The Ultimate Guide To Business Consultant Insurance
Business consultants provide valuable insights and expertise, in areas that range from marketing and management to IT and compliance. Consulting firms come in all sizes, from one-person operations to international corporations. But they all have one thing in common: They need business consultant insurance, which helps protect them from financial hardship.
Who needs business consultant insurance?
Any business that consults with other businesses on how to improve their operations, revenue, or other processes can benefit from consultant insurance coverage. If you provide managerial, financial, or investment advice, or you deal with confidential information, this type of insurance is especially important. The top professions that need this coverage include:
- Management consultants
- Strategy consultants
- Operations consultants
- Financial consultants
- Human resources consultants
- IT consultants
- Marketing consultants
- Public relations consultants
- Legal consultants
- Environmental consultants
- Sales consultants
- Risk and compliance consultants
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Benefits Of Business Insurance For Consulting Firms
Why do you need business consultant insurance? Even if you think you work in a low-risk industry, insurance can have several benefits.
As a business consultant, your reputation is everything, and some of your best clients likely come from referrals. Insurance shows that you take risk seriously and want to be prepared. And knowing you’re properly covered for a variety of scenarios can give clients peace of mind – and make them more likely to recommend you.
Protect against financial loss
If you’re hit with a lawsuit, it isn’t just your reputation at risk. Defending your business comes with legal fees and court costs, not to mention the money you could pay in a settlement or jury award. The biggest benefit of consultant insurance coverage is that it can help protect your finances from unhappy clients. If you’re covered, your insurance will pay so you don’t have to.
Follow the law
Business consultant insurance requirements vary, but almost every state requires workers compensation insurance, depending on the number of employees you have. In many states, it’s required if you have one or more employees, regardless of how many hours they work per week. Employee injuries can happen to any organization, so it’s best to play it safe.
Types Of Insurance For Business Consultants
As you look into business consultant insurance, you’ll find there are a few different types you may need, depending on the type of consulting you do. Here are the most common.
Professional Liability Insurance
Professional liability, also called errors and omissions (E&O) insurance, is the most essential type of business consultant insurance. That’s because it covers one of the biggest risks to your business – and one that other insurance types won’t: causing your clients financial loss. Professional liability insurance will cover the economic harm caused if you or a member of your staff:
- Provide advice or opinions that turn out to be incorrect
- Make a mistake, for example on paperwork
- Oversee a product implementation that goes wrong
- Unintentionally breach a contract
- Infringe on a copyright or trademark
- Are sued for libel or slander
Situations like these can result in legal costs that really add up. Your E&O policy will pay for your defense costs and any money you owe after a settlement or judgment against you. It may even pay for disciplinary proceedings or loss of earnings, depending on your policy.
General Liability Insurance
Commercial general liability (CGL) insurance is the most basic insurance that all businesses need. It covers costs associated with bodily injury, property damage, and personal and advertising injury claims. (Personal injury includes things like libel and slander, while advertising injury includes misappropriation of ideas and copyright infringement.) If you have an office that clients visit, the premises liability coverage that you’ll get under your CGL policy is especially important – it will cover you if someone is injured on your property.
Commercial Property Insurance
Commercial property insurance fills another gap in your general liability policy: It covers damage to business property you own, like your office, furniture, and equipment, due to events like fires, storms, and theft. (Premises liability under your CGL policy only covers damage you cause to someone else’s property, as well as injury.) For example, if a fire damages your office, or thieves steal your computers, this policy covers the cost to repair or replace your equipment.
Workers Compensation Insurance
Workers compensation covers medical expenses and lost wages if an employee is injured or gets sick while performing work-related duties. State law varies, but most states require it for any business with at least one employee. Even if you’re an owner-only operation, keep in mind that it’s something many clients look for, and they might not do business with you if you don’t have it.
Commercial Auto Insurance
A commercial auto policy is an important type of insurance for consulting businesses that have vehicles in their name. If you or an employee is at-fault in an accident, it will cover damage to the vehicles and medical costs for any injuries, as well as liability. For example, if you're in a car accident while driving to meet a client and need to go to the ER, your commercial auto policy would cover vehicle repair costs and your hospital bills.
Cyber attacks can be a nightmare for consulting firms that deal with sensitive client information.
As they increase, more and more businesses are looking into cyber insurance, which covers financial losses resulting from data breaches and cyberattacks. If the worst happens, and your confidential database is hacked, cyber insurance covers things like the cost of notifying affected individuals, credit monitoring services, and any legal expenses due to lawsuits.
Our Tips For Purchasing Business Consultant Insurance
Getting business consultant insurance doesn’t have to be a hassle. Here is the most common advice we give our clients.
Get hired and non-owned insurance
Adding hired and non-owned auto insurance to your CGL policy has a few benefits. First, if you’re a small firm or your employees work remotely, you probably don’t need a commercial auto policy – yet some clients might require you to have one anyway. Even if you have commercial auto, it typically won’t cover employees who use their personal cars for work-related tasks, which leaves you out of luck if Jeff crashes his car while picking up lunch for a client meeting. Add hired and non-owned auto insurance, and you’ll be covered down the line.
Add a few other endorsements
Medium-sized and enterprise corporate clients often submit certificate requests for various insurance endorsements, including:
- Blanket additional insured, which extends coverage to certain groups, allowing them to file a claim under your liability policy
- Waiver of subrogation, which means the insurance company can’t recover money from the company listed on the endorsement
- Primary and noncontributory, an endorsement that specifies your policy will be the primary one to pay for a claim
It’s smart to add these when you first purchase a policy, so you know you're covered. Adding them after the fact can be more expensive, and it can take up to a week for underwriting to approve them, which could cause delays with a high-value contract.
Look into a business owners policy
A business owners policy (BOP) is almost always the best business insurance for consultants. A BOP simplifies your insurance buying by combining many coverages together, which also makes it more affordable. Plus, it auto-renews each year with very little hassle. Unless you’re a large firm or need something more customized, ask your insurance agent about getting a BOP.
Find the right E&O insurance company
E&O is the most important business consultant insurance, and finding a reputable company is equally as important. E&O policies are on a “claims made” basis, meaning that in order to be covered, the claim has to be discovered and reported while you’re under the same insurance carrier you had when the incident occurred.
For example, if a client claims you provided inaccurate financial advice a year ago, but you’ve switched E&O insurance carriers since then, you won’t be covered. You’ll want to stick with your E&O carrier for a long time, and that means you’ll want to find a reputable company that can meet large contractual requirements – ideally, more than $3 million in limits – and has been around a long time.
The Bottom Line
Business consultant insurance is necessary for nearly any type of firm, but the policies and coverages you’ll need can vary based on your industry, business size, location, and more. An experienced risk advisor can help you find the best policy and price for your needs. Contact LandesBlosch today to get an online quote or talk to our experts about what’s right for you.
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.
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