Consulting businesses come in various forms and across various industries. From management consultants to IT consultants, experts across various disciplines help businesses reach their financial goals and milestones.
However, consulting businesses are also at risk at the same time. A client who is unsatisfied with the advice provided or who suffers financial losses due to the advice can potentially legally sue the consulting businesses.
This is where business insurance policies for consulting businesses can help you protect your business.
Do Consulting Businesses Need Business Insurance?
Insurance policies can protect various businesses from legal damages, claims, business disruptions, and more. The same applies to consulting businesses. Since consultancy falls under professional services, there are huge risks involved with running a consultancy business.
This risk stems from the nature of the consultancy industry. Should a consultant not be able to provide adequate guidance or cause financial damages to the client, a consultancy business can suffer greatly.
To add to this, there are certain insurance policies, such as a Workers Compensation Insurance policy, that are required under the law in certain states for any business that hires employees. If your consulting business hires even one employee, you will need Workers Comp.
Here are the five business insurance policies to consider for consulting businesses:
1. Business Owners’ Policy-
A Business Owners’ Policy is standard for business owners across industries. It provides a great level of protection against various scenarios that a business could potentially face. It includes three business insurance policies bundled into one. These are:
General Liability Insurance:
This insurance policy protects your business should a client or a third party suffer bodily injury from accidents, slips, or falls while on your property. Property damage can also be included in this insurance policy. Certain kinds of slander and libel can also be included in this business insurance policy.
This is especially useful for consulting businesses, as damages to their reputation can severely hamper the prospects of securing new clients.
Commercial Property Insurance:
Whether you own the property you’re running your consulting business from or renting it, damages to the property can affect your business. It’s also not possible to always prevent damages to the property.
A natural disaster such as a hurricane or an earthquake can affect your commercial property and prevent you from opening your office. For circumstances like this, Commercial Property Insurance is perfect. You can file claims for damages that are covered under your Commercial Property Insurance.
Business Income Insurance:
If you can’t open your business due to a covered reason, such as property damage, you stand to lose business income. A Business Income Insurance can help protect your business by helping you recover lost income.
2. Errors And Omissions Insurance:
Errors and Omissions Insurance is probably the most important business insurance policy a consulting business needs. The reason behind this is that this insurance policy protects your business if any incorrect information, negligence, or misrepresentation on your part negatively affects your client.
Suppose your client feels that you were unable to provide adequate service to them, your business can be negatively affected. Especially if your client suffers financial losses due to your advice, they can legally sue you.
For a consulting business, the probability of this happening makes having an Errors and Omissions Insurance handy a good mitigation measure. This business insurance policy is also known as Professional Liability Insurance. Without this insurance policy in place, your business assets can be at risk if your consulting business gets sued.
3. Directors and Officers Insurance:
This insurance policy protects you or anyone in senior management if sued for mismanagement. This business insurance policy covers internal management issues. Your employees, stakeholders, etc., can sue you or management if they feel that your leadership is affecting their livelihood and/or employment. In such situations, Directors and Officers Insurance can protect you.
4. Cyber Liability Insurance:
A consultant works directly with management from their clients’ companies. The idea is to understand existing processes and help clients achieve their business goals. Due to the nature of the work, a consulting business often has access to various data from the businesses they work with. A lot of this data is very valuable.
Should malware or malicious online entities or other third parties breach your software/hardware, then you can be sued. Cyber Liability Insurance covers the cost of investigating the reason behind the data breach, recovering corrupted information, restoring systems, etc.
5. Workers Compensation Insurance:
A Workers Compensation Insurance policy protects your employees in case they suffer an accident at work. Their medical expenses, partial wage recovery for lost hours, death benefits, disability benefits, etc., are covered under this Workers Cover policy.
Consulting businesses should consider insurance policy as a way to protect their business interests. From Workers Comp to Errors and Omissions Insurance, choosing the right insurance policies that can best protect your consulting business will ensure business success. If you want to learn more about business insurance for consulting businesses, you can click here.