Professional indemnity insurance for consultants
As a consultant you provide guidance and advice to clients who lack your expertise. However, occasionally they may conclude your services haven’t met their expectations, or worse, resulted in a financial loss. That’s why professional indemnity insurance for consultants is essential to protect your business and reputation.
Our guide to insurance for consultants
What insurance does a consultant need?
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.
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.
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.
There are other covers that might be useful to your business. If you have premises, you might need content and building insurance. If you employ staff, you must have employers liability insurance by law. If you own expensive work equipment, insurance may be a good way to minimise replacement or repair costs.
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 hesitantly 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.
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. Therefore when buying your business insurance you should make a provision for legal costs and any other associated expenses as well.
Common Questions
Is my past work covered?
Suited does offer past work cover. Make sure you select the retroactive date during the insurance online application process.
Will the work of my employees be covered by Suited professional indemnity insurance?
Yes, any work by bonafide employees of your business is covered.
What's the difference between professional indemnity and public liability?
Professional indemnity insurance protects you and your business against accusations of professional mistake, negligence or failing your duty of care.
Public liability insurance protects you against accusations of causing an injury or property damage to your clients, third parties or members of the public.
I am contractually obliged to get professional indemnity insurance - does Suited provide proof of cover document?
As soon as you purchase your insurance, you will have access to documents including a certificate of insurance.
If I subcontract another consultant to manage my client brief, will the work be covered by Suited PI insurance?
The work of your subcontractors is covered by SUITED professional indemnity insurance. Make sure you have a written agreement in place, your subcontractor should also have PI cover in place. Do not agree to waive your rights of recourse.
Can I cancel my PI insurance when I stop working as a consultant?
If you have worked as a consultant for some time, there is a risk that a claim can still made be against you. Therefore rather than cancelling your professional indemnity insurance, it might be better to consider "hibernating" for PI insurance for a sufficient period of time. With Suited that means paying less while staying covered for past work.
Covers we offer
Suited small business owner and freelancer insurance starts with professional indemnity. It’s our core cover. With that you can also get public liability and a couple of other helpful insurance add-ons for a solid protection of your business.
Recent articles
What does ‘hibernate’ mean in professional indemnity insurance?
Imagine you’ve just delivered the last piece of work for your client and plan to take some time off, perhaps for good. Cancelling your professional indemnity cover is an option but not a very good one. The work you did in the past may still catch up with you in the future and since professional indemnity insurance (PI) works on a ‘claims made basis’, you won’t be able to access its benefits unless you have an active PI cover in place.
What is a retroactive date in professional indemnity insurance?
A retroactive date is a line in the sand which determines a specific point in the past from which your insurers have agreed to insure your business. You are effectively allowed by some insurers to backdate your professional indemnity (PI) cover so that your business is protected against possible claims as a result of your past work.
Is professional indemnity insurance the same as public liability insurance?
In short, no. It isn’t. Professional indemnity and public liability insurance are both legal covers, meaning you’re protecting yourself and your business against legal threats from clients and third parties. However, there are subtle differences and whether you need one, the other or both does depend on your business activities.
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