Why do business consultants need insurance?
Stay compliant with a contract
As a business consultant, it is important to note that many contracts will require you to have professional indemnity insurance and provide proof of it. This requirement may still apply even after the completion of your contract.
IR35 enquiries
If you are contracting through your own limited company, it is possible that you may be subject to IR35 inquiries from HMRC.
Unpaid invoices and contract disputes
Independent business consultants may encounter problems with unpaid invoices and contract-related issues.
Accusation of causing a financial loss
Clients often seek your advice to resolve a business problem, but it is important to be aware that there is a possibility of being blamed for any financial harm caused by your recommendations.
Professional indemnity insurance for business consultants
Professional indemnity insurance protects business consultants against claims of negligence or inadequate advice that could lead to financial losses for your clients.
As a business consultant, it is important to be adaptable and provide innovative solutions to meet the ever-evolving needs of your clients. Despite your best efforts, there may be times when projects yield different results, which can lead to strained relationships and even legal disputes over compensation. Additionally, defending your reputation can be a time-consuming and costly process.
Therefore, it is crucial to have professional indemnity insurance to protect yourself and your business.
What does professional indemnity insurance for business consultants cover?
Business consultants can safeguard themselves from allegations of misconduct related to their professional advice or work product by acquiring professional indemnity insurance.
Cover includes:
- Failing your duty of care
- Acting negligently
- Giving the wrong advice or recommendation
- Confidentiality breaches
For example:
- A customer has expressed concern that the advice provided may have contributed to decreased sales.
- The suggestions made by you have resulted in a significant drop in productivity.
- The approach recommended did not produce the desired outcomes.
- Regrettably, confidential information regarding a client was mistakenly disclosed.
Does professional indemnity insurance cover my business activities worldwide?
If you work with clients outside the UK, you should check your policy for a couple of provisions. One is called ‘territory or geographical limits’ and the other ‘jurisdiction’.
Territory or geographical limits define where your work is covered. Whereas jurisdictional limit will define where you have legal protection against being sued by your clients.
For example, suppose your policy states a territory limit “worldwide” and a jurisdiction limit "worldwide excluding USA and Canada". It means that you can do work for clients based in the US and Canada but you won’t be insured for any claims brought up against you in those countries. However, if a US client tried to sue you in a UK court, your policy would respond.
Switching or cancelling professional indemnity insurance for business consultants
If you cancel your professional indemnity policy in the UK, you cannot make any claims against it.
Therefore, when switching to a new business consultant insurance provider, it is important to ensure that your new policy includes coverage for your previous work, referred to as "retroactive cover".
Should I keep professional indemnity insurance if I take a break from business consulting?
It’s wise to keep your professional indemnity if you retire or take a break from business consulting. Claims against professional misconduct can surface months or years after you delivered the work.
If a past client sues you for damages and you have cancelled your professional indemnity, you will not be covered.
How long you keep your cover in place is up to you; consider the type of consulting you did and the likelihood that a client might bring a claim against you.
Public liability insurance for business consultants
Public liability insurance shields business consultants from claims of injuries or property damage.
If you interact with clients or the public in person for your business, there is a chance of causing injury or damage to their property. Even a minor accident, like spilling your coffee on a client's laptop, can result in significant financial loss.
Public liability insurance offers affordable coverage for unexpected incidents such as slips, falls, or accidental damage to someone else's equipment. It protects third-party claims and safeguards your business from potential lawsuits.
What does business consultant public liability insurance cover?
Having public liability insurance can be very helpful in the event of injury claims and demands for compensation.
Cover includes:
- accidental injury or death
- accidental property damage
For example:
- A client, while visiting your place of work, suffered s trip. Some days later, you’re asked by their solicitor to pay the medical costs and compensation.
- You bought your client a hot drink. They picked it up but dropped it, spilling the hot liquid all over their pricey possessions or clothing. You may not think it was your fault but your client may seek compensation.
Other insurance for business consultants buy
Commercial legal expenses
Most commercial legal expenses insurance will protect business consultants against various tax and legal issues you may encounter due to your profession, which are not covered by professional indemnity or public liability.
At Suited, we combined £100,000 of commercial legal expenses insurance with helplines and other tools to better assist business consultants in dealing with these issues. We call this Business Legal Protect, and it’s part of your subscription.
Business Legal Protect offers qualified advice and assistance with:
- Legal and tax matters concerning your business
- Criminal prosecution
- Unpaid invoices (over £200)
For example:
- HMRC investigates your tax affairs
- You are facing an investigation from a professional body
- You need legal help chasing a significant unpaid invoice
- You’re being taken to court for breach of contract
Electronic business equipment insurance
If you work as a business consultant, you probably rely on various gadgets and equipment to perform your job. If the cost of this equipment is high, it would be prudent to have electronic business equipment insurance.
This insurance can assist with the expenses of repairing or replacing your work belongings in case they are stolen or unintentionally damaged.
Shopping for business consultant insurance
If you're considering using Suited for your business consultant insurance, it's important to keep the following factors in mind:
Cheap business consultant insurance
While some providers may offer very low prices, they may not offer great after-sales service or have expertise in your specific industry. At Suited, we offer multiple ways to contact us and provide quick responses.
Check the insurer's reputation
Ultimately, insurance needs to be there when you need it most. That's why Suited only uses financially sound insurers with a top A+ rating for payout reputation.
Look for run-off and retroactive cover options
Some insurance providers don't offer cover for past incidents or the ability to switch your professional indemnity to a run-off mode. But at Suited, we offer both.
Watch out for restrictive policy wordings or high excess
Some providers may offer attractive prices but limit the coverage they provide. Suited's professional indemnity and public liability policies have a £0 excess.
