You can get insurance for your consulting business by reaching out to providers, online marketplaces or brokers.
Published Sep 10, 2021 9:59 a.m. PDT · 3 min read Written by Tina Orem Assistant Assigning Editor Tina Orem
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Tina Orem is an editor at NerdWallet. Prior to becoming an editor, she covered small business and taxes at NerdWallet. She has been a financial writer and editor for over 15 years, and she has a degree in finance, as well as a master's degree in journalism and a Master of Business Administration. Previously, she was a financial analyst and director of finance for several public and private companies. Tina's work has appeared in a variety of local and national media outlets.
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MORE LIKE THIS Insurance Small Business MORE LIKE THIS Insurance Small BusinessIf you provide advice or services for a living, business consultant insurance may protect you from legal actions, property damage, injuries and other risks that can cause financial losses. Consultants who are sole proprietors could even be personally responsible for damages if they don’t have insurance.
Whether you’re an education consultant, wedding consultant or any other kind of business consultant, you will likely need professional liability insurance and other types of business insurance to cover your risks adequately. There are several ways to buy business consultant insurance, including straight from an insurer or a third party such as a broker or marketplace.
Here are five steps to help you understand the kinds of small-business insurance that business consultants should consider and how to find the right coverage for you.
Before you hand over money for business consultant insurance, think about the risks you face. That can help you figure out your coverage needs.
Here are some examples of specific risks that business consultants may face:
Lawsuits accusing you of giving bad advice. Your legal expenses alone could be thousands of dollars, even if the client drops the claim against you.
Contract disputes over missed deadlines or incomplete work. Lost or stolen laptops that result in data breaches or lost records. Fire or damage to your office.What lawsuits, accidents or natural disasters might affect your business? Factors such as the size of your business, the nature of your work, where your office is, whether you have employees and what kind of assets you have will affect how insurers evaluate your risks.
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Here are some types of business insurance for business consulting — and what those policies typically cover.
Type of insurance
Claims of mistakes, negligence, inadequate work, inaccuracies, misrepresentation or similar allegations. A business may need E&O insurance if it provides services to customers for a fee, which is common in many consulting firms.
Claims against your business for third-party bodily injury, property damage or personal and advertising injury. For example, if you operate a consulting firm from home, you may be able to add an endorsement to your homeowners policy rather than have to buy a separate policy.
Damage to your office and the items in it as the result of natural disasters, fire, smoke or vandalism. An electrical fire destroying your market research consulting office, for example, would be covered under commercial property insurance.
Loss of income when your business is unable to operate due to a disaster. Business interruption insurance covers lost income if you close your computer consulting office due to an electrical fire, for example.
Vehicles used for business. Your personal auto insurance may or may not have coverage for limited business use of your car. For example, a marketing consultant using a personal vehicle to take clients out to dinner or visit a client’s business may need a commercial policy.
Data breaches or software hacks. If hackers breach your computer system and steal your clients’ credit card information or financial data, for example, this insurance can cover the costs of notifying customers, setting up credit monitoring and investigating the attack.
Employees who are injured or get sick at work. Most states require employers to get workers' comp insurance for employees.
Employee dishonesty coverage, also called a fidelity bond
Employee theft of money or property, such as if an employee steals something from a client’s home or office during a meeting. Can be part of a larger commercial insurance policy.
You may also be able to bundle multiple types of insurance into a business owner’s policy . BOPs usually consist of general liability, commercial property and business interruption insurance, but can be customized to meet your business’s needs.
To get the right business consultant insurance, you have a few options.
You can buy business consultant insurance straight from an insurer. If you have simple policy needs and an idea of what you’re looking for, this can be an easy approach. You’ll have to contact companies one by one to get quotes, though.
Contacting multiple providers for quotes may be time-consuming, especially if they don’t provide the same coverage.
May not get the same level of help as you would from a broker or independent agent.Insurance marketplaces can speed up the shopping process. First, you give them information about your consulting business and the coverage you’re looking for. Then you get quotes from different insurers and finally, you compare the quotes to find the best deal.
Marketplaces don’t underwrite insurance policies, and you might not be able to manage claims or other issues through their systems. The communication among you, the marketplace and the provider aren’t always seamless.
An insurance broker can offer personalized assistance. First, you’ll discuss your needs, and then the broker gets multiple quotes for you from different insurers.
Using a broker will likely take longer compared to an online marketplace or directly contacting providers.
Getting multiple quotes from different providers allows you to find the best coverage for your consulting business. When comparing providers, consider things such as:
Policy coverage. Find out exactly what the policy does and does not cover.Limits of liability. Understand how much of a loss the insurer will cover. Larger or riskier businesses may need a higher limit.
Price. Know how much the policy will cost and what the deductible is. Understand whether the coverage and liability limits are the same for the policies you’re comparing.
Reviews. The National Association of Insurance Commissioners website shows how many complaints people have filed against a company. Also, read ratings and reviews of each provider before purchasing a policy.
After you buy your policies, make sure you know when your payments are due and how to manage your coverage — including filing a claim, adding endorsements or requesting a certificate of insurance.
Reevaluate the insurance coverage for your consulting business on an annual basis. When your policies are up for renewal, consider your coverage, costs, customer service and any new risks you face — such as opening an off-site location or hiring employees. Reconsidering your policies will ensure you still have the right coverage for your business.
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Tina Orem is an editor at NerdWallet. Before becoming an editor, she was NerdWallet's authority on taxes and small business. Her work has appeared in a variety of local and national outlets. See full bio.
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