If you’ve recently decided to start your own consulting business, several things will need to be in place before you can successfully strike out on your own. Beyond registering your new business, purchasing business cards, and finding customers, you will need to secure any business insurance policies needed for your profession.
In this article, we discuss why independent consultants need insurance, what kind of liability insurance is required, and how you can protect your business against the various risks that consultants may face.
Should a Consultant Have Insurance?
As an independent business owner, you represent yourself in every client interaction and the jobs you take on. You will no longer have an employer to back you financially in the case of any legal issues. Purchasing insurance is the best resource to protect your assets and your line of work against financial risks or unexpected circumstances.
Consultants encounter a variety of risks every day because they work closely with clients in integral parts of their customer’s organizations. As a professional, they are also privy to critical information and the functions of their clients. Since any potential accident could have a significant impact on their business, and as a consultant, you’ll have a much higher risk for liability lawsuits than other occupations.
Additionally, you may eliminate yourself from future business opportunities by not purchasing a liability insurance plan. Some customers and industries will require consultants to have specific policies before doing business with them. To ensure a successful future in consulting, professionals should have all the needed liability insurance for their field.
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What Kind of Insurance Do Consultants Need?
Consulting is a vague term encompassing the many different professional services that an independent contractor or personal business may provide customers. Consultants can range from accounting, business and management, designers, engineers, IT professionals, lawyers, writers, and more.
However, what remains consistent are many of the risks that consulting professionals face and the policies they may need to ensure they’re covered properly.
- General liability insurance protects your business from losses related to third-party bodily injury, personal injuries, and property damage. This basic insurance policy will protect you if you visit a customer’s home or workplace. It will also cover financial costs due to medical expenses or lawsuits.
- Professional liability insurance covers you against any general mistake, negligence, neglect, or misinformation. Without this, your business is responsible for any legal costs stemming from liability lawsuits, and this could come at an extreme cost to you.
- Business property insurance expands the coverage provided by general liability policies. This type of insurance covers your business against risks associated with the physical location of your consulting firm. This is regardless of whether you own or rent space for it. If you run a home-based consulting business it also covers incidents like power outages.
- Business interruption insurance covers any situation that stops you from performing your consultant work or prevents your business from running. Power outages, a broken computer, fires, or anything that results in a potential loss of business are covered by this policy.
- Cyber liability insurance assists you in recovering from an online attack and covers the cost of investigating a cyber attack. It also protects you against the financial cost of repairing or restoring your website, systems, and data, any loss of income, and legal fees and damages if a client sues for lost data.
- Equipment breakdown insurance protects mechanical equipment and covers the costs of repairs if they suddenly break down. This helps protect your personal assets that you need in order to perform your work.
- Consultants should purchase errors and omissions (E&O) insurance, the policy protects consultants if they forget something or make a mistake during the service to a client. E&O insurance also protects you in case of any lawsuits or negligence claims and is recommended if you provide professional services for a fee.
- Advertisers’ liability insurance protects professionals if someone claims the consultant stole their existing idea. Marketing consultants greatly benefit from this kind of insurance policy as it will protect them in the event an individual claims the constant stole or plagiarized their initial concept.
Any professional doing consulting work should speak with their insurance agent to decide the right insurance plan for them, and to make sure they’re insured against any accidental incidents, negligence claims, or potential mistakes. The right insurance ultimately provides peace of mind, so you won’t be kept up at night by any “what ifs”.
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