Insurance Do Consultants Need?
For consultants, two main factors threaten lawsuits: unsatisfactory results and common risks. Sometimes, the client is unhappy with your service. Other times, a bodily injury occurred during a project associated with your consulting services. So now we must consider, what insurance do consultants need? Whatever the case may be, here are the two most important kinds of liability insurance for consultants:
- Professional Liability Insurance – Also known as Errors and Omissions Insurance, this type of insurance protects consultants from client lawsuits when their professional services are deemed negligent, late, unsatisfactory, or incomplete.
- Bodily Injury and Property Damage Insurance – Often required by the client, this type of insurance protects against common risks like customer property damage, customer injuries.
Although a professional liability and bodily injury and property damage insurance are both are vital for consultants, there are other policies you should also consider, especially if you have employees:
- Cyber Liability Insurance – This is required to protect any information a company shares with a third party.
- Commercial Property Insurance – If you run a consulting firm from a commercial office or building, chances are you need this policy. It covers any damage done to the building itself, the contents within it, and associated third-party property.
- Business Owner’s Policy – This insurance policy, also known as a BOP, bundles general liability insurance and commercial property insurance into a more affordable package. This is an ideal policy for small firms and independent consultants.
- Auto Insurance – Car accidents are extremely costly, so if you are required to drive to and from a project site, both you and the client will benefit from good auto coverage.
A Worthy Investment
You might be asking yourself, how much is insurance for a consultant? Consultant insurance may seem too expensive to prioritize, however not having it could cost you your business. Independent consultant insurance coverage is even more essential because the legal fees from a lawsuit fall on the individual alone. Whether you’re a part of a large firm or a solo consultant, you want to have the most robust liability coverage possible so you can trust your judgment without fear.
In the event of a lawsuit, not having the proper liability coverage can potentially cost you your entire business. Without insurance, the full financial burden associated with a lawsuit would be on you—legal defense costs and damages add up to be quite the hefty chunk of change.
Consultant business insurance covers all of this and more. For example, if a new consultant hired by your firm makes a mistake and the client sues, you’ll still be protected.
Moreover, reputation is everything in consulting services. If you show that you are fully covered, you will attract more clients, improve your brand reputation, and put clients at ease.
No matter how impressive your professional services are or how good your reputation is, mistakes happen all the time. Having an insurance policy for both independent consultants and consulting firms gives you the leeway you need to do your job right.
Although a liability policy can seem like a large expense, nothing is worth more than your peace of mind—that’s worth every penny.
Savage and Greene. A General Guide to Business Liability Insurance. https://www.savageandgreene.com/wp-content/uploads/2012/11/Liability-Insurance-Guide-09-2012.pdf
Bizinsure. Why Do Consultants Need Liability Insurance? https://www.bizinsure.com/why-do-consultants-need-liability-insurance/
Insurance Quotes. Do Consultants Need Professional Liability Insurance? http://www.insurancequotes.org/qa/do-consultants-need-professional-liability-insurance/
Insureon. General Liability insurance for consultants. https://www.insureon.com/consulting-business-insurance/general-liability