Professional liability insurance, also called errors and omissions insurance, protects small businesses against the costs of client lawsuits over unsatisfactory work.
An oversight or mistake by your consulting company or research firm could cause financial setbacks or reputational damage to your clients, and lead to an expensive lawsuit. That’s why finding the right professional liability insurance should be a part of your risk management strategy. It can help protect you from financial losses related to a liability lawsuit.
These policies offer coverage related to:
Many companies require their business consultants to have professional liability insurance, and provide proof of coverage with a certificate of liability insurance. Regardless of your line of work, clients want to know that you have the right coverage to pay for any damage caused by your actions or neglect.
The idea of indemnity is frequently discussed when talking about professional liability insurance, and it’s the foundation of most business insurance policies.
Simply put, indemnity is a commitment between two contracted parties, where one will compensate the other for any covered losses during the policy period.
This compensation could be in the form of a cash payment, or repair or replacement of damaged property. The insured losses could include things like property damage and legal expenses.
In the case of professional liability, also known as professional indemnity, the insurer takes on the policyholder’s liability for their professional work and compensates them for legal action against them.
Professional liability insurance provides protection for consulting firms when they are accused of an error, failure to deliver promised results, or professional negligence. Because it's a claims-made policy, consultants need to keep this policy active to ensure coverage for work done in the past.
Even if you’re not at fault, being accused of an error can be costly. If a client claims a consultant's inaccurate projection or some other mistake caused financial damage, you may find yourself in an expensive legal battle. Professional liability insurance helps cover your legal fees – which can be significant.
Project delays can have a significant impact on your client’s bottom line. If a client takes you to court over a missed deadline, your professional liability coverage could help pay for court costs, along with a judgment or settlement.
Clients usually have high expectations. If your work doesn’t meet their standards, you could be accused of professional negligence. When your consulting work is challenged, professional liability insurance helps pay for legal expenses, including the cost of hiring an attorney.
Helping a company improve its performance is no small task, and management consultants can take the fall if a client misses their revenue projections. That's why professional liability insurance is vital for this profession.
This policy gives you the financial protection you need, even if you’re not at fault. It'll cover a management consultant's legal costs, including settlements, if a client holds you responsible for their company's disappointing performance.
A tabulation error or an inaccurate projection can lead to a lawsuit for a market research analyst. Even if your consulting firm isn't at fault, you might still have to pay for a costly legal defense.
Professional liability insurance provides critical financial protection for market research analysts and others whose data is directly tied to client revenue.
IT consultants take on additional risk because they often make software recommendations to clients or oversee cybersecurity. If an IT consultant recommends insecure software and the client's data is exposed, the client could sue.
For protection against this type of liability, IT professionals buy technology errors and omissions insurance (tech E&O), a package that includes both professional liability insurance and cyber liability insurance. Any consultant who works in IT or technology should consider this protection.
Most consulting businesses pay a median of less than $55 per month for professional liability insurance, but you could pay more or less depending on your risks.
Insurance costs for consulting professionals are based on a few factors, including:
Professional liability insurance covers several risks inherent in the consulting industry, but it does not offer complete protection. Other policies to consider include:
General liability insurance: This policy covers expenses related to common accidents, including third-party injuries, accidental damage to client property, and advertising injuries.
Business owner’s policy (BOP): A BOP bundles general liability coverage with commercial property insurance, typically at a lower rate than if the policies were purchased separately.
Workers' compensation insurance: Workers' comp covers medical costs if a consultant suffers a work-related injury, such as tripping in the office and breaking a wrist. Most states require this coverage for businesses with employees.
Cyber liability insurance: This policy is important for businesses that handle personal information. It helps consulting firms recover from costly data breaches and cyberattacks.
Commercial auto insurance: This policy covers costs in the event of an accident involving your consulting business's vehicle. Most states require this coverage for vehicles owned by a business.
Fidelity bonds: Fidelity bonds provide reimbursement if one of your employees steals from a client. They are often required for client contracts.
Are you ready to safeguard your consulting firm with professional liability insurance or another policy? Complete Insureon’s easy online application today. Once you find the right policy, you can begin coverage in less than 24 hours.