If you are working as a consultant, then you are likely to get a host of professional benefits. Working as an independent consultant gives you much-needed flexibility and autonomy to make your own business decisions. You can select the clients and the projects you want to work on and get to showcase your problem-solving prowess and business expertise. This is certainly something that a typical 9-to-5 job does not offer, which is why so many people in the United States are switching to the idea of setting up their consulting ventures.
As an independent consultant, you will have to work with third parties. This means you will be personally responsible for any financial or legal challenges that come your way. You will have a huge liability exposure, especially when your client(s) file a lawsuit against you if there’s any professional negligence or breach of duty on your part. Such a situation can shake up your business assets and finances because you will have to bear enormous legal expenses and compensation costs.
This is why it’s recommended that you have a consultant insurance policy in place. Such insurance covers your legal and compensation expenses whenever a lawsuit arises. To know more about this insurance, you can visit bizinsure.com.
Types of insurance policies for consultants
Let’s take you through some important types of insurance that you should have for your consulting business:
1. Business insurance
As a business, you will be in possession of many assets that help you generate income from your clients. These business assets include inventory, stocks, equipment, and office space, to name a few. Unfortunately, there may occur events, such as fire, theft, storm, or any natural calamity, which can cause irreparable damage to these assets. Such damage can jeopardize your business’ liquidity and its ability to generate income.
Hence, you need a business insurance policy that can cover such damages. With such insurance in place, you can compensate for the loss of revenue owing to operational interruption. Also, this type of insurance covers tax audit and statutory liabilities too.
2. Public liability insurance
The second type of insurance that you need as a consultant is public liability insurance. This type of insurance is created to offer you and your consulting business the much-needed protection against events when a client(s), vendor, or a member(s) of the public at large files a lawsuit. The aim of the lawsuit is to seek compensation for any loss, property damage, or personal injury they suffer because of negligence on your part while offering your consultancy services.
Take, for example, a client visits your office for a meeting. During his or her visit, he or she suffers an injury due to an accident on your premises. When that happens, you will be liable to pay for his or her medical expenses. When you have public liability insurance, you get coverage for such unexpected expenses, in the absence of which, the entire cost would have to be paid out of your own pocket.
3. Professional liability insurance
Also known as professional indemnity insurance or Errors and Omission (E&O) insurance, this type of insurance is created to provide protection against compensation claims raised by clients who have incurred a loss due to real or alleged omission or negligence on your part. This is a must-have insurance policy for consultants to safeguard their business against hefty financial losses due to enormous compensation claims.
This type of insurance typically covers compensation payable to the plaintiff(s), defense costs, and attorney fees. Ideally, all types of consultants should have this insurance policy to avoid paying for compensation by liquidating their business assets or drawing into their personal cash reserves. Whether the mistake is unintentional or whether the advice you offered is inaccurate, this insurance can save you and your business from financial losses.
4. Cyber liability insurance
Finally, you need to have cyber liability insurance if you are offering consulting services by using the internet. There are many unscrupulous hackers out there who are lurking around to access sensitive information of your business and your clients. These cybercriminals target vulnerable computer systems and databases and electronically steal confidential details. When such data breaches happen, you will be liable for the loss that entails.
This is when you need a cyber liability insurance policy, which can protect you and your business against claims arising due to data breaches. Such insurance covers all costs involved in defense and compensation claims. Be it ransomware, loss of sensitive data, or business interruption costs, this insurance gets you covered.
The above are some of the most important types of insurance you need to have for your consulting business. You should get in touch with a reliable insurance provider to know more about the coverage under each and get one that suits your consulting business.