Whether you are a marketing consultant, help businesses develop their team’s leadership skills, or provide any other consulting service, you should understand the importance of business consultant insurance. Experts who advise companies on implementing best practices or provide services to business owners need business consultant insurance to protect themselves against industry risks.
This article explains what business consultant insurance is and how to get it, the different types of business consultant insurance, and the factors affecting the cost of business consultant insurance so that you have all the information you need to purchase the best policy to cover your unique needs.
What is Business Consultant Insurance
Business consultant insurance is a policy that protects individuals who offer services or advice to other business owners. It keeps them from paying out of pocket for unforeseen events, including:
- Bodily injury
- Property damage
- Negligence lawsuits
- Employee injuries
Business insurance for consultants is essential as the cost of defending lawsuits or paying for clients’ or employee’s medical expenses on your own can be enough to wipe out your bank account–and effectively shut your business down.
4 Steps to Get Business Consultant Insurance
There is a simple four step process for getting insurance for consultants, which starts with understanding your business risks.
Step 1: Assess Your Business Needs
The first step in getting business consultant insurance is determining what risks your company potentially faces. Once you understand your business risks, you can choose a policy that covers your needs. For example, financial consultants or anyone who offers advice that could cause clients to lose money will need a professional liability policy that covers those types of lawsuits.
Common business risks include:
- Theft
- Breach of contract
- Fire or storm damage to your property
- Employees’ workplace injuries
- Bodily injury claims from non-employees who get hurt at your place of business
- The damage you cause to someone’s property
- Data breaches or cyberattacks
- Negligence claims
Step 2: Research Insurance Providers
Once you understand your business risks and coverage needs, you should research insurance providers. It is a good idea to look for highly rated providers that offer a variety of coverage options. You can check websites like the Better Business Bureau (BBB), National Association of Insurance Commissioners (NAIC), and Trustpilot for ratings and customer reviews. Once you have narrowed down your choices, you can reach out to insurance providers or brokers to find out more about what they offer.
There are a couple different ways to find out more about insurance providers and what they offer, including:
- Reaching out directly to insurance companies
- Contacting an insurance brokerage
Talking to insurance companies directly can work well for business consultants whose policy needs are simple, but it can be time-consuming to get individual quotes.
An insurance brokerage can help if you have more complex needs or want to get quotes from multiple companies without having to contact each provider yourself.
Step 3: Compare Insurance Policies
Not all policies are created equal! Read each policy carefully to understand exactly what is covered–and what is excluded–before making a purchase. Your policy should cover your risks, fit your budget, and have appropriate liability limits for your industry.
Step 4: Purchase and Maintain Insurance Coverage
Once you purchase your policy, you must pay your premium when it is due (often monthly) and review your coverage needs regularly. You may need to adjust your policy or purchase a new policy if your risks change between your policy’s effective and expiration dates.
Types of Business Consultant Insurance
There are different types of business insurance for independent consultants that offer protection for your specific needs.
Let’s take a look at how each of the following types of insurance can help protect consultants who offer advice or help to business owners.
Professional Liability Insurance
Professional liability insurance (also known as errors and omissions or E&O insurance) can help protect you if you make a business mistake that harms someone or causes your client to lose money or if you are accused of negligence.
For example, if you are a financial consultant and a client claims that they lost money due to your advice and sues you, professional liability insurance can help cover legal defense or settlement costs.
The best professional liability insurance for consultants factors in your industry, number of employees, location, and claims history to provide maximum coverage with an affordable premium.
General Liability Insurance
General liability insurance is essential insurance for all small business owners as it can help cover costs associated with bodily injury, property damage (to other people’s property), legal fees, medical expenses, and costs associated with claims of advertising or reputational harm.
For instance, let’s say you’re a style consultant visiting a client at their home, and you accidentally drop your client’s phone and break it while taking a picture of their outfit. General liability insurance could help cover the cost of repairing the phone.
Business Owner’s Policy
A business owner’s policy (BOP) typically combines general liability and property insurance. Bundling policies can save you money on your premium while providing comprehensive coverage.
For example, an IT consultant who operates primarily from an office would do well with a BOP as it provides all the protection a general liability policy offers and can help protect their business property and tech equipment from damage or theft.
Workers’ Compensation Insurance
Many states require business consultants with employees to maintain workers’ compensation insurance, which helps pay for an employee’s medical expenses and lost wages if they get injured while working.
For example, if a PR consultant’s secretary cuts their hand on a letter opener and has to get stitches, workers’ compensation insurance can help cover the hospital bill.
Cyber Liability Insurance
Cyber liability insurance helps protect against cyber threats, including data breaches and cyberattacks such as ransomware (when a hacker holds a data or system hostage until a ransom is paid) or phishing (when a hacker sends an email disguised as coming from a legitimate source to gain access to confidential info) attacks.
Business consultants who work in the technology industry or who have access to sensitive client information (such as personal health or financial data) should have cyber liability insurance, as it can help cover legal fees and costs associated with investigating and recovering from cyberattacks, such as paying for customers’ identity recovery.
Cost of Business Consultant Insurance
Factors affecting business consultant insurance costs can include your industry, where you do business (for instance, conducting most of your business from your laptop at home will have different risks than visiting clients in their homes), how much coverage you want, and policy limits.
The average costs for business consulting insurance also depend on what policy (or policies) you choose.
There are a few things you can do to reduce small business consultant insurance costs, including bundling your policies, managing your risks, and paying for your policy in advance. For instance, some providers offer discounts if you pay for your policy all at once on or before its effective date as opposed to monthly.
Conclusion
Business consultant insurance helps shield you from paying out of pocket for legal costs and other expenses arising from covered events. Depending on your policy, business consultant insurance can help pay for bodily injury, property damage, medical costs from employee workplace injuries, and recovery from cyberattacks or data breaches.
To get business consultant insurance, you will first need to assess your unique business needs. Then you will need to research insurance providers and compare policies, paying attention to differences in coverage and price. Finally, you can choose the policy that best fits your needs. You should review your business’s needs when your policy is close to expiring to see if you need different or more coverage.
Anyone who offers advice or consulting services should consider purchasing business consultant insurance to ensure they are protected from costly unanticipated events.
FAQs
How much is insurance for a consultant?
The cost of insurance for a consultant depends on several factors, including your policy type, industry, number of employees, risk level, and location.
