Running a consulting firm can be extremely rewarding, both personally and financially. Consultants now sell their services in many different fields, from education to information technology. No matter what kind of business consultant you are, you will face risks as well as rewards. That is why you should think about small business insurance coverage to keep you safe. Here, we’ll discuss the various business insurance policies for consultants.
Business Insurance For Consultants
#1. General liability insurance
General liability insurance is one of the most important business insurance policies for consultants. It protects your company in the event of a third-party liability claim relating to:
- Bodily harm to the client
- Client property damage
- Advertising injuries, such as copyright infringement or defamation
Consultants frequently meet with clients at their own offices as well as at their clients’ enterprises, putting them at a higher risk of being sued for accidental injury or property damage.
If your consulting firm is sued, your general liability insurance policy will pay for your legal defense, a settlement with the other party, or any court-ordered judgments to repay a loss.
What Is The Cost Of General Liability Insurance For Business Consultants?
The average cost of general liability insurance for a consulting firm is $350 per year, which works out to less than $30 per month.
How Can General Liability Insurance Help You?
Consider this: a marketing expert is holding a business meeting in their office, and their customer stumbles on a damp floor and fractures a bone while heading to the conference room. In this situation, general liability insurance would cover the client’s medical expenditures.
A general liability policy is commonly required in client contracts since it protects the client. A commercial office space mortgage or lease may also require general liability coverage.
#2. Professional liability insurance
Professional liability insurance is often known as errors and omissions insurance (E&O). This business insurance policy protects consultants from client claims alleging financial harm as a result of inadequate work or advice.
Any company that provides professional services should think about getting a professional liability insurance policy. Consulting businesses, for example, are more likely to be accused of a costly mistake, oversight, or neglect. Even if you are not at fault, E&O insurance can protect you.
Some common examples of professional liability insurance claims are:
- Workplace blunders
- Overspending
- Services not provided
- Deadlines missed
- Claims of negligence
An E&O insurance policy is a vital aspect of risk management for consultants. If your company is sued by a client, this coverage will cover your legal fees, court costs, and any settlements or judgments.
How Much Does Professional Liability Insurance Cost for Business Consultants?
The average cost of professional liability insurance for consultants is $650 per year, or roughly $55 per month.
How Does Professional Liability Insurance Help Consultants?
For example, suppose an IT consultant is hired to assist a client in evaluating and improving their cybersecurity measures, but the customer suffers a data breach many months later. The client sues the consulting business, claiming that their blunders caused the breach. In this situation, technology E&O insurance, which combines an E&O policy with third-party cyber liability insurance, would cover the expense of the lawsuit.
Your clients will also benefit from professional liability insurance. As a result, many organizations demand their consultants to get E&O insurance before signing a contract.
#3. Business owner’s policy
A business owners’ policy (BOP) is a package that combines two distinct insurance policies:
- General liability insurance
- Commercial property insurance
While general liability insurance protects against third-party liability lawsuits, commercial property insurance pays to repair or replace damaged or stolen business property. It includes real office premises and storefronts, as well as equipment, merchandise, and electronics.
However, not all consulting firms are eligible for a BOP. This coverage is normally accessible to businesses that:
- Have fewer than 100 workers
- Have a small office or workplace
- Make less than $1 million in annual revenue
- Work in a low-risk industry
How Much Does A Business Owner’s Policy Cost?
Purchasing a business owner’s policy is often less expensive than purchasing general liability and commercial property insurance individually. A BOP for a consulting firm costs $500 each year, or about $40 per month.
#4. Workers’ compensation insurance
Workers’ compensation insurance covers medical expenses and missed pay if an employee suffers a work-related illness or accident. It is necessary in practically every state for businesses with one or more employees.
How Much Does Workers’ Compensation Insurance Cost?
The average yearly cost of workers’ compensation insurance for a consulting firm is $500, or roughly $40 per month. However, your premium is determined by criteria such as the number of employees you have and the level of risk your employees confront on the job.
How Can A Workers’ Compensation Insurance Help Consultants?
Assume an employee of a research consulting firm trips on a power cord in the office and injures their knee. The employee’s lost pay for the time they are unable to work, as well as the cost of their medical costs, such as X-rays and physical therapy, would be covered by the firm’s workers’ compensation insurance.
In addition to paying an employee’s medical bills and partly missed income, most policies provide employer liability insurance to safeguard your firm if an injured worker sues you for failing to avoid a workers’ compensation injury.
Continuing with the preceding example, suppose the wounded employee decides to sue their company for unsafe working conditions. In this situation, the employer’s liability insurance element of the firm’s workers’ compensation policy would cover their legal bills and attorney costs.
#5. Cyber liability insurance
Cyber liability insurance is essential for many types of consulting firms, and there are two types of this insurance. Depending on the nature of your business, you may require both.
First-party cyber liability insurance covers data breaches and other cyber incidents that harm your company’s systems or network. It covers costs such as:
- Notifying clients of the breach
- Credit monitoring services for affected individuals
- Cyber extortion demands
- Services in public relations and reputation management
Third-party cyber liability insurance legally protects your company if a client suffers a breach and launches a lawsuit against you. It will cover expenses such as:
- Attorney’s fees
- Court Fees
- Settlements or judgments
Consultants that handle sensitive data or advise customers on IT systems or cybersecurity are the most in need of this coverage.
How Much Does Cyber Liability Insurance Cost?
Cyber liability insurance can be costly. The average cost is $1,675 per year, or around $140 per month. However, keep in mind that your pricing will be determined by a variety of criteria, including the quantity of sensitive information your organization handles and the type of job you undertake.
How Can Cyber Liability Insurance Help Consultants?
Here’s an example of how cyber liability insurance could be useful. Assume a research consultant is recruited to study confidential client data. The consulting firm is hacked, and the client’s data on their servers is compromised. In this situation, the firm’s cyber liability insurance would cover the damages.
#6. Fidelity bonds
Fidelity bonds provide protection if your employee steals from you or your client. It provides protection against:
- Theft
- Fraud
- Embezzlement
- Unlawful data access
There are two kinds of fidelity bonds: first-party and third-party.
First-party fidelity bonds shield your consulting firm from the activities of dishonest personnel. This bond will pay for the following expenses:
- An employee who steals or embezzles money from your company
- An employee who commits fraud against your firm
- An employee that commits forgeries that harms your firm
Third-party fidelity bonds safeguard your clients if one of your employees commits a crime against their company. It will address the fallout from:
- An employee who steals from one of your clients
- An employee who conducts fraud against one of your clients
- An employee who commits forgery against one of your clients
How Can Fidelity Bonds Help Consultants?
Here’s an example. Assume that an employee of your market research consulting organization transfers monies from a client without their permission. When the client discovers that your employee illegally shifted the funds, they sue your company for their damages. In this case, a fidelity bond would cover the cost of compensating your client for the theft.
Although fidelity bonds are frequently combined with insurance plans, they are not the same thing. Your corporation must repay the insurance carrier for any payments made under a claim using fidelity bonds.
So, if your fidelity bond provider compensated your company for $2,000 due to employee theft, you would be obligated to return the insurer the whole $2,000 later on.
How Much Does Fidelity Bonds Cost?
The cost of fidelity bonds is determined by a number of criteria, the most important of which is the size of the bond. The average yearly cost of a fidelity bond for a small business is $1,055, or $88 per month.
What Business Insurance Does A Management Consultant Need?
Management consultants should always have both general and professional liability insurance. They provide clients with financial, staffing, organizational structure, and technology advice and services. Professional liability insurance, often known as errors and omissions insurance, provides coverage for instances involving negligence, errors, misconduct, omission, or breach of contract. Professional liability insurance helps pay legal defense costs and settlement prizes if a client sues.
Most firms have general liability insurance. It shields the company and its assets from claims of bodily harm or property damage. If a client sues, general liability insurance can help cover medical expenses, legal fees, and settlement awards.
In Conclusion,
Having the proper forms of insurance coverage is important for consultants. It safeguards your company against costly liability litigation, which can have a financial impact on your consulting firm. Furthermore, it demonstrates to clients that you have their best interests in mind, which can help you acquire more business.
Frequently Asked Questions
Do you have to pay business insurance?
If you employ people, you must carry insurance to compensate employees who are harmed on the job. This is a statutory obligation.
What are the benefits of a management consultant?
Management consultants allow your company to gain from failures without having to go through them directly.
Is consultant a high paying job?
Management consultants are among the highest-paid professionals across all functions.
Related Articles
- OHIO BUSINESS INSURANCE: 2022 Requirements & All You Need!!!
- BUSINESS INSURANCE TEXAS: Costs, Best 2022 Options & All You Need
- The Top 10 Best Small Business Insurance Companies In 2022
- NC BUSINESS INSURANCE: 2022 Requirements & The Top Reliable Companies (Updated)
- The Top Best 11 Small Business Insurance for LLC 2022
References
