As a consultant, you spend much of your day providing clients with advice based on your specialized knowledge and expertise. This opens you up to potential liability claims. If a client alleges that the advice you provided resulted in a financial loss for them, they could decide to file a lawsuit and seek compensation.
Professional Liability insurance for consultants is one way to help protect your consultancy and livelihood. Let’s take a closer look at what this form of insurance coverage is and how it can benefit consultants in any industry.
What is Professional Liability insurance for consultants?
A Professional Liability insurance policy (also known as Errors and Omissions or E&O insurance) is an essential policy that protects you and your company in case of a lawsuit due to alleged professional wrongdoing.
- Errors and mistakes
- Breach of contract
- Undelivered services
- Missed deadlines
Why consultants may need Professional Liability insurance
Professional Liability insurance for consultants may be good to have. Consultants typically give their clients advice, which could lead to a lawsuit if there is a mistake in your recommendations or your advice is misunderstood.
Beyond a need to protect your business and professional reputation, there are other reasons why consultants may need Professional Liability insurance.
1. To meet legal obligations
State law may require consultants in certain industries to have a Professional Liability policy before they can work in the state. These details can typically be found on state government websites. If you work for clients in multiple states, you will likely need to meet the separate legal requirements in each state, which may differ.
2. To meet licensing or industry requirements
Certain industries may require consultants to have Professional Liability insurance to become licensed in the field. Often, professional associations will set minimum coverage limits that its members must meet to legally work within the industry. If you are a member of any professional associations, they can usually provide details about any insurance requirements in your area.
3. To meet client expectations
Some clients may require all consultants and other contractors they work with to have Professional Liability insurance. This may be specified in work contracts that you are asked to sign before beginning a project. Clients often require consultants to have their own insurance coverage, as their business policies may not fully cover independent contractors.
Even if you are not legally required to have Professional Liability insurance, buying a policy could help you attract clients. Purchasing a policy before you are asked for proof can be a sign that you take your work seriously and are prepared to defend it and your professional reputation.
How does Professional Liability insurance protect consultants?
Professional Liability for consultants will cover legal expenses resulting from a related liability claim made by a client. These include attorney’s fees, court costs, settlements, and judgements.
Many Professional Liability policies are “claims-made” policies. Coverage may begin from a retroactive date that is agreed upon by you and your insurer. This means that you are covered for events that occurred on or after that date, providing cover for your work long after it was completed.
Your Professional Liability policy may also have an extended reporting period that goes beyond the date when your policy ends. This helps protect you for a limited period of time if a client makes a claim after you’ve ceased doing business or the policy has ended.
Is Professional Liability the only coverage that consultants need?
Every consultancy is different, and you may face risks that Professional Liability insurance does not cover. Consultants may also consider these other forms of coverage:
- General Liability – Also referred to as Commercial General Liability (CGL) or “slip and fall coverage”, this insurance can protect your business against bodily injury or property damage lawsuits from outside parties.
- Business Owner’s Policy – This is a convenient and affordable way for small business owners to protect against several of their most common exposures. These policies combine General Liability insurance with other types of coverage, such as business interruption and business property damage.
Finding Professional Liability insurance for consultants
Running your own small business is time consuming, especially for consultants who may be juggling multiple projects. That’s why BizInsure has made it simple and easy to find business insurance.
We’ve used technology to simplify the process of comparing and buying insurance. With greater pricing transparency, you can also be sure that you are getting a fair deal, without needing to complete complicated paperwork. Plus, our licensed and knowledgeable agents are ready to help at every step of your business insurance journey!
Visit our website to learn more about Professional Liability for consultants and other insurance products that might suit your consultancy.