The professional consultancy industry is a broad, diverse sector serving multiple organizations across various industries in advisory, strategy, and implementation roles.

For example, independent consultants or firms serve in various fields, including human resources, information technology, finance, business management and development, marketing, and business operations. And it’s a lucrative industry: according to the latest data from Statistics Canada, the management, scientific, and technical consulting services industry grew strongly in 2021, reaching $29.2 billion in operating revenue, up by almost 10% from 2020, with businesses (64.6%) the largest share of the client base.

Regardless of the type of services you or your consultancy offers or the industry you serve, there’s little doubt a consultant should have a business insurance policy as part of their risk management and business continuity plan.

Why consultants need contractual liability and E&O insurance

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Among the coverages every consultant should consider as part of a comprehensive insurance policy are contractual liability insurance and errors and omissions (E&O) insurance. Let’s look at these two types of insurance and why every consultant should have them in their policies.

How Contractual Liability Insurance Helps Consultants

Contractual liability insurance covers your legal obligations and liabilities arising from contracts or agreements with clients. When you sign a contract, you’re assuming specific responsibilities and liabilities that could lead to financial losses if you fail to fulfill the obligations outlined in the agreement.

Contractual liability insurance can help you in two primary ways should issues arise:

1. Protection from breach of contract claims

If you’re accused of failing to deliver on the promises outlined in the contract, your client may file a breach of contract lawsuit against you, especially if your client has suffered financial harm. Contractual liability insurance is designed to cover your legal defence, settlements, or judgments in court resulting from such a claim.

2. Gives your clients confidence

Having contractual liability insurance can give your clients confidence in your ability to stand by what you’re committing yourself to, potentially making them more inclined to hire you. In other words, it strengthens your position as a reliable, reputable consultant.

How E&O Insurance Helps Consultants

Also called professional liability insurance, E&O insurance covers a consultant’s professional services in the face of an allegation or claim of professional negligence.

E&O insurance can also help protect your finances and reputation and helps you in two critical ways:

1. Coverage for professional negligence

Anyone can make a mistake, inadvertently forget to do something, or offer advice to a client that results in a less-than-stellar outcome. If a client accuses you of providing incorrect advice, making mistakes, or failing to meet expected standards or deliver on a promise and they pursue legal action against you, E&O insurance can cover the costs of defending yourself against such a claim and any resulting damages. That leads us to point no. 2.

2. Gives you confidence

You intend to avoid making a mistake or giving incorrect advice to a client. Still, if it accidentally happens and a client takes issue with it, knowing you have E&O insurance can help you relax and stay focused on your career and business without worrying about the financial impact of a lawsuit if you do err.

How to Get the Insurance Protection Consultants Need

Although contractual liability insurance and E&O insurance are crucial for consultants to mitigate the financial risks associated with contractual obligations and the potential for mistakes or professional negligence claims from their clients, they may need other types of insurance to form a customized consultant insurance policy. For example, cyber liability insurance has become increasingly vital for consultants in the face of ever-increasing cyber threats.

Nevertheless, with these coverages as part of their policies, consultants can protect their assets and reputation and ensure business continuity in the face of unexpected legal claims.

Get the low-cost coverage you need quickly and easily from Zensurance. Just fill out our online application (it only takes a few minutes) providing details about your consultancy, and we’ll shop our partner network of over 50 Canadian insurance providers to find the policy you need, customize it to your specifications, and walk you through all the details.

Have a question about what insurance a consultant needs? Get in touch with us.

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About the Author: Justin Tisdale

Justin Tisdale is a Team Lead, Professional Lines, at Zensurance.