Consultants provide valuable services in many areas – from marketing and business to finance, real estate and beyond. However, providing advice and expertise involves some risks. For example, if a consultant’s advice results in a client’s financial loss, the consultant can be sued. The right insurance products can help minimize the exposures. Here’s a look at the insurance types that consultants need.
The Different Types of Consultant Work
Before you can determine which types of insurance you need for your consultancy business, it’s important to narrow down exactly what type of consultant work you do. This is a fairly broad category that includes many different fields and focuses.
Although there can be great variation in terms of what consultants specialize in and how they work, here are some common types of consultant work:
- Business consultants work with upper management to help businesses navigate key decisions and meet their goals. This category of consultants encompasses many different specialties, and other types of consultants may fall under the umbrella of business consultant.
- IT consultants advise businesses on issues related to technology, such as upgrading systems or improving cybersecurity.
- HR consultants provide assistance with issues related to human resources. Advice could be related to various issues, including recruitment and benefits.
- Financial consultants give financial advice. These consultants may help businesses improve their revenue while reducing their overhead expenses and taxes.
- Marketing consultants provide guidance on marketing strategies and campaigns. Marketing consultants may focus on different types of marketing, such as social media marketing.
Professional Liability Insurance for Consultants
Although a consultant’s specific insurance needs will vary depending on the type of consulting done, as well as other details related to the business, there is one type of coverage that all consultants should consider: professional liability insurance.
Also called errors and omissions coverage, professional liability insurance provides protection against liability stemming from an error or omission that occurs in the course of providing professional services. If a client suffers a financial loss as a result of the professional services, professional liability insurance can cover defense costs and settlements or awards, up to the policy limit.
Due to the nature of consultant work, this is an important policy type for consultants. Clients depend on the expertise of consultants to make high-stakes decisions. If those decisions do not go as anticipated, legal disputes may result. Clients may also claim that a consultant failed to provide key information, or that a delay in action resulted in financial loss. Even if the consultant did nothing wrong, a claim of negligence or oversight can lead to a costly court battle.
Other Types of Insurance for Consultants
In addition to professional liability insurance, consultants may require other types of insurance. Common insurance coverages to consider include the following:
- General Liability Insurance: This coverage type provides protection against claims of bodily injury or property damage. For example, if a client is injured on your property, or if one of your employee’s accidentally damages a client’s property, general liability insurance can provide coverage. General liability insurance may also provide coverage for advertising injuring and claims of libel or slander. Note that professional liability insurance covers financial loss, not bodily injury or property damage claims. These are two separate coverages, and many businesses require both.
- Commercial Property Insurance: This insurance type can provide coverage for both the building structure and the contents kept within. Covered perils typically include things like fires, many types of weather-related damage and theft. It can also include business interruption insurance, which helps with lost income.
- Commercial Auto Insurance: If your consultancy business owns vehicles, commercial auto insurance can provide coverage for claims involving bodily injury or property damage. If your company uses vehicles that are not owned by the company, you might benefit from hired and non-owned commercial insurance coverage.
- Commercial Umbrella Insurance: This insurance policy provides excess liability coverage. Nuclear verdicts and social inflation have been sending jury awards upward. If you are worried that a large jury award could bankrupt your company, umbrella insurance is a simple way to obtain higher coverage amounts without raising the limits on each individual policy. Umbrella insurance can also help fill in coverage gaps.
- Cyber Liability Insurance: If your business has an online presence, you should consider cyber liability insurance. This coverage type can kick in if your company experiences a data breach or is hit by ransomware or another form of cyberattack. Coverage can also provide protection for claims involving intellectual property rights, privacy and other cyber-related issues. This is an important type of coverage for many consultants.
- Employment Practices Liability Insurance: If your consultancy company has employees, employment practices liability insurance provides important protection against claims of wrongful termination, harassment, discrimination and other common employment-related issues.
- Workers’ Compensation Insurance: States typically require employers to maintain workers’ compensation insurance. Whether or not you are required to purchase coverage will depend on the laws in your state and the number of employees you have.
Obtaining the Right Insurance Policies for Your Needs
You don’t want to find out that you’re lacking key coverage after a claim occurs. By then, it will be too late. To protect your consultancy business, you need to assess your risks and obtain appropriate coverage before a claim happens.
Consultants understand the value of expert advice better than anyone. When it comes to insurance issues, an insurance agent can provide important insight and experience to help you obtain the right coverage.
Look for an agent who understands your work. An agent who has no experience with consultants might not be aware of some of the risks and other issues to watch out for. However, because insurance risks and budgets can vary significantly, you also need an insurance agent who will take time to learn about your unique situation. Your insurance agent should customize an insurance package specifically for you.
Do you need help securing insurance coverage for your consultancy business? Contact one of our agents to learn more.