Being self employed allows consultants, whether working individually or as part of a boutique firm, to enjoy certain perks such as flexibility, autonomy, and the ability to follow their passions. But there is always something that needs to be taken care of- insurance.

Just like other businesses, insurance plays an important role here as well.

What Is Consulting Insurance, Anyway?

In simple terms, consulting insurance provides a blanket coverage for various risks associated with a consulting business. Consider it a safety net you desire when the unexpected happens, as there are sometimes unforeseen factors that undermine the success of business endeavors.

How Come You Need It—Even If You Are Cautious

For instance, you might be thinking, “I only give guidance, what is the big deal? I am not a doctor.””

Let’s be clear—there is a range of potential problems, even when you are cautious. A client might argue that your recommendation resulted in a significant financial loss. You may unintentionally violate a contract. Or perhaps the laptop containing confidential client information is stolen. Any of these situations can land you into costly legal problems, and that’s exactly why insurance is helpful.

Most Important Types of Insurance for Consultants

Let me highlight the most important types of consulting insurances that you have to think about.

Professional Liability Insurance (Errors & Omissions)

This insurance is the most crucial. Professional liability insurance covers negligence claims, errors, and assumed responsibilities that you were never meant to undertake.

Illustration: A client claims your strategic advice led to a bad investment decision. Defending yourself in court can drain your finances even if the accusation is false.

General Liability Insurance

General Liability insurance protects you against claims made by third parties for injury to a person or damage to property. If a client slips in your office or you accidentally knock over a projector during a presentation—this policy has your back.

Cyber Liability Insurance

Most clients rely on consultants to handle confidential and sensitive information. If a client’s personal information gets leaked, the client can sue you. Cyber liability relieves employers of legal expenses incurred from a data breach, associated costs in recovering from the breach, and public relations.

Business Owner’s Policy (BOP)

This is a packaged policy containing general liability, property insurance, and business interruption insurance. BOP is ideal for small consulting firms to provide a variety of coverage options for a single fixed rate.

What of Independent or Freelance Consultants?

Of course freelancers also need coverage. Many clients, especially large firms now require proof of insurance before signing contracts. It is beneficial for the business to have it since it not only protects them, but contracts as well.