Do you want to establish your career as a consultant? It is a fantastic job one can consider. As a consultant, you would provide a service or advise another party. Many professionals start consulting companies remotely or in an office.
But what is wrong with this approach? Nothing. Yet what happens if the other side sues you for the wrong idea you provide to the firm? As a consultant, you can face a broad scope of risks. You can be accused of lying. In that case, a professional liability insurance policy is recommended to ensure coverage.
Once I received a legal notice when I failed to meet a crucial project deadline. Due to that, the company suffers financial losses. You know what? Insurance becomes a guardian angel for me to cover the company’s loss.
Do you want to keep yourself on the safe side in your consulting career and wonder, “What insurance does a consultant need?” Well, fret not. I have collected information about consultants’ insurance to assist you.
General liability insurance for consultants
A general liability policy is often needed in client contracts. Because it protects the client. Consider the scenario in which a client of a marketing consultant slips on a wet floor while walking to the conference room during a business meeting.
In this scenario, the client’s medical costs would be covered by general liability insurance. A consulting company’s most important insurance policy is general liability insurance. Third-party liability claim covers:
● When a client gets injured
● If there is any damage to the customer’s belongings
It also covers damages caused by advertising. The general liability insurance policy covers legal defense, a settlement with the other party, or court-ordered decisions. The purpose is to cover a loss if your consulting business is sued.
General liability insurance cost
On average, a consulting company’s general liability insurance costs less than $30 per month. Or it could cost $350 annually.
Professional liability insurance for consultants
Errors and omissions insurance (E&O) is known as professional liability insurance. It covers your company against client lawsuits claiming financial damage due to poor work or guidance. Every business should have a professional liability policy. Consulting firms are more likely to be accused of mistakes, oversight, or negligence.
Professional liability insurance coverage
E&O coverage can protect you even if you are not at fault. Examples of professional liability claims are:
- Work botches
- Assistance that has yet to be delivered
- Missed Deadlines
- Claims of negligence
How does professional liability insurance help you?
Suppose a client hires an IT consultant to improve their cybersecurity services. But the client experienced a data violation several months later. The client can sue the consulting company.
The lawsuit cost would be covered by E&O insurance. It combines third-party cyber liability insurance with an E&O policy. Before signing a contract, consultants have to ensure E&O insurance.
Types of Risks Consultants Face When They Do Not Carry Professional Liability Insurance
Consultants face many risks daily. For that, they have to know about “What insurance does a consultant need? Still, they have the risk of being sued if they do not have professional liability insurance. If you do not have insurance, you could have to pay high costs to the clients.
- You have to pay the fees for lawyers.
- You have to bear the costs associated with the court.
- You have to pay for defense charges.
Consultant Professional Liability Insurance Costs
Fees for professional liability insurance can vary. The fact is that each consulting firm is unique. When determining your company’s costs, insurance companies evaluate various factors, including your:
- If you have a clean record in your claims history, you can get this insurance for a low cost.
- If you exceed the coverage limit, it could raise your policy’s cost.
- Experience matters a lot in determining the cost. If you have been in business for a while, you are less likely to make a mistake.
Businesses are impacted differently by each of these variables. Obtaining a quote for your professional liability insurance is the most helpful method for determining its cost.
Professional liability insurance costs $650 per year for a consulting company. It costs $55 per month.
Business owner’s policy
A business owner’s policy (BOP) bundle includes two types of insurance policies.
- It includes the coverage for general liability.
- It covers insurance for commercial property.
Commercial property insurance pays to fix or replace damaged or stolen business property. On the other hand, general liability insurance protects against lawsuits brought by third parties. Yet, some consulting companies will be eligible for a BOP. Your business will be selected for BOP if you:
- Have less than 100 workers
- Have a small workplace or office
- Earn less than one million dollars annually
- Operate in a sector with low risks
- Require business interruption insurance for less than one year
Consult an insurance agent who will decide whether you qualify for a BOP for your consulting company.
Business owner’s policy cost
Purchasing a business owner’s policy comes at a lower cost. But, if you buy general liability and commercial property insurance separately, you have to bear more costs. A BOP costs $500 per year for a consulting company or about $40 per month.
Workers’ compensation insurance
Workers are the keys to your business’s success. Workers’ compensation insurance coverage protects your customer from unwanted harm. Employees are the main priority in this insurance.
When a worker becomes sick, this insurance covers medical bills. It also covers lost wages if a worker becomes ill or is injured on the job. All business requires to ensure this insurance in the United States.
Workers’ compensation insurance cost
A consulting company’s average annual cost of workers’ compensation insurance is $500. It costs $40 per month. On the other hand, your premium is influenced by many things. It depends on your workers and the degree of danger they encounter on the job.
How does Workers’ compensation insurance help you?
Just imagine a scenario where a worker at a research consulting company trips over a power cord in the workplace. Eventually, he gets hurt in his knee. The company’s workers’ compensation policy would cover the employee’s medical bills, such as X-rays and physical therapy. This insurance pays for a worker’s medical bills and partially lost salary.
Cyber liability insurance
There are two kinds of cyber liability insurance. Many consulting companies need it. You might require both. It depends on the nature of your business.
Data breaches and other cyber incidents may affect your business’s network. In this case, business losses are covered by first-party cyber liability insurance. It covers expenses like:
- Advising customers of the breach
- Services for monitoring credit for affected customers
- Demands from cyber extortion
- Benefits for managing reputation and public relations
Your company is legally protected by third-party cyber liability insurance if a client breaches security and files a case against you. It will pay for things like:
- It will cover fees for lawyers.
- It includes costs associated with the court.
- It also covers the cost of settlements.
Cyber liability insurance coverage is most needed by consultants who control sensitive data. It is needed by those who advise clients on IT systems or cybersecurity.
Cyber liability insurance costs
Insurance for cyber liability can be costly. The average annual premium is $1,675. It costs about $140 per month. Yet, remember that your costs will be affected by several things, such as your work and how much sensitive information your company handles.
How does Cyber liability insurance help you?
Cyber liability insurance can be handy in a possible scenario where a client hires a research consultant to look at sensitive data. A cyberattack on the consulting firm breaches the client’s data stored on their servers. The company’s cyber liability insurance would cover the damages in this scenario.
Having honest workers is a blessing for your business firm. But dishonest workers also exist. If your worker steals from you or a customer, fidelity bonds provide protection. It offers protection against:
- Unlawful access to data
Fidelity bonds can be divided into two groups:
1. First parties:
You can protect your company from the actions of dishonest employees. For that, you have to buy first-party fidelity bonds for your consulting firm. This bond covers:
- A worker who embezzles or steals money from your business.
- An employee who steals from your company.
- A worker who commits forgery that has an impact on your business.
2. Third parties:
If one of your employees commits a crime against your clients’ business, third-party fidelity bonds protect them. This bond covers:
- An employee who robs one of your customers.
- An employee who defrauds one of your customers.
- An employee who cheats on one of your customers by forging documents.
How does Fidelity bond help you?
Suppose your worker transfer clients’ money from your company without clients’ permission. When the client discovers that your employee transferred the money illegally, they sue your company for their losses. And you have to pay your client for the theft.
Fidelity bond covers this cost in this case. Although insurance policies and fidelity bonds are frequently grouped, they are not the same. Fidelity bond payments are a part of a claim. And it must be returned to the insurance company by your company.
Thus, if an employee theft resulted in a refund of $2,000 from your fidelity bond provider, you would be expected to repay the insurer the total amount in the future.
Fidelity bond cost
Several factors determine the fidelity bond cost. The size of the bond is a significant factor that determines how much fidelity bonds cost. For a small business, the average cost of a fidelity bond is $1,055. Or you have to pay $88 per month.
Frequently asked questions
Since you are a consultant, you need to know, “What insurance does a consultant need.” I have included some crucial questions which will assist you in deciding which insurance you might need as a consultant.
What Is Insurance for Errors and Omissions?
Errors and omissions insurance is professional liability insurance. It helps avoid cases from clients. Your company’s court costs and settlements can be very expensive. In that case, Insurance for Errors and Omissions covers all of the costs.
What is covered by E&O insurance?
Insurance for errors and omissions protects your business from claims for:
2. Errors in rendered services
5. Violation of fair dealing and good faith
Is Liability Insurance Required for Consultants?
Consultants should include professional liability insurance coverage if they provide services directly to customers. Without coverage, they would have to pay for their legal fees. If someone sues the company and claims, you provided incorrect services.
What could be the annual cost of cybersecurity insurance?
The annual cost of cybersecurity insurance is $1,675.
What does Insurance for workers’ compensation cover?
Insurance for workers’ compensation covers medical bills. It also covers lost wages if a worker becomes sick or is injured in your workplace.
What could be the annual cost of Insurance for workers’ compensation?
The average annual cost of workers’ compensation insurance is $500.
What does commercial property insurance pay for?
Commercial property insurance pays to fix or replace damaged or stolen business property.
What does general liability insurance cover?
A consulting company’s general liability insurance covers the following:
1. Injury to the client
2. Damage to customer belongings
Isn’t it better to be in the safe zone when you run a business? You would like to be there. It is a blessing to have insurance coverage who operate consulting businesses. Insurance covers your business from expensive liability fees that could financially affect your company.
Thus, it is vital to know “What insurance does a consultant need.” It’s important to gain clients’ trust in the business. If you have insurance for your business, it confirms that you are trustworthy and thinking of customers’ interests.
Mehedi Hasan is an insurance expert with over 6 years of experience in the industry. He has a deep understanding of various types of insurance policies and is skilled at helping clients find the coverage that best fits their needs. In his current role, Mehedi works as a consultant, advising businesses and individuals on the best insurance options for their specific situations.
He is also a frequent speaker at industry events, sharing his knowledge and expertise with colleagues and professionals in the field. Mehedi holds a degree in insurance and risk management and is committed to staying up-to-date on the latest industry trends and developments. In his free time, he enjoys reading, traveling, and spending time with his family.