Why is business insurance for independent consultants important?
When a client brief doesn't go according to plan and the result of your work has not yielded the expected results, your client is likely to want answers. These discussions get very quickly heated and lead to disputes over money or become compensation claims.
Professional indemnity insurance for consultants
Therefore the first element of insurance for consultants has to be professional indemnity. It is a legal cover that provides legal assistance and it covers the associated expenses during the defence of your case. It will also pay any compensation if you become liable.
You should consider this key cover whether you work as a contractor or run your own business. The work you do is relied upon by your clients and with that come certain risks.
Why do consultants need professional indemnity insurance?
When things are going well, it’s easy to cast aside any worries and just get on with the job. So far we have been quite general about the kind of scenarios a consultant should be worried about and though they are still reasonably rare, they do happen and they can be very costly.
Jason is a consultant in the healthcare industry and until a few years ago he’d never experienced a serious problem with his clients. Therefore he’d never really worried about his business liability insurance.
However, all that changed one day when he received an email from his regulatory body informing him that a client made serious allegations against Jason regarding inappropriate racial comments. Jason knew that while the accusation was completely unfounded, he could lose his career over this complaint. Luckily for Jason his regulatory body membership included professional indemnity insurance for business consultants. Somewhat hesitant he contacted his insurer to find out whether he could receive assistance. The insurer accepted his claim and arranged legal representation during the disciplinary hearing.
As a result of covid the proceedings were delayed and what should have been a matter of weeks became a saga of two years costing some £150,000 in legal fees. Jason was grateful to his insurers for a number of reasons.
Firstly, knowing that he had an experienced solicitor on his case reduced the stress induced by fear of losing his livelihood. The fact he didn’t have to pay any of the costs saved his bank balance. And because the solicitors successfully rebuffed the accusation and cleared Jason’s name, Jason’s business reputation has stayed intact.
“The best professional liability insurance for consultants isn’t one with the cheapest price but best claims service.”
Professional errors come in many forms and this is only one example. In essence Jason wasn’t negligent or made a mistake in his work. However, we could say Jason may have made a professional error in his communication style which consequently prompted his client to retaliate.
How much professional indemnity insurance do consultants need?
When it comes to professional indemnity insurance for consultants UK insurance providers offer a variety of policy limits starting from £50,000 going up to millions.
The appropriate limit very much depends on the nature of the consultant’s work, the size of client accounts and related contracts as well as any kind of contractual obligation.
Firstly, every contract you ever form with your client should state what the limitation of liability is for both parties. Leaving this issue unaddressed will leave you exponentially exposed if something goes wrong.
Once the clause is agreed and inserted in the contract, the amount in the clause provides a good indication of what your professional indemnity and public liability limits should be. However, you should always account for legal costs. For example if the limitation of liability clause says up to £1,000,000, it means that you could be potentially asked to pay £1,000,000 in compensation to your client if found liable.
Public liability insurance for consultants
If, as a consultant, you visit your clients, work at their premises or in any way physically engage with their property, you should also have in your legal arsenal public liability insurance to protect you against accusations of causing an accident leading to an injury or property damage.
Business equipment insurance
As an independent consultant you probably rely on your equipment to help you deliver your client work.
Sometimes the cost of repair or replacement may not be affordable which could bring about unwanted delays in your work.
Having equipment insurance can be very helpful getting your equipment back in shape or getting a good replacement quickly.
Income protection insurance for consultants
As an independent consultant, it would probably be difficult to continue to earn if you were struck by a critical illness.
Income protection insurance is a good backup plan for such a situation. The cover will provide a financial lifeline for several months until you get well enough to get back to work.
Personal accident insurance
This is particularly useful insurance to those in riskier areas of work such as construction.
A serious accident might mean that going back to the same profession is no longer an option. Personal accident cover provides a one off quick payment to bridge over the worst.
It is usually a very inexpensive cover, costing monthly less than a cup of coffee. The cost will depend on what you do and how much cover you need.
Life and relevant life insurance for consultants
Independent consultants don’t receive any employee benefits including any kind of payout to those who are left behind should the worst happen.
As a self-employed consultant or consultancy business you have a number of ways to protect your loved ones against that kind of life changing situation - key person insurance, relevant life insurance and others. The one that is most suitable to you will depend on your professional and personal circumstances. It often helps to take advice from a specialist life insurance provider.
