Professional liability insurance is what protects skilled and self-employed professionals from any lawsuit or litigation brought upon them by their clients. Almost every professional such as a doctor, lawyer, dentist, architect, builder, electrician or plumber should have this insurance. The question, however, is whether or not consultants need this type of insurance. The answer to that is a resounding “Yes”. Here are the reasons why consultants must have professional liability insurance and how they can benefit from it.
Professional liability insurance a “necessity” for consultants
A consultant is an expert who offers advice or service to other companies or individual professionals. A consultant may have a very strong command in the chosen subject or field like marketing, IT, finance, taxation etc. But he or she is still human, and is prone to making mistakes. So what happens when the advice that the consultant offers is not up to the mark? What if the suggestion is faulty and costs the client a lot of money and time? In such a case, the consultant would be responsible for the losses that the company or individual has incurred and will be liable to compensate such losses.
Without insurance, such expenses will go out of your own pocket. This puts your business as well as personal assets in considerable risk. Therefore, it is not only important that the consultant have insurance, but it is necessary.
What does PLI cover?
You may think that commercial general liability insurance is enough to protect your practice. However, it does not cover all the risks involved. Also known as Errors & Omissions Insurance in some regions, the professional liability insurance covers everything that the general liability insurance does and a few more risks. It covers:
- Actual or alleged negligence
- Personal injury or damage – like slander and defamation
- Claims for damages due to past services
- Breach of duty, in some cases – offering wrongful advise deliberately
- Misuse of data – data loss
When professional liability insurance is a must
Professional liability insurance for consultants becomes more important when the professional risks you face are very high. For instance, professional liability insurance is must when:
- You are an IT consultant – a small glitch in the program or negligence in coding can result in massive losses for the company
- Clients are fussy – they can get dissatisfied and bring claims against you
Care should be taken to read the insurance documents completely and thoroughly to make sure that you are properly covered from any possible claims by your clients.