Business insurance for consultants
The insurance a consultant needs: professional indemnity for clients' financial losses, basic cover for the company, and the requirements clients often put in contracts.
As a consultant, your biggest risk is usually not that something breaks, but that a mistake in your work costs a client money. That makes professional indemnity the most important cover, and it is often a requirement in client contracts. Beyond that, most consultants need basic business insurance for equipment, liability and legal protection.
A consultant's biggest risk
A consultant sells expertise. So when something goes wrong, it is rarely physical damage. It is advice that was wrong, a delivery that was late or an analysis with a mistake in it, and a client who loses money because of it.
That kind of loss is called a pure financial loss, ren förmögenhetsskada in Swedish, and the general liability insurance in a business insurance policy does not normally cover it. For that you need professional indemnity insurance.
What most consultants need
Professional indemnity
Pays the client's financial loss if it is caused by a mistake in your work, and helps you answer claims that are unfounded.
General liability
If you injure a person or damage someone else's property, at a client's office for example. Usually included in business insurance.
Property
Your computer, phone and other equipment, including when you take it with you on assignments. Read more about property insurance.
Legal protection
Help with the cost if you end up in a dispute with a client or a supplier. Read more about legal protection insurance.
If you work as an IT consultant, an accounting consultant or at an agency, there are separate pages for IT consultants, accounting firms and advertising and communications agencies.
Clients set requirements
Many clients and consultant brokers require you to have professional indemnity, often with a set minimum amount. Always check three things in the contract:
- What limit the client requires.
- Whether your liability has a cap. The contract should limit how much you may have to pay the client, ideally to no more than your insurance limit. Otherwise you can owe more than the insurance pays.
- Whether you must show a certificate of insurance before the assignment starts.
If you travel for work, business travel insurance is also worth a look.
Example: The faulty spreadsheet. A financial consultant prepares the basis for an investment decision. A formula in the spreadsheet is wrong, and the client makes its decision on incorrect figures. When the mistake comes to light, the client claims compensation for the loss. The professional indemnity insurer investigates the claim and pays the client's loss if the consultant is liable.
Frequently asked questions
What is the difference between professional indemnity and liability insurance?
General liability insurance applies when you injure a person or damage property. Professional indemnity applies when a mistake in your work makes the client lose money without anything being broken.
Do I need professional indemnity as a sole trader?
The legal form of your business does not change the risk in the assignment. And as a sole trader, a claim for damages can hit your private finances directly.
