Consultant Business Owners Policy
Many consultants are remiss when it comes to mitigating their risk while offering themselves out as a consultant. When you hold yourself out as an expert or specialist, your clients are depending on your business expertise to improve their business decisions, but in some cases, things can go terribly wrong. Many professional business consultants do not understand their vulnerability to financial devastation if the advice they offer goes awry. Assuming that a refund will settle the issue is quite naive and rarely makes the offended client whole again. Why personally accept the financial risks that are inherent with any client when you can transfer the risk to a third party insurance company at a very affordable rate? Let’s explore how we can mitigate the majority of these risks at a very reasonable cost.
Although to properly transfer a consulting firm’s risk may take several types of insurance coverage, the bedrock for any insurance plan should start with the BOP.
A BOP is a common packaged policy that is used for most any type of consulting business. In its standard form, it provides general liability coverage, building coverage, business personal property (contents) coverage, and business interruption coverage. Typically, consultants that visit the office space of any client will be required to purchase general liability insurance before they’re allowed on the premises, so why not cover your tools, contents, electronics, and office space with the same policy in a packaged deal?
Many insurers that offer BOPs will also allow the insured to endorse other needed coverages onto the policy for an additional charge, making their policy more comprehensive than an out-of-the-box product. Depending on the nature of your consulting business, most Business Owner Policies start at about $500 per year for a $1 million dollar limit.
The premium is considered vey inexpensive for the amount of risk the insurer is accepting. BOPs are considered comprehensive coverage because they offer a standard group of coverages:
- General Liability – Provides coverage in the event that you or your firm is responsible for causing bodily injury or property damage to a third party while performing the tasks of a business consultant.
- Building Coverage – Building coverage protects the building you own or the improvement and betterments you make in a building you lease. The coverage will pay to repair or replace the building for a covered peril minus the deductible you’ve selected. In many cases, when you lease office space, the lessor will require you to insure the glass window panes in your space, and the BOP will cover this risk as well.
- Business Personal Property – Simply put, business personal property is comprised of your stuff in the building, such as office furniture, office equipment, office supplies, and electronic devices. Consultants that rely on laptops, tablets, and cell phones will be pleased to know that the devices are insured whether on premise or off.
- Business Interruption – If you are unable to operate your business resulting from a covered peril, the Business Interruption coverage will reimburse you for financial loss that will likely result and the costs of temporarily moving to another location.
Coverage Not Included in a BOP
Commercial Auto Insurance
Many of your clients may require you to carry $1 million dollars of auto liability before they allow you to bring your vehicle onto their property. In this case, your personal auto policy may not offer the higher limit and therefore, a commercial auto policy will be necessary. More importantly, having a client as a passenger in your vehicle can present a substantial risk if they become injured in an accident that you may be responsible for. In these cases, a personal auto policy is not going to offer sufficient coverage to protect you and your business. With most commercial insurers, the higher limit commercial auto policy is not much more than the premium paid for a personal auto policy.
Probably the most important coverage for the individual consultant or firm, is covering the risk of a professional liability claim. Actions for professional liability damages can be brought by the client if they determine the advice or product you offered did not live up to their expectations that were based on your contract or promise when you enter into a consulting agreement. The good news is that for many industries, Professional Liability Insurance is less than $750 per year for million dollar limits. Typical examples for a consulting business would be:
- Investment advice that causes financial loss.
- Negligence of duties that result in financial loss
- Software development advice that leads to financial loss
- Accounting advice that results in penalties, fines, or financial loss
Some consulting businesses new to their industry fail to understand the risks that are inherent with offering professional advice. Typically, it’s much more likely that you will be sued for professional reasons rather than “slip-and-fall” accidents or property damage, yet many consultants fail to obtain this most valuable coverage. Cover every risk so that the money will be there when you need it.