What is consultant insurance?
If you are a consultant specializing in any field-marketing, research, or management, clients depend on your professional expertise and knowledge. The clients put their business needs and confidentialities in your hands – whether it is building a website or recommending investment strategies. However, a small mistake or an oversight from your side could inflict reputation damage on your clients, which might end up in a business loss.
You could easily face lawsuits for any damages or perceived damages from your client. According to Consulting.us, Accenture, a management and IT consultancy, landed on a $32 million lawsuit for delays and dissatisfactory results.
Having a consultant insurance could give you protection from the risks and uncertainties you could face as an independent consultant or a consultancy owner.
Why do you need consultant insurance?
Consulting is a huge market. According to Inc., management consulting alone is a $250 billion industry. In this massive industry, the risks are also numerous. So, for smooth operation of your consultancy, properly dealing with each risk is important. The importance of consultant insurance are:
- Data breach could easily wipe out your clients’ data.
- Client dissatisfaction could destroy your business financially if they file a lawsuit.
- Any missed deadline could land you with a hefty lawsuit.
- Temporary closure due to equipment and property damage could interrupt your regular income.
Business consultant insurance gives you peace of mind about these risks when dealing with clients. It provides different coverages you might need as a consultant.
If you want to get tailored consultant insurance for your consulting business, get in touch today to get quotes!
Who needs consultant insurance?
Insurance for consultants is essential to outsource your business risk while you are serving your clients. Many times, clients require you to have insurance to earn their business.
- Independent consultant: If you work from home or operate from a small office independently, you need to insure yourself against possible business risks, however small they might be. It would be best if you cover your business for known risks as well as the ones you might have overlooked.
- Consulting firms: To meet the high demand for markets, consultants are hiring more employees, which can possess unique risks and threats. Hence, to eliminate the damages these risks can cause, consulting firms need additional policies when compared to independent consultants.
What policies fall under consultant insurance?
Business Owners Policy (BOP):
Business owners policy (BOP) is a compilation of three standalone policies: commercial general liability, commercial property, and business interruption insurance. It provides balanced coverage for small consulting firms and independent consultants.
General liability insurance for consultants gives coverage for third-party claims regarding:
- Bodily injury
- Property damage
- Legal costs in case of reputation damages
The commercial property protects your building and contents in case of loss due to fire, storm, or any covered event. Business interruption policy covers losses that occur due to work interruption.
Commercial General Liability Insurance:
Commercial general liability insurance is the most recommended policy for consultants. Other individuals could easily blame your business for any damage or injury. Above all, consultant liability insurance provides coverage against three claims:
- Bodily injury to third-party: A prospective client was visiting the office to discuss a project. Your recently wiped floor caused them to slip and fall. In this case, liability insurance would pay for bodily injury, medical costs, and any legal fees if they decide to sue.
- Property damage to third-party: While visiting your client’s home, you knocked over an expensive sculpture. The client gets very angry and decides to sue you. Now, liability insurance covers you for any legal settlements and repairing and replacement costs for damages done to other’s property.
- Personal injury: Your client overheard your employees talking about their company in a bad light. They decided to sue for defamation. Liability insurance covers any legal fees, settlements, and damages done to a third party’s claims of slander or defamation.
Commercial Property Insurance :
You need to purchase commercial property insurance to protect your business premises. If you have a home office, your home insurance might cover the office but not your expensive laptop. This policy covers any property that is valuable to your business operations, including physical location, equipment, furniture, and computers.
Business Interruption Insurance:
Any temporary closure to the business property could interrupt your income. Business interruption insurance provides coverage when the business can’t generate revenue. According to Solo PR Pro, this policy provides coverage for the losses resulting from a temporary shutdown by providing reimbursement for lost net profits.
Commercial Auto Insurance:
Travelling for business purposes is very common for a consultant. If you own a vehicle for business purposes, it’s an excellent option to get commercial auto insurance. In case of accidents, this policy coves the damages.
But if your employees use their vehicles for business, a personal auto policy will not cover them in case of an accident. Similarly, you could opt for a hired/non-owned auto coverage if your employees use their personal vehicles for business purposes.
Workers Compensation Insurance:
If your consulting firm has hired employees, you need workers compensation insurance. It is a compulsory program for private employment, except Texas as per Annual Statistical Supplement 2017 of Social Security Administration.
Workers compensation gives coverage to your employees in case of any accidents and injury in the workplace. Injuries at the workplace are not common in the consulting business, but your business might end up with a hefty bill if something were to happen. Coverages include medical fees, lost wages, and funeral expenses.
Errors and Omissions Insurance:
Consultants depend on their expertise, which might not work all the time. However, one bad advice or mistake could cost thousands of dollars to the clients. A simple oversight could land you in court.
Errors and omissions insurance, or professional liability insurance, provides coverage against claims of errors even if there aren’t any. The policy includes liability coverages for:
- Accusations of negligence or mistake
- Services not delivered on time
- Work-related errors
- Violation of good faith
A report by National Center for State Courts claims that defending a professional malpractice lawsuit has a median cost of $122,000. In case of these mishaps, errors and omissions insurance covers legal fees, settlements, and court costs.
Cyber Liability Insurance:
Consultants have to store and deal with the client’s confidential and sensitive data. If a small malware or virus causes a data breach, you could have a lawsuit coming your way. The Wall Street Journal reported that Accenture was sued by Marriot International Inc. over data breach in 2019. The consulting firm was accused of failure to maintain security controls in the reservation system, which it managed.
According to RSM US‘s NetDiligence Cyber Claims Study 2019 Report, breach costs for professional services is $90,000 on average. Cyber liability insurance covers the expense for data restoration, ransom demands, and other costs in case of cyberattacks.
Inland Marine Insurance:
Inland marine insurance cover losses of equipment that occur while in transit. During the transportation, equipment gets lost or damaged. Hence, it is vital for consultants who have to travel a lot with expensive equipment—specialty items like high-tech computers.
Commercial Umbrella Insurance:
Large consulting firms with significant exposures should consider commercial umbrella insurance to increase the limits of their primary policies. Similarly, the limits of general liability and auto liability might not be adequate for a large firm in comparison to a smaller one.
How much does consultant insurance cost?
From research to account keeping, consultants have a varied nature of work. Hence, several factors affect the cost of consultant insurance. Similarly, the industry type also affects the premium amount.
Here are some factors that differentiate the cost of business insurance for consultants: