By: Dr. Chris Downs

Over the years I’ve been a consultant, I’ve been surprised when other consultants told me they’d never bothered to get business insurance. I was surprised because the consequences of a lawsuit can be personally and professionally ruinous.

I asked one of these insurance-less consultants if he ever worried about being sued by a client. He said he was not. I knew that he worked in an area that had a fair amount of risk and exposure to legal liability. When I asked him why he didn’t carry business insurance, he replied, “I don’t think I can afford it.”

The truth is, this guy was wrong on two counts: (1) business insurance usually isn’t that expensive, and (2) the costs of a malpractice or other type of lawsuit can add up fast. An adverse verdict in court could take all of a consultant’s assets, both personal and professional.

I think consultants without any business insurance take a big risk. We are a litigious society. There is always a possibility that a client, client representative, subcontractor, employee, business partner, or competitor might file a claim against you. If you have any degree of exposure or risk in your consulting work, I urge you to get business insurance if you don’t already have it. Why?

1. Many states require at least a modest business insurance policy.

2. Business insurance sometimes also protects those who work with you, such as employees and contractors.

3. Business insurance sometimes protects your clients. For instance, I’ve delivered premium training workshops for a large state client for years. That client requires that I not only carry standard business insurance, but an additional $1M rider naming them as the insured party in case any of the attendees in my workshop decides to sue me (as consultant), them (my client) or both of us.

4. Carrying business insurance demonstrates to both clients and subcontractors that you take business risks and protections seriously.

5. Many, especially larger, client contracts require specific business insurance levels.

6. If your consulting office is located somewhere other than your home, business insurance is usually required to rent office space, or borrow funds to finance equipment.

7. If your company is sued, business insurance can sometimes help cover legal fees.

8. Honestly, business insurance brings me peace of mind. While the actual risks in my industry are small, they are never zero.

Several of the points above echo the wise advice given by The Hartford Insurance Company (see https://www.thehartford.com).

When I originally pursued business insurance, I contacted my regular insurance agent, Ted. He managed my car, home, and property insurance. I approached Ted about his company providing business insurance for me. He made sure to understand my consulting area, the kind of work I’d be doing, and the numbers and backgrounds of people I’d work with (meaning my vendors, subcontractors, clients). I had business insurance in place about three weeks later at a very reasonable price.

I’d be cautious about purchasing discounted business insurance from online vendors. Their prices may be lower than, for instance, The Hartford, but do you understand the coverage you are purchasing? Do you know how you would be protected if sued? Will you have direct access to your online business insurance agent if you need them quickly?

If you’d like to know more about business insurance, please check out “Solo Consulting: Insider Tips for Success!”

Notice: This blog wholly reflects the views and suggestions of Dr. Chris Downs. Readers’ use of his views or suggestions are wholly the responsibility of the reader as reflected by their actions, reactions thoughts, statements, and behaviors. Dr. Downs accepts no responsibility for readers’ use of his words. Further, this blog contains no intentional or structured therapeutic intent nor is the content designed to harm or improve the psychological state of the reader. Readers are responsible for their own reactions to and/or use of any and all suggestions or advice.