As a consultant, your job is to help companies attain excellence. Therefore, you should show that you’re making excellent business decisions in your own business. Any business that offers consultancy services should have professional liability insurance. As a consultant, your enterprise, future career prospects, and personal assets are at risk if you don’t have this coverage. While you’ll have to pay extra expenses in premiums, it’s a small expense compared to the immense costs you could be liable for without it.
What is Professional Liability Insurance, and What Does it Typically Cover?
Professional Liability Insurance, also known as E&O (errors and omissions insurance), protects businesses from risks typically not covered by general commercial liability policies. As a consultant, getting E&O insurance is akin to a doctor getting malpractice insurance. Similar to malpractice insurance, acquiring professional liability insurance should be standard practice for consultants. E&O kicks in if you or your workers’ actions lead to damage or losses. Some of the covered incidents include:
- Verification mistakes
- Documentation errors
- Misusing or failing to protect your clients’ data or property
- Misrepresenting services or products
- Legal violations
- Exposing confidential or proprietary company information
- Breach of contracts, poor ethics or behavior, theft, or mismanaging any aspect of your clients’ business
Your policy will cover your legal expenses and judgments made against your business up to the specified limit.
Risks Consultants Face
Consultants provide a wide range of services and thus face a wide range of risks. Your risks hinge on your specialty. For instance, if you’re a PR consultant, you may be exposed to the risk of slander and defamation lawsuits. Conversely, if you’re a human resource consultant, you face the risk of being held liable for hiring an individual who you shouldn’t have hired for clear reasons. It’s important to note that any consultant can be sued for small errors such as making a wrong data entry. Remember, even a small mistake can lead to an expensive lawsuit.
The Key Risks of Not Having E&O Insurance Coverage
Not having professional liability insurance can expose you to more risks compared to the usual risks consultants face. These risks include:
- Greater Risk of Being Sued
Not having E&O insurance exposes you to risks of lawsuits because some of your clients may try to take advantage of your consulting business not being protected. Without professional liability coverage, you can lose your financial assets or home if a judgment is made against you and you’re incapable of paying it. Some unethical clients can see this as a convenient way of acquiring all you’ve got.
- Risk of Losing Business
Many clients won’t hire you if you don’t have proof of professional liability insurance. Clients need the assurance that the resulting damages or losses will be covered if you or your workers make a mistake. Without coverage, you can lose business as well as ruin your reputation.
Do I Have to Have E&O Insurance Coverage, and What Happens if I Don’t Purchase It?
If you don’t carry professional liability insurance, you risk losing your business investments and personal assets. If you’re incapable of compensating your clients after a judgment has been made against you, your personal assets like your savings and home can be seized.
How Pittman Insurance Group, LLC. Can Help
Having E&O assures clients that you’re responsible and capable of rectifying mistakes and that they will be financially protected in case your errors cause them a loss. For a professional liability insurance policy that will adequately protect your business investments and personal assets, contact Pittman Insurance Group, LLC now!