Business consultant can mean many different things. A consultant offers services or solutions to a business that is seeking specialty advice. They are usually experts in the field they work in. Some of the many professions that may work as consultants include:
- Financial advisors
- Investment advisors
- Tax preparers
- Accountants
- IT consultants
- Management consultants
There’s quite a bit of overlap in the first four categories. They can also go by names such as financial planners, wealth advisors and investment managers. These types of professionals provide advice to businesses regarding money: where to invest to grow it, how to manage it, how to track it, and how much taxes to pay on it.
An IT (information technology) consultant advises clients on how to use technology to meet their business goals. They also help solve problems with computers and computer systems.
- 6 Best Professional Liability Insurance (or E&O) Companies for Consultants
- Who needs Professional Liability Insurance?
- How Much does Professional Liability Insurance for Consultants Cost?
- What does and doesn’t Professional Liability Insurance for Consultants Cover?
6 Best Professional Liability Insurance Companies for Consultants
- CoverWallet: Best for Comparing Online Quotes
- NAPA: Best for Investment Advisors
- TechInsurance: Best for IT Professionals
- The Hartford: Best for Accounting Accountants
- Biberk: Best for Tax Preparers
- Markel: Best for Financial Advisors
CoverWallet: Best for Comparing Online Quotes
CoverWallet is a digital business insurance broker. They work with several leading business insurance companies. One significant benefit of working with CoverWallet is that once you provide your information, within a few minutes, they can provide you with several quotes from their partner companies so that you can compare in one place.
If you look for a cheap professional liability insurance policy for consultants, working with CoverWallet can be a good option. Comparing several quotes will help you find the cheapest one for your needs.
NAPA: Best Professional Liability Insurance for Investment Advisors
NAPA (also associated with Gallagher) offers low rates and an online application. Once you have your policy, you can pay either monthly or annually. You’ll also need a membership in NAPA, which is about $60.
A quote from NAPA suggests that E&O insurance for an investment advisor can cost from $72 to $228 a month depending on the advisor’s income.
TechInsurance: Best Professional Liability Insurance for IT Professionals
TechInsurance offers online quotes. You can start your coverage in 24 hours and get a certificate of insurance at the same time. They insure tech professions from data analysts to web developers.
They gave us an online quote from Philadelphia Insurance Companies for an IT business based in Ohio. It costs $699 in annual premium.
The Hartford: Best Professional Liability Insurance for Accounting Accountants
The Hartford has errors and omissions (E&O) insurance for consultants, accountants, tax preparers, and more. They specialize in small business insurance, and they insure over a million small business owners.
They have articles and resources to help support your accounting consulting business and can make recommendations on other policies to consider.
For an accounting consultant, it quotes $34.5 a month.
Biberk: Best Professional Liability Insurance for Tax Preparers
Biberk has an easy online quote system, giving us the quote below in under three minutes. You can purchase a policy, make the first payment and get a certificate of insurance online.
You can make claims online as well. As a tax preparer, the potential for slight errors costing thousands is high and clients like to see that you have a professional liability policy in place.
For a tax preparer, it quotes $647 a year for professional liability insurance only, adding cyber liability insurance increases annual premium to $759.
Markel: Best Professional Liability Insurance for Financial Advisors
Markel insures thousands of financial service professionals. You can keep your policy even if you change your business from fees and commissions to fee-only. As a Markel customer, you have access to their risk management and prevention hotline, which allows you to discuss potential lawsuits you think may be filed.
To get a quote from Markel, you just give them your zip code and an agent will contact you.
Who needs Professional Liability Insurance?
If you work as an independent contractor in any of these fields, you’re going to need professional liability insurance or E&O insurance. The IRS defines an independent contractor (as opposed to an employee) as a self-employed person. The payer has the right to control or direct the result of work, but not when or how it’s done.
Any profession that deals with people’s money assumes risk. Clients understandably have very strong feelings about their money. If they lose money because of something you said or did, they may sue you. The following financial consultants will need professional liability insurance coverage:
- Financial advisors
- Investment advisors or RIA (registered investment advisors)
- Retirement planners or retirement advisors
- Tax preparers
- Accountants or CPAs
IT consultants are sued for things like data breaches and errors that cause the computer system to go down, resulting in lost revenue.
>>MORE: Where to Get No Down Payment Errors and Omissions (E&O) Insurance?
Why do consultants need professional liability insurance?
Consultants need professional liability insurance to protect themselves if they are sued by their clients. However meticulously careful you are in your practice, you can’t be perfect. Mistakes and omissions can still be made. Even if you were perfect and never made any mistakes, your clients can still decide to sue you if they suffer from personal injuries or property damages. Without professional liability insurance, consultants can be bankrupt and their careers can be ruined if they are involved in a lawsuit. That’s the reason why they need to have professional liability insurance to protect themselves.
Learn more at why consultants need professional liability insurance
What does Professional Liability Insurance for Consultants Cover?
Examples of mistakes clients could sue over include:
- Errors in paperwork (failing to file on time, missing signatures. etc)
- Providing incorrect information
- Breach of duty (misusing client funds)
- Misleading statements
- Claims related to performance (an investment you recommended loses money)
What Is Not Covered?
- White collar crime
- Intentional deception
- Copyright infringement
- Slander or libel
- Discrimination
The amount of money you pay for professional liability insurance isn’t based on how likely it is that you lose a liability lawsuit, it’s based on how likely it is one will be filed against you in the first place.
Now that we’ve agreed you need insurance, where should you buy that insurance?
How Much does Professional Liability Insurance for Consultants Cost?
Insureon estimates that IT consultants pay about $730 a year, or $60 a month for professional liability insurance. If you’ve been sued in the past or want a policy with a higher limit (this estimate is based on a $1 million dollar occurrence limit with a $1 million dollar aggregate) you’ll pay more.
Insurance for investment advisors or financial planners is more expensive. Insureon says the median cost of professional liability insurance for these professions is about $2,610 a year or $220 a month.
According to FINRA (Financial Industry Regulatory Authority) they received 3,136 complaints in 2018. Your chances of being sued are increasing as society becomes more litigious.
The professional liability insurance cost for an accounting consultant is about $400 a year, or $35 a month.
Insurance for investment advisors is higher because of the greater risk involved. If an investment advisor makes a recommendation and that investment loses money, the client will be upset. They could claim you breached fiduciary duty, which means you acted in your own best interests instead of the clients. USLegal asserts that a person acting in a fiduciary capacity is held to a high standard of honesty.
Professional liability insurance will protect you from mistakes. Also, a lot of clients want you to have it and will be more likely to hire you if you do.
Cost of professional liability insurance varies by professions. The best way to make sure you get a good and cheap policy is to shop around with a few companies or to compare several quotes with a digital broker like CoverWallet.
>>MORE: Errors and Omissions (E&O) Insurance Costs by Professions
>>MORE: How Much Does Professional Liability Insurance Cost for Consultants?
Professional liability insurance for accountants or CPAs
Accountants or CPAs need professional liability insurance coverage to protect themselves from lawsuits by their clients in related to their mistakes or negligence in doing their work. It covers alleged errors, professional negligence, breach of duty, and misleading statements. It pays for court costs, defense attorney fees, and any settlements the client wins.
As we mentioned above, professional liability insurance costs $30-$50 a month for an accountant or CPA. It is relatively inexpensive, so don’t skip it. Your clients will feel more comfortable working with you knowing that you have E&O insurance coverage.
Many insurance companies offer professional liability coverage for accountants and CPAs. We recommend the top 5. Lear more at the best professional liability insurance for accountants and CPAs.
Tax preparer insurance: Errors & omissions (E&O) insurance, data breach insurance, and more
Similar to accountants and CPAs, tax preparer is another financial consultant that insurance coverage. The most important insurance coverage tax preparers need is professional liability, or errors & omissions (or E&O). It covers them from claims related to negligence, errors in services provided, omissions, misrepresentations, violation of good faith and fair dealing, and inaccurate tax advice. It pays for court costs, legal fees, administrative costs, and any settlements and judgments.
You can many options to choose from when buying tax preparer E&O insurance. We recommend the top 6. See more at the best E&O insurance for tax preparers.
In addition to professional liability insurance, tax preparers also need to have data breach insurance coverage. Cyber attacks has become more and more prevalent these days. Businesses of any sizes are at risk of cyber attacks and data breaches. As a tax preparer, you are dealing with a lot of sensitive and confidential data of your clients. That makes you a good target of these breaches. Learn more at the best data breach insurance companies and the best cyber insurance companies.
Business insurance for financial advisors, investment advisors (or RIA), and retirement planners
Similar to accountants and tax preparers, financial advisors, investment advisors (or RIAs), and retirement planners are another group of business consultants that need insurance coverage. The two most important coverages they need are E&O insurance and data breach insurance.
Professional liability insurance protects financial advisors, investment advisors, and retirement planners from mistakes they made, negligence, errors in their advice, omissions of data and information, misrepresentations, violation of good faith and fair dealing, and inaccurate advice. The insurance policy also pays for court costs, legal fees, administrative costs, and any settlements. Learn more at the best E&O insurance for financial advisors and investment advisors.
In addition to professional liability insurance, financial advisors and investment advisors also need data breach insurance coverage. They handle a lot of highly sensitive and confidential data of their clients every day. A minor data breach event will expose their clients’ highly sensitive data to the public and put their clients at risk of financial loss. Learn more at the best data breach insurance companies and the best cyber insurance companies.
Last Thoughts
Independent consultants work for themselves. As such, you don’t have a large firm’s protection and legal team to back you up if something goes wrong. Professional liability insurance will protect you in the event a customer is dissatisfied with your services and blames you for financial losses. Even if you never use it, it will help you sleep at night.
>>MORE: The Best Business Insurance for Consultants and Consulting Businesses