Most contracts you will engage with as a business consultant will stipulate you must have and show proof of professional indemnity insurance.
You are likely to use your own laptop or computer for your work, if it gets stolen or damaged could you want to pay for the repair or replacement?
Depending if you use an umbrella company or contract directly you may be exposed to IR35 enquiries from HMRC. Regardless of how you're engaged you still could be subject to late or non-payment of invoices.
An unhappy client may allege your advice or recommendation ended up costing them money which they now want to recover from you.
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What insurance do business consultants need?
Choosing the right insurance for you depends on the size and nature of your business. Key insurance covers business consultants should consider include:
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.
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.
When you decide to protect your business with Suited we want you to get more than just insurance. That's why with every policy subscription we include Business Legal Protect. From the moment you sign up you gain access to extra support services which are all part of our price.
- IR35 & HMRC investigations
- Legal matters concerning your business
- Negative PR (£25,000 cover)
- Criminal prosecution
- Compliance & regulation issues
- Unpaid invoices (over £200)
- Free tax advice
- Free commercial legal advice
- Counselling for you and your staff
- Access to a legal template library
- Identity theft assistance
My work contract requires professional indemnity insurance. Suited were quick to call back and very helpful explaining the product to me. Suited offers a trustworthy, professional service and a peace of mind.
Suited was easy to use, to the point, concise, I found everything I was looking for , was covered. The process was efficient and quick. Fast forms to fill in. I think the price was pretty competitive too.
The fast and hassle free way to get business insurance for small professional outfits.