Do consultants need business insurance?
Yes. Legit consultants should have business insurance. Many things can go wrong when you provide professional services and give expert advice for a living– whether you’re a business consultant, management consultant, marketing consultant or IT consultant. And besides, anyone can benefit from the peace of mind that business insurance offers.
If you’re a serious player, you know it’s not all unicorns and rainbows. You have to invest your time and energy to get momentum and make a name for yourself before you get the results you crave.
Part of your plan needs to be about protection, especially if you’re a full-time consultant. What happens if you get injured and can’t work? What if a client sues you for something that’s out of your control?
These are things that can happen at any time, and that’s why the world created business insurance for consultants.
But don’t my contracts specifically protect me from these types of things?
Contracts are great. They’re fantastic. And they’ll protect you a lot of the time. But if you think you don’t need professional liability insurance because you have a contract, you may be mistaken. A larger company with resources can easily interpret a contract in their favor, not yours.
Harsh, but true!
A contract won’t stop a client from taking you to court, even if the rules are clearly spelled out. And you’ll have to pay to defend yourself, which can be quite expensive.
Ok, so what kind of insurance do consultants need?
Well, liability insurance is a great place to start – it’ll protect you from all the things you could be liable for.
How about liability insurance?
Taking risks can be fun. It’s why people do things like skydiving or free climbing. But taking a professional or financial risk when you could easily protect yourself isn’t thrilling and it’s not smart. Even if you are a gambler at heart, you might be required to get insurance when you start working with bigger clients, anyway.
Many consultants will avoid getting insurance when they first start out, but what it comes down to is this: If you want the gig, you’ll do what it takes.
Liability insurance can come in handy if:
- Your computer breaks, and you can’t meet your deadline
- A client claims you maliciously altered web content
- Your work is deemed too similar to previously produced work
- A flood damages your office and your work is lost
- You get in a fender-bender while running an errand for work
How does liability insurance work?
Liability insurance can give you protection against the high costs of lawsuits and claims. The policy limit on your insurance policy is the amount you’re covered for if something happens.
If there’s a lawsuit, your insurance company will defend you and pay up to the per occurrence (per claim) policy limit, which includes legal costs and settlements.
Pretty awesome, right?
And if you work in the digital space, cyber liability insurance is also something you should check out.
Professional Liability Insurance
This insurance is crucial for anyone who is providing a professional service, like giving advice. It’s crucial for consultants. It’ll protect you and your business from claims stemming from the performance of your professional services – like faulty work.
If you work with corporate clients, who tend to have intense legal departments, this is even more important.
This coverage is essentially protection from an unhappy client. It doesn’t matter if you’re always on the ball. At some point you may have a client who thinks they have suffered a loss because of you or your work. Even if it’s technically not your fault, you will have to defend yourself.
If you are working with smaller clients who are most likely not going to sue you (due to time or money) unless something really bad happens, you may not find it necessary. However, E&O coverage is one of the most important types of insurance for consultants working in the digital space.
Learn more about professional liability insurance for consultants.
General Liability Insurance
General liability insurance protects your business from third-party claims regarding damage to someone else’s property, bodily injury (slips and falls), and associated medical costs.
It’ll also help protect you from claims of libel, slander, copyright infringement, and false advertising – which can happen to any consultant, even those who work from home.
General liability covers things like:
- Bodily injury and medical bills
- Property damage
- Libel or slander arising from your written or spoken words
If you meet with clients at their office or job site, it’ll protect you if someone trips over your briefcase and twists their ankle. If you work from home and don’t meet with clients very often, you probably don’t face as much risk.
But even consultants who work from home are not immune from libel, slander, and copyright infringement lawsuits.
Cyber Liability Insurance
This kind of insurance helps protect consultants who are dealing with a lot of digital data that could get lost, stolen, or otherwise compromised.
If you handle any kind of digital data, even something as simple as credit cards, you’ll want at least some cyber liability coverage – no matter how small your consultancy is.
Learn more about cyber liability insurance for consultants.
Insuring your property & equipment
The tools you need to run your consultancy are your livelihood. If you have an office, that could mean things like desks, chairs, and computers. For consultants who work from home, it probably means your laptop, printers, and other business equipment.
If you work from home, your homeowners or renters insurance might not have you covered. A business property insurance policy can cover the gaps and protect your equipment from damage or theft.
If you have simple equipment that you use for both business and personal use, you may be alright, but it’s worth checking.
Business Owner’s Policy
Business owner’s policies are popular with consultants because they combine general liability insurance and property coverage at a lower price than each policy by itself.
Will business insurance be expensive?
It really all depends on how big your business is, the type of work you do, where you work, and how much coverage you want. But if you work with an insurance agent, they’ll make sure you’re only paying for the amount of risk you have. And that’s worth it.
The cost of each policy is affected by several different factors, including:
- Your industry
- The size of your business
- The revenue of your business
- Number of employees
- Claims your business is exposed to (workplace accidents, property damage, bodily injury, data security, etc.)
- Any insurance claims that have occurred in the past.
Pro-tip: Your business insurance premiums are tax deductible as a business expense. That’s pretty sweet, so don’t forget that little tidbit when tax time rolls around.