Professional consultants are always in high demand across a wide range of industries, including strategy, business operations, financial, human resources, and technology consulting. Working on a contract-by-contract basis allows these knowledgeable troubleshooters to determine which clients to provide their expert advice and professional services to while growing their businesses – and there are plenty of opportunities to do so.
For instance, management consulting is one of the largest industries worldwide, worth an estimated $16.9 billion in 2022. According to an online survey of Canadian certified management consultants by research firm Nanos, 54% expect market demand for management consulting to increase in 2022 compared to demand before the pandemic, 38% expect it to stay the same, and 8% think demand will decrease this year.
Many of these independent professionals launch their own consultancies. Despite all the upsides of earning a living as a consultant-for-hire, the territory is highly competitive. It does come with risks and drawbacks, regardless of the type of consulting services you offer. After all, the advice and services you provide to your clients can be misinterpreted or fall short of expectations, leading to a claim of negligence or even an expensive lawsuit. With no large employer and legal team backing you up, you’re on your own safeguarding your business, finances, and reputation.
Risk Management for Consultants: What Insurance Do Consultants Need?
The policy you need to cover your assets depends on multiple factors insurance providers consider, including the type of consulting services you provide, where you’re located, your years of experience, and more. However, most independent consultants or small consultancies require a comprehensive consultant insurance package that includes:
Professional liability insurance
Professional liability coverage – also called errors and omissions (E&O) insurance – is critical for all consultants, as most claims against consultants involve the services they provide. It can cover you if a client alleges you caused them financial harm due to bad advice, poor work or mistakes, negligence, or failing to deliver a service as promised. If you’re sued, it can provide you with funds to defend yourself in court and any financial settlement against you even if the lawsuit is fraudulent.
Commercial general liability (CGL) insurance
CGL, or general liability, is equally vital for consultants. It protects you from costs associated with a third-party bodily injury, property damage claim, or lawsuit. Frequently called ‘slip-and-fall’ insurance, CGL is valuable as consultants typically meet with clients in-person at a client site or your office. That creates considerable risk if someone is hurt in an accident or if your actions damage a client’s property.
Cyber liability insurance
Consultants are trusted by their clients with access to their mission-critical, sensitive data. It’s on you to ensure you keep that data protected and safe. But here’s the problem: data breaches and cyber-attacks against small businesses and self-employed professionals are not uncommon and have been increasing annually. If you’re hit with malware, suffer a phishing attack, or if your systems are hacked, the cost of repairing the damage done to your systems and a lawsuit can be financially devastating if your client sues you for failing to protect their data. Cyber liability protection exists to restore your compromised systems and losses resulting from a cyber-attack, investigate the cause of the incident, and provide your client with credit monitoring services.
There may be additional coverages you may wish to add to your policy, such as legal expense insurance. Speak to a licensed Zensurance broker if you have questions about the coverage you need.
In any event, getting insured is essential to your risk management strategy and business driver. Many organizations will ask to see your certificate of insurance (COI), or they won’t hire you.
How Consultants Can Get Business Insurance
Find out your options to protect your consulting business by filling out an online application to get a free quote. Zensurance specializes in helping small businesses, startups, and self-employed professionals get the insurance protection they need by shopping our partner network of over 50 insurance providers.
Protect your business, assets, and reputation in just a few clicks, and stay focused on helping your clients be successful.
— Reviewed by Justin Tisdale, Team Lead, Professional Lines, Zensurance.
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