What is Professional Liability insurance for consultants?
Professional Liability insurance is also known as Errors and Omissions (E&O) insurance is designed as a safeguard against the potential risk of clients disputing the professional delivery of your consulting work. A client may allege that you were professionally negligent, provided incorrect work or made mistakes, alleging you of failing to perform your professional duties.
This is where your Professional Liability insurance comes into play, saving you the cost of your attorney fees, settlement/judgment expenses, and other court costs up to the limit of your policy. Even if you are not found liable, your coverage will protect your finances by making sure you are not left with any out of pocket costs for defending your case.
As a consultant, Professional Liability insurance is an important measure for protecting your business in the long run. A client can potentially perceive the professional advice or services you render as unsatisfactory and file a lawsuit against you if they don’t receive the results they expected.
In addition to protecting your business, your client contracts may also stipulate that your business has Professional Liability insurance cover in place. If you were found liable for an error, your coverage delivers peace of mind for your clients, knowing that you have a plan to cover for potential financial losses that they may suffer because of your mistake.
Did you know a client could file a professional negligence lawsuit against your business months after you have completed your project? Your Professional Liability insurance will only cover for incidents that occur during the life of the policy, making it essential to ensure you have adequate cover before you begin working on contracts.
How much does Professional Liability Insurance cost for consultants
Professional Liability policy is a very specialized insurance product, tailored individually to each business. When it comes to calculating the cost of a Professional Liability insurance policy, a variety of factors are taken into consideration. Some of the main factors include:
- The type of consulting work: Malpractice claims can pose more of risk within some industries, including the legal and financial industries. Consultants with a high risk of malpractice allegations may pay a higher premium compared to a consultant who may be exposed to a lower level of risk of a malpractice allegation occurring.
- Level of experience: Consultants with an established and notable reputation without allegations of professional misconduct can expect to have lower premium costs than a consultant who is just starting out or who have had past claims.
- Location: the location of where you work can affect your premium. If your location is prone to high claim rates or has a large population you may have a higher premium
- Coverage limits: The amount of coverage can impact your premium, typically the higher the level of cover the higher the premium.
- Number of employees: as your business grows with more employees, so does the growing potential for a claim to occur