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Professional Liability insurance is required for all businesses that provide services or advice for a fee, including contractors. In fact, clients will often require proof of coverage before they agree to do business with you or your firm.
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Professional liability insurance covers defense costs and damages if your business is sued for negligence, negligence, error or slander, whether or not these claims are substantiated.
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In addition, your business is on the hook for any unnecessary costs, and a larger lawsuit could cause your business or yourself to fail. Consultants acting as sole proprietors can be held personally liable for financial loss without professional liability coverage.
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Wondering how professional liability insurance can apply to business consulting? Here are some situations in which coverage (also known as fault and negligence insurance) is included.
Consultants are hired for their expertise in a particular field. But if the client thinks that your referral is hurting their business and costing them money, they will try to make themselves accountable.
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This can have additional implications for IT consultants and software, as a bad plan can expose a company or customer’s data. Some insurance providers offer technical errors and omissions coverages that combine professional liability and cyber liability insurance.
Human resources and management consultants may be assigned to collect and analyze data for reports or projects. Entering the wrong numbers or missing important details can cost your client money and lead to lawsuits against your consulting business. Professional liability insurance can cover attorney fees and defense costs, among other expenses.
Even if you are not directly at fault, the buyer can sue you if you do not complete the job on time. If you have professional liability coverage, you cannot be personally liable for any resulting damages.
The cost of professional liability insurance depends on a number of factors, including your industry, coverage limits, the size of the consulting firm, and prior litigation history.
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A typical plan has a limit of $1 million (per occurrence and total), but coverage limits range from $250,000 to $2 million or more. How much collateral you need depends on your risk level of your business.
About the Author: Kelsey Sheehy is a personal finance writer. His work has been published by The New York Times, USA Today, CBS News and The Associated Press. Read more
How to Get Business Insurance: The Ultimate 4-Step Guide Randa Chris Read More How Much Does Business Insurance Cost? Kelsey Sheehy Business. Business planning can be a very rewarding profession – but also a risky career! You may have all the right strategies to help your clients succeed, but if you don’t have the right insurance coverage, you could lose everything you’ve invested in your hard-earned successes.
While insurance may not be the first thing on your mind when you start consulting a business, it’s an important step to take, and it’s less expensive and less complicated than you think. In this article, we compile 101 insurance options for consultants so you can make the best decision for your business.
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So why do you think about insurance policy? Representing yourself as personal counsel does not mean that you do not have an employer to support you in the event of a legal issue. The bigger your business and the more risk you work in, the riskier the decision.
A well-written advisory agreement can provide a solid foundation for your client agreements. But there are many situations in which this cannot protect you, and if you do everything right, you will have to pay the cost of hiring a lawyer to handle your case. Accidents on your property or in the community can happen at any time, and if you have one or more employees, you are also responsible for them.
Additionally, some clients may require a certificate of insurance before a contract is signed, which can be seen as a sign that they are serious about the consulting practice. Just to strengthen your sales pitch and convey professionalism!
Now, the variety of insurance packages that you find on insurance sites may seem overwhelming at first, but there are only a few that you should be aware of as a policyholder. So let’s take a closer look at what they bring and what to look for.
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Take care of your health before you take care of your business. If you recently quit your corporate job and started working solo (if you do, congratulations), this means you will no longer receive employee bonuses like health insurance.
Companies like COBRA can help you keep your insurance up to 18 months after you leave your job. If you join as a “domestic partner” (including a same-sex couple), another option is to provide your significant other assets through your business (even if you are not married) through companies such as Spouse Policy. If these options are not for you or you prefer something else, you can find out about insurance for individuals at HealthCare.gov or choose a small business insurance plan.
If you visit clients (or if they visit you), you should definitely consider getting general liability insurance. This package protects you from liability if someone is hurt or injured or your customer’s property is damaged.
It seems like something that only happens to “other people” until your client accidentally steps down the stairs in your meeting room or knocks a glass of water over their laptop. If you file a lawsuit, your general insurance policy will cover your legal defense and cover your medical treatment.
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Also, clients and service providers (for example, a co-working space where you rent a meeting room) will often ask you to provide proof of this type of insurance. They also know that when things go wrong, it is better to handle insurance.
If you are a negligent consultant, professional liability insurance, including errors and omissions insurance. Let’s say you’ve done all the research in the world and created a strong strategy for your client that will attract them. A few months later, they come back with a lawsuit saying your plan cost them thousands of dollars.
Whether you accidentally left out important information, made a mistake, or did everything right, your client still thinks you are responsible for the lost money if it cost you your job if you didn’t have legal protection. Professional insurance will cover your attorney’s legal defense costs and any settlement or loss you incur in your case.
Business personal property insurance is necessary to keep everything safe for use in running your business. Whether you run a full-service office or work solo from your home, this insurance package covers everything from phone equipment to the office. If you’re out and about and your laptop is stolen or lost, you’ll definitely want to cover it with good personal business insurance.
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The same goes for the car you used to drive to meetings. There are over 6 million car accidents in the US alone each year, and it’s unlikely you’ll find yourself in one of these, but if you do, your insurance will cover the expensive repairs.
As a consultant, you have access to insider information about the business you’ve worked with. With these private information is different, but attacks and data breaches can happen to anyone, including you, and leave you with unnecessary litigation.
60% of small businesses that experienced data breaches were closed within six months of the attack because they could not afford the high costs of the consequences. Your cyber liability insurance (sometimes cyber risk insurance or data breach insurance) can protect you in these situations and cover all legal costs to keep you on your toes.
Your insurance costs will depend on your individual circumstances. If you have a clean history and many years of experience as a consultant, they can help you get back to the elite package. However, if you work in an industry that is often more dangerous than others, the cost can be higher.
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Weigh your work options and choose the type of coverage that’s right for you.
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