Meet Karmel, a financial consultant based in Calgary who provides accounting advice to clients throughout the province. After preparing and submitting financial statements for Sam, a local small business owner, it is discovered that Karmel made a miscalculation. As a result, Sam owes a large amount of money to the bank, but is unable to make his payments without compromising his business. Fearing more financial strain, Sam sues Karmel for negligence, resulting in $30,000 in legal fees. Luckily, Karmel has consultant liability insurance, which covers Sam for the additional expenses he paid to the bank and a portion of her legal fees.
Like Karmel, a lawsuit alleging failure to deliver a service or poor advice could be detrimental to your business. As a consultant, you face a specific set of risks related to your professional activities, which means you require a policy that matches your business needs.
What is Consultant Insurance?
The consulting industry in Canada is booming and is going to continue to grow at an exponential rate. As the industry grows, protecting your practice will become increasingly more important.
Consultant insurance is a policy package designed to help protect those who offer professional advice and services to individuals and companies, therefore covering the cost of defending your business against a liability or negligence claim made by a client.
Insurance for consultants is built upon two foundational insurance policies:
- Professional Liability Insurance (a.k.a. Errors & Omissions Insurance) is the policy that you are probably most familiar with. It covers most of the risks you can expect to face as a consultant, such as claims of professional negligence, such as a mistake you made when delivering a service or failure to deliver on what you promised.
- Say you are a freelance human resources consultant hired by a small business to screen potential candidates for a leadership position. The chosen candidate was fired after a year and sued your client for wrongful termination. Your client, in turn, sues you alleging you failed to conduct a thorough background check on the candidate. In this case, Consultant Insurance would provide coverage for legal fees.
- Commercial General Liability Insurance (CGL), on the other hand, is one you may not have thought of but is of equal importance. CGL covers costs associated with claims of property damage or third-party bodily injury, such as a slip-and-fall injury.
Does Consultant Insurance Cover Everything?
Knowing what policies you need, as well as what policies you don’t, makes all the difference when it comes to protecting your business. Insurance is not one size fits all and we know that finding the right policy is a personal choice. To fully protect your consulting business, you may want to consider adding some common policies to your insurance package, such as:
- Business Interruption Insurance: This policy covers the costs associated with temporarily halting business operations. For example, your office is flooded and you have to shut down business while repairs are being made. Business Interruption Insurance could cover income lost during this time, as well as overhead expenses, such as rent and electricity.
- Cyber Insurance: If your client’s personal information is compromised due to a cyber attack, they may sue you for damages. For example, a hacker steals your client’s credit card information and spends a large amount of money. Cyber Insurance could cover these costs, in addition to associated legal expenses.
- Directors & Officers Insurance: D&O Insurance protects your company against ‘wrongful acts’ such as breach of duty, neglect and misleading statements made on behalf of the company. This type of insurance is especially relevant for companies with a Board of Directors.
- Legal Expense Insurance: This type of insurance policy may cover legal costs associated with defending your legal rights. This is especially targeted toward some claims relating to employment disputes, contract disputes, and tax protection.
It’s always better to be safe than sorry. When it comes to insurance, this means overestimating the amount of coverage you need.
Makes Sense, What’s Next?
When it comes to insuring your consulting business, the premiums that you pay are worth the time, resources and money you save if a lawsuit were to be filed against your business. In fact, not having any insurance may deter other businesses from partnering with you.
Searching for the appropriate coverage options may feel overwhelming at first. This is where we come in. Tell us more about your business and we’ll take care of the rest.
Ready To Start? Let’s Get a Quote!
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