Insurance Essentials For Consulting Businesses

With the right mix of coverage, risk management, and cashflow friendly payment plans you can put optimal coverages in place to protect your business while consistently improving your bottom line over time. 
The consulting field has grown increasingly complex as more and more firms and individual consultants move towards specialization and the entrepreneurial movement continues to accelerate. When combined with remote work, technological advancements and changes in benefit and employment law – consulting businesses like yours can face a host of risks that can cost you your business if you’re not prepared.

Insurance for your Connecticut consulting business is a powerful tool that can help you mitigate risks now and as you grow your business. With the right mix of coverage, risk management, and cashflow-friendly payment plans you can put optimal coverages in place to protect your business while consistently improving your bottom line over time.

 

Key Consulting Business Insurance Coverages

Like all businesses, your Connecticut consulting business should have an “insurance foundation.” The “insurance foundation” is the minimum insurance you should have in place to ensure that you, your employees, and your business have adequate protection from the most common and basic risks of running a consulting company.

The first step in building an effective “insurance foundation” is to have a basic understanding of the risks that you face as a consulting business owner. Particular risks are specific to consulting, such as the risk of being sued over a mistake you made that cost your client money. While others are more general and apply to most small businesses, such as the risk of fire damaging your property.

Below are the four most critical, foundational coverages that most Connecticut consulting businesses should consider.

1. Coverage For Your Property

40% of small businesses will incur a property or liability loss within the next 10 years.

Most Connecticut consultant businesses need basic commercial property insurance regardless of their size.

Commercial property insurance can help you repair or replace your business property and potentially the property of others in the event of a covered loss. This coverage includes protection for your building, equipment, furniture and personal property.

If for example, someone breaks into your office and steals all your computers – this type of coverage could help you replace your computers and other stolen items. It can also provide coverage for your mobile devices while you’re traveling for business or visiting clients.

Working out of your home? Have a remote operation or sharing co-working space? It’s likely that you still need some form of commercial property insurance designed specifically for home-based consultants such as the coverage provided by a Micro-Business Owner Policy.

2. Coverage For Operational Lawsuits

The average cost of a reputation harm claim is $50,000.

General liability insurance offers protection for common Connecticut consulting business risks related to operations such as client injury, client property damage, and advertising or personal injury.

People typically think of a slip and fall accident or damage to a client’s property as examples of general liability claims, which is true. But general liability covers much more than physical losses. It also can help pay for personal injury or reputational harm that you may be liable for from actions such as slander, libel, wrongful eviction, false advertising, and more.

Say you’re overheard saying something derogatory about one of your competitors to a mutual client, which gets back to them and they sue you for personal injury. Your general liability insurance can help pay for your defense attorney, legal fees, and damages if you’re liable.

Without this coverage, you’d have to find the cash to pay these costs yourself – putting your business and potentially your own assets at risk.

If you rent or plan to rent space, most lease agreements will require that you have a minimal amount of general liability insurance and many consulting clients will also ask that you carry this coverage prior to beginning your work with them. 

3. Coverage For Work Related Lawsuits

Even if you’re an expert, mistakes happen. And if your client thinks your consulting business’s mistake caused them financial loss, they can sue you. Even if you haven’t done anything wrong, you’re on the hook to pay for the legal costs to defend yourself.

Professional liability for consulting businesses, also called errors and omissions insurance helps protect you and your business finances if you’re sued by a client claiming negligence, misrepresentation and inaccurate advice and other potential accusations.

Common professional liability lawsuits for consulting firms in Connecticut include breach of contract, failure to render services, financial losses, and errors and omissions accusations. 

4. Coverage For Cyber Incidents

The average cost of a cyber attack incident is $175,000, the average number of records exposed per attack is 504K, and the average cost to the business per record impacted  is $208.

The ever-evolving world of technology opens your Connecticut consulting business  operations up to a new world of possibilities but unfortunately it also opens us up to new risks.

The risk of cyber-attacks on small businesses is increasing rapidly. Professional services, including consulting businesses accounted for 21% of all cyber-attacks in 2020.

As a consultant, you’re storing confidential, personal data on your clients and their businesses. Using a computer or mobile device, using email, having a website, accepting online payments all mean that you’re at risk of cyber related crimes and losses.

If you experience a data breach involving client data you can be held liable and incur significant costs, even if the situation is outside of your control. These costs include forensics, costs to legal notify those affected, credit protection services, and public relations costs.

Cyber liability insurance can help you pay for the costs you may incur due to a cyber breach including extortion, breach response costs, data recovery and the lost business income when your network-dependent income is interrupted.

Additional Coverages That Consulting Businesses Should Consider Investing In

Coverage for Auto Related Risks

Because consultants are often traveling to and from client appointments, you’re at a higher risk of auto liability losses. If you or a member of your team is liable for an accident while traveling between client calls, it’s likely that your personal auto insurance will not provide coverage because the accident occurred while the vehicle was being used for business.

Coverage for Employee Related Risks

If you have employees, there are several additional coverages you should consider to help protect your business and your employees.

  • Workers Compensation can help pay for workplace injuries and protect you from employee injury lawsuits. This coverage is required by law in many states including Connecticut.
  • Employment Practices Liability insurance can help pay for claims and legal fees associated with allegations of harassment, discrimination, wrongful termination and other employment related issues.
  • Employee Benefits packages can help you keep your most valuable assets, your staff happy, healthy and productive. Competitive benefits can also help you attract the best talent.

Coverage For Business Continuity Risk

What happens to your business if you are injured or fall ill for a long period of time? Or if you pass away unexpectedly? To ensure that your business and your employees are taken care of if something unexpected happens to you, consider individual disability insurance and key man life insurance.

The Last Word

Insurance is a valuable tool that can help lower the risk of financial hardship for your Connecticut consulting business.

Understanding the unique risks you face is an important first step. Work with a professional insurance agent to identify your most pressing risks and implement programs, including insurance strategies to manage those risks within your operating budget.

Your consulting business is too valuable to not have a risk management strategy in place as part of your business plan.

Yours in business,
Meredith

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