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Types of Liability Insurance Every Consultant Should Consider

Types of Liability Insurance Every Consultant Should Consider

August 29, 2019
Author: Kelly Sheridan

You've built your consulting business – congratulations! It wasn't an easy road to get here: you had to earn a degree, build years of experience, and foster relationships to create a strong client base.

But wait … could you be forgetting something? If you haven't considered professional liability insurance, then yes.

Professional liability insurance is extremely important for any organization, and yours is no exception. You may have heard it referred to as "professional indemnity insurance" or "errors and omissions insurance," as it's commonly described in the United States. In short, this coverage helps protect your business from things typically not covered under general commercial liability insurance.

Errors and Omissions (E&O) insurance can help protect your business from financial injury caused by mistakes made on the job. As a consultant, you have great influence over the decisions your clients make and access to sensitive data that keeps them running. Any unintentional slip-up could have a significant impact on them and lead to a pricey liability lawsuit for you, as clients may hold you responsible for fiscal or reputational damage caused.

The reasons for needing E&O coverage vary from industry to industry, but generally it's intended to help protect against errors that cause damage to your client. This may include inaccurate advice, documentation mistakes, misusing or poorly securing clients' information, exposing confidential data, professional negligence, or failing to deliver services as promised.

Should these or similar instances occur, E&O insurance can help cover legal fees and expenses sustained as a result of errors, up to the limit in your policy. It's worth noting professional liability insurance doesn't cover criminal prosecution or other liabilities, unless they're specifically written into the policy, so be sure to select coverage that meets your needs.

Still on the fence? Some clients may decline to work with you unless you have E&O protection, as it's in their best interest to know you can cover losses in the event you make a mistake. Investing in professional liability insurance shows clients they can trust you.

Professional liability insurance is separate from general liability insurance, which is also critical for most independent professionals. Also known as commercial general liability insurance, this type of coverage helps protect you from claims resulting from 3rd party bodily injuries or property damage caused by your products, services, or operations. If your small business causes harm and you're held responsible, this insurance can cover the legal fees you incur.

In addition to injury and damage, most commercial general liability policies also protect against libel (written offensive comments) and slander (spoken offensive comments) claims made against your organization, unless otherwise excluded.

Regardless of your line of business, it is always best to do your research and ensure that you are acquiring the proper insurance coverage that works for you. For more information about professional liability and general liability insurance, you can visit our website.

About Kelly Sheridan

Kelly Sheridan is a New York City-based writer who enjoys covering businesses and the technologies they use. Her background is in enterprise technology and you can find her articles on Dark Reading, InformationWeek, and Insurance & Technology. When she's not researching, writing, or editing, Kelly can be found on a run, at a kickboxing class, or in her kitchen testing a new (probably) healthy recipe. She earned her Bachelor's degree in English at Villanova University. .