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As a consultant, your expertise and professional advice is highly sought after by clients facing problems and challenges.
But what happens if your advice becomes the problem? If a client experiences financial loss as a direct result of following your professional guidance, they could sue you.
In order to protect yourself from such a scenario, you may want to consider taking out consultant insurance.
Here, we will tell you everything you need to know about business consultant insurance, including what it covers, what will impact the cost, and how to choose the right policy for your requirements.
» MORE: How To Start a Consulting Business
What is consultant insurance?
Consultant insurance is not one policy, but rather a term used to describe various products that can provide financial protection in a range of situations.
Professional indemnity insurance, which covers your business for claims of professional negligence, will likely form the cornerstone of your policy. It can help cover your legal and compensation costs if, for example, you suggest a particular course of action that results in your client suffering a financial loss.
Public liability insurance should also be considered in your policy. It can protect you in the event that a member of the public is injured or killed, or if their property is damaged or lost or damaged as a result of your consultancy work.
Employers’ liability insurance, meanwhile, is legally required if your consulting business employs anyone in the UK who is not a close family member. This insurance can help cover the compensation and legal costs that might arise if a member of staff were to raise a claim against you. You’ll need at least £5 million of cover. If you fail to have employers’ liability insurance in place, you can be fined £2,500 a day.
You might also add personal accident insurance, which can offer a small payout to help cover some loss of income and medical costs in the event of an accident that prevents you from working for a while. Personal accident insurance can also provide some compensation to your beneficiaries in the event of your death.
Equipment cover may also be worth considering to protect office equipment, such as laptops and phones. This insurance can provide compensation if your office equipment is lost, stolen or damaged.
Finally, while it’s not always included as standard in a consultant insurance policy, you might want to consider the benefits of cyber and data insurance cover. After all, if you have access to valuable client data, and there is a data leak, you could be facing a major claim.
» MORE: What is business liability insurance?
Do I need consultant insurance?
If you’re an employer, the only type of insurance you’re legally required to have is employers’ liability insurance worth at least £5 million. The only exception is if your staff are based abroad or are direct family members.
However, if you’re dealing with big corporations and big budgets, the costs of an unwise decision or being accused of offering negligent advice could be astronomical… and ruinous for your consulting business.
The policies contained within consultant insurance can help to protect your business from the financial ramifications of a legal claim.
The first policy to consider is professional indemnity insurance. This insurance will kick in if a client is or becomes unhappy with your advice and loses money as a result of following it. If a client comes after your business demanding compensation, professional indemnity insurance will cover the costs of a court battle and contribute to a payout.
» MORE: What is business insurance and do you need it?
What does consultant insurance cover?
Consultant insurance cover is not one policy, but a set of products that can cover everything from claims of professional negligence and client injury to personal accidents and loss, damage or theft of your business equipment.
What your consultant insurance covers will depend on which policies you choose.
Professional indemnity insurance will help with the cost of legal fees and compensation payouts resulting from claims of professional negligence. Public liability insurance will help with legal and compensation costs if your business activities lead to the injury or death of a member of the public, or loss or damage to their property.
If you’re not sure what cover you need, you should speak to potential insurance providers to make sure your business’s specific requirements are met.
What is usually included in consultant insurance?
Consultant insurance could include:
- professional indemnity insurance
- public liability insurance
- employers’ liability insurance
- portable equipment cover
- cyber and data insurance
- personal accident insurance
Other products you could consider are legal expenses insurance and if you work from business premises, you may also need business buildings and contents insurance.
As a rule, what is included will depend on what you choose, and most insurance providers will allow you to pick out the relevant policies for your business.
What isn’t usually included in consultant insurance?
You should check that your consultant insurance policy covers you for your specialism and the specific risks faced by businesses operating in that sector.
For example, you will want to check whether you need tailored insurance for your IT consultancy Or specific professional indemnity insurance if you’re an engineering consultant. If you don’t have the correct insurance, your provider is unlikely to pay out in the event of a claim.
How much does consultant insurance cost?
Consultant insurance costs vary based on your specific circumstances.
You should base the level of cover you take out on the worst-case scenario that your business could face.
If you’re working with a multinational corporation, the financial impact of bad advice could be substantial, whereas a claim from a small business might be in the thousands. This could mean a big difference in your monthly insurance premiums and the amount of cover you require.
» MORE: The cost of business insurance
Consultant Insurance FAQs
Primarily, as a consultant you should consider professional indemnity insurance to cover you for the legal costs of being sued for negligence or breach of contract.
Additionally, if you employ any staff in the UK who are not direct family members you are required to take out employers’ liability insurance worth £5 million.
One way to protect yourself as a consultant is to take out an adequate consultant insurance policy that includes professional indemnity insurance as well as public liability insurance and employers’ liability insurance (if you have employees).
Consultant insurance is important because if you give a client advice that turns out to be incorrect or leads to a financial loss, they could sue you. In that circumstance, consultant insurance could help cover legal and compensation costs.
Can a consultant be held liable for advice?
Yes, a consultant might be held liable for giving advice to a client that results in damages or financial loss. If a claim is successful, compensation may be granted to put the client in the same financial position as they were before taking the advice.
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