Professional Liability Insurance for Consultants
Consultants are charged with improving their clients' businesses, which means the expectations and stakes are high. Clients depend on marketing consultants to forge their company's perception and reputation, while management consultants must organize a business so it can run efficiently and effectively. An oversight or mistake on the consultant's part could impede the clients' growth and harm their company image. And sometimes, severing ties with your consulting company won't be enough. Clients who place the fault on your company for their perceived damages may turn to the courts to resolve their grievances.
It's scenarios like these that compel most Independent consultants to carry adequate Errors and Omissions Insurance (also known as Professional Liability Insurance). Should a client sue your business for professional negligence or mistakes made while performing your services, your consulting firm will have the financial backing to combat the high cost of attorney's fees, court costs, and even settlement or judgment fees related to initial charges.
Keep reading to learn more about E & O Insurance and how this coverage protects your consulting firm from potentially devastating lawsuits.
Protecting Independent Consultants
Professional Liability Insurance: Protecting Independent Consultants
Professional Liability Insurance — also known as Errors and Omissions (E & O) Insurance — is a necessary safeguard against the risk of lawsuits challenging the professional delivery of your consulting work. If a client claims you were professionally negligent; provided shoddy, incomplete, or incorrect work; made mistakes or oversights; or that your business failed to perform professional duties, your Errors and Omissions Insurance kicks in to save you the cost of attorney's fees, settlement or judgment expenses, bond premiums, and other court costs, up to the limit of your policy. Even if the claim is meritless, your coverage will ensure you don't have to pay out of pocket for the costs of defending your business in court.
Professional Liability Insurance is particularly important for consulting professionals because your client's perception of the work you performed is ultimately what will determine whether they decide to file a lawsuit if a project fails or they don't receive the result they'd hoped for. In many cases, the decision to turn to the courts is more a reflection of the client's desire to find a scapegoat than it is a reflection of your work.
Additionally, many of your client contracts may require that you carry E & O Insurance. In the event you are truly responsible for a mistake, your coverage proves you can account for the financial losses your client may have suffered because of your error. However, your Professional Liability Insurance only covers incidents that occur during the life of the policy, which is why it's important to protect your business with an adequate E & O policy before you begin work. Depending on state laws, a client could file a professional negligence lawsuit against your business even months after you've finished your work on a given project.
Work that involves growing your client's business or their brand exposure always comes with the risk that any dissatisfaction with your performance could trigger a costly lawsuit. E & O coverage ensures that no matter what unexpected turns may come along in your consulting career, you will have the financial safety net your business needs to survive.
Errors and Omissions Insurance for Consulting Businesses: Key Details
While shopping for an Errors and Omissions policy to safeguard your consulting firm, remember to talk to your insureon agent if you need help assessing the amount of coverage to meet your needs. Our specialist agents know the unique risks associated with consulting businesses and can address any questions you may encounter. Here are a few considerations you'll want to keep in mind as you search for a Professional Liability policy for your business.
Most E & O policies today offer what is called "claims-made" coverage. This policy is built on two conditions:
- Your policy must be active when an alleged incident occurs.
- You policy must still in force when a claim is filed.
With claims-made policies, you must meet both requirements before the incident will be covered. Consultants typically carry their Errors and Omissions policy throughout the life of their business to ensure they receive coverage when they need it.
If you have an E & O policy, but you want to switch insurance carriers or purchase a different policy, purchasing limited coverage, or a "tail," for the interim period between policies can make sure your business is still protected. That way, you can still file a claim if your new coverage hasn't started yet.
Tails and Prior Acts for Coverage Gaps
Should you need to end your current E & O policy, you could expose your business to gaps in coverage while you search for a new policy. To keep your business protected in times of transition, you may want to purchase "tail" coverage or "prior acts" coverage. Tail coverage allows you report claims after your policy has been terminated. If a past client files a lawsuit against your business after you've terminated your previous policy, prior acts coverage protects you retroactively for those events that may have already taken place but haven't been reported. When in doubt, talk to your insurance agent about how you can protect your business while changing E & O policies.
Coverage Limits and Deductibles
Professional Liability Insurance policies are typically issued in increments of $1 million. Depending on the amount of coverage your consulting business requires, your per-claim deductible can range from $1,000 to $25,000. Be sure to double check your client contracts to ensure your Professional Liability Insurance limit meets their specific requirements.
Find a Professional Liability Policy
Find a Professional Liability Policy for Your Consulting Services Business
The insurance experts at insureon can help you meet the terms of your client contracts and address your unique risks with an Errors and Omissions Insurance policy tailored to your business's needs. Your Professional Liability plan can be adjusted based on the number of people you need to cover and the professional responsibilities you need to insure.
Complete our easy online application to get competitive quotes from our A-rated insurance providers in minutes. Depending on your business needs, you may be able to begin coverage within 24 hours of your initial application.