So you’ve finally achieved your dream of being a management consultant. You’ve got the skills, the drive, and everything else you need that you know will make you succeed. However, your checklist isn’t complete until you’ve bought one of the most important investments you’ll ever make as a management consultant: errors and omissions insurance.
Errors and omissions insurance, sometimes called professional liability insurance, will help protect your consulting business from risks that aren’t normally covered by commercial general liability insurance. Similar to the way medical facilities need malpractice insurance, having errors and omissions insurance is a standard product you need to protect your management consulting business.
What risks do management consultants face?
You’re only human, and whether you’re a management consultant or an opera singer, mistakes can always be made. Even those at the top have inevitably made at least one mistake somewhere along the way: but sometimes, the tiniest, accidental mistake could end up costing you. Clients hire management consultants and expect them to carry errors and omissions insurance so that if a mistake is made, there’s coverage to make up for any loss or damages that result from these mistakes.
For example: you have an employee who recommends a certain billing system to a client. However, this system fails to charge things correctly and results in your client losing hundreds of thousands of dollars. The client expects you to replace the loss. Errors and omissions insurance would help cover the claim and protect your assets.
If sued, your personal assets will be at stake: if a client brings a lawsuit against you and a judgment is made against you, all of your personal assets could be seized to pay the claim, including your home, savings, and any other assets you have. Errors and omissions insurance is also a great supplement to commercial liability insurance and policies such as employment practices liability coverage.
What does errors and omissions insurance cover?
Essentially, everything you or your employees do, advise, or recommend to clients is your responsibility.
Errors and omissions insurance will cover mistakes or acts made by you or your employees such as:
-Errors in documentation
-Misrepresentation of products or services
-Losing a client’s property, data, or misusing it
-Failing to protect a client’s property, whether physical or intellectual
-Any legal violations of federal or state laws
-Theft, breach of contracts or trust, or mistreatment
Do I have to have errors and omissions insurance?
When you’re a management consultant, you’re being recruited for your expertise and knowledge, and having errors and omissions insurance will further establish you as a professional who takes your business seriously. As a consultant, you should be an example and while it may not be required by law, most clients are going to expect you to have it.
The cost of errors and omissions insurance will vary according to the size of your business, the location, but this cost is small compared to what you stand to lose as a management consultant in the event of a claim or lawsuit. If others are looking to you as an example, set the right one.