Best Business Insurance for Consultants

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Contributor, Benzinga
October 23, 2020

If you’re a consultant or you run a consulting firm, you probably know that even a minor lawsuit can quickly evolve into a financial nightmare for your business. Comprehensive consulting insurance can help you protect your livelihood from threats like legal action, cybercrime, burglaries and much more.

If you’ve been operating your business without a comprehensive consulting insurance policy, you could be putting yourself and your employees at risk. Our guide to business insurance for consultants will help you find the right policy for your company — and we’ll help you get started exploring your options with a few of our favorite providers. 

Best Consulting Insurance

From major, nationwide names to smaller, more local operations, there are many insurance providers offering a host of coverage choices for consultants. Browse a few of our top consulting insurance providers below and begin your search by collecting a few quotes. 

Types of Consulting Insurance

There are many types of insurance that consultants can benefit from. The best insurance for your needs will vary depending on where you operate your business from, how you consult with clients, the services you offer and much more. Below, you can view a list of some of the most common coverages consultants invest in.

Errors and Omissions Insurance

Errors and omissions insurance, sometimes referred to as “professional liability insurance,” is a type of protection that protects your business if a client decides to sue you for negligence in your work. For example, imagine that you recommend a particular course of action for a client’s marketing campaign. The client follows your suggestion and, instead of seeing a return on the campaign, incites a public boycott of the company’s product.

If the client decides to sue you for malpractice or negligence, your errors and omissions insurance will help you cover the cost of legal defense for your business. It can also help you cover any court-awarded judgments you’re required to pay.

Some additional examples of situations in which you might need to use your errors and omissions insurance can include:

  • A strategy or investment product that results in a financial loss
  • Mistakes made in client paperwork that results in a missed opportunity
  • A client who believes that you’ve misrepresented your level of experience or area of expertise and sues for false advertising

Errors and omissions insurance is an absolute must-have for any type of consulting service. Even the most experienced consultant can make a costly mistake — and a single mistake has the potential to bankrupt your business without coverage.

General Liability Insurance

General liability insurance is a type of umbrella coverage that extends your coverage to include a wider range of potential lawsuits. Some common inclusions that come with a general liability insurance policy include:

  • 3rd-party property damage: If you damage a client’s property and they sue you for the cost of a repair or replacement, your 3rd-party property damage coverage will help you cover legal expenses.
  • 3rd-party bodily injury: 3rd-party bodily injury compensates you if a client sues you after being injured on your property.
  • Advertising injuries: When you advertise your business, it’s possible to unintentionally infringe on another business’ copyright or commit an act of defamation. Advertising injury coverage helps you pay for legal expenses if a client sues you for libel, slander or copyright infringement.

An important thing to keep in mind: Your general liability insurance will only compensate you if another party sues you for damages. It won’t provide any type of protection if you decide to sue a client for slander, property damage and more. For example, if you drop a client’s laptop and they sue you for damages, you’d be covered under your general liability insurance. However, if a client drops your laptop and you decide to sue for damages, you’ll need to cover your legal expenses out-of-pocket. 

Commercial Property Insurance

Commercial property insurance is a type of coverage that compensates you if someone or something damages the property you run your business from. It is similar to homeowners insurance because both types of coverage protect you against damage from a set list of perils. Some examples of perils that are covered on most commercial insurance policies include:

  • Fire
  • Burglary
  • Electrical storms

In addition to covered perils, your insurance policy will also usually include a list of perils that you’re not covered under. Some common examples of noncovered perils include:

  • Earthquakes
  • Flooding
  • Riots or acts of war

In some cases, you might be able to extend your commercial insurance policy to include coverage for an excluded peril. Say your office is near a lake that’s prone to flooding, your insurance provider might be able to add a rider for flooding coverage to extend your policy to flood-related damages.

You should consider purchasing a commercial insurance policy if you own a physical location where you operate your business from. If you rent your commercial space, you might be required to hold at least some level of commercial property insurance as a condition of your lease. 

Business Owners Policy (BOP)

If you need both general liability insurance and commercial property insurance, you may be able to combine both coverages together with a business owners policy (BOP). A BOP is a more convenient policy option that includes all coverages found in both commercial property insurance and general liability insurance policies. Most business owners prefer to purchase a BOP over individually selecting both coverages from competing providers because coverage from a BOP is often more affordable and convenient when compared to buying 2 policies. 

Cost of Consulting Insurance

There is a wide range of factors that influence what you’ll pay for your insurance coverage. Some of the things that might influence what you can expect to budget for insurance include:

  • Your business revenue: The more money your business brings in, the more likely you need to file a major claim with your insurance provider. Expect your insurance expenses to increase as your business revenue and spending per client starts to increase.
  • The clients you work with: Some businesses and lines of work carry more potential for lawsuits than others. If you work with very high-value clients or clients who work in a particularly risky industry, you’re more likely to spend more on your insurance.
  • Your location: Certain types of natural disasters and property crimes are more likely to occur in certain parts of the country than in others. If you operate your business from a physical space in an area where these types of perils are more likely, you’ll pay more for your commercial property insurance coverage.
  • Your policy limits: Like most types of insurance coverage, consulting insurance policies come with a per-incident limit that dictates the maximum amount of money you can claim from your insurance provider. For example, if your policy has a $1 million limit, you cannot claim more than $1 million from your insurance provider, regardless of how much you actually spend repairing damages. Choosing a policy with higher limits will increase the cost you pay per month.

As a general rule, you can expect to pay about $40 per month for a BOP and $55 per month for an errors and omissions policy as a consultant. However, the best way to receive specific pricing information is to contact an insurance provider and request a quote using your business’ unique information. 

How Consulting Insurance Works

Unlike some other types of insurance, there is no singular coverage type called “consulting insurance.” Instead, consulting insurance refers to a set of policies that consultants and consulting firms use to protect their businesses.

The most common insurance for a consultant is errors and omissions insurance, which protects you against clients claiming that you’ve conducted your business in a negligent manner. You should also consider purchasing a general liability insurance policy, which extends your coverage to include a wider range of claims against you. 

Finding the Right Coverage for Your Business

As a business owner, you know that balancing costs is important to the longevity of your operation and the quality of services you’re able to provide. We highly recommend collecting at least 3 quotes from competing insurance companies in your area to ensure that you’re not overpaying for your insurance. Knowing all of your options can help you get the coverage you need without breaking the bank. 

About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.