Financial Planning Firm Business Insurance

Getting insurance for your financial planning firm is essential.

To operate their business safely, financial planners must protect themselves from the various risks that come with daily operations. By securing insurance, financial planners can mitigate potential risks and safeguard their operations.  

For example, a client may allege you withheld pertinent information that caused him financial loss. If he takes legal action, it would be good to have the right insurance to mitigate or avoid liability. 

We’ll help you find the most personalized and affordable coverage for your unique business.

Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.

Best Insurance for a Financial Planning Firm Business

General liability insurance is — generally speaking — one of the most important insurance policies for financial planners. 

Some of the risks general liability insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

While general liability insurance will protect your financial planning firm from a wide range of hazards, there are insurance policies especially designed for specific risks. Such policies are generally more cost effective than general liability insurance, since they assess the specific risk directly rather than apply an average risk rate. Such specialized policies include:

  • Errors and Omissions (E&O) insurance: E&O insurance protects you from claims made by clients who allege that you were negligent or made an error or omission that caused them financial harm.
  • Cyber Liability Insurance: As a financial planner, you will most likely have sensitive client information such as financial data, account numbers, and personal information in your possession. In case there is a data breach, cyberattack, or other cyber-related incident that results in financial loss to your clients, cyber liability insurance will protect you.
  • Business Interruption Insurance: If a natural disaster or other event causes your office to close temporarily, business interruption insurance can help cover your lost income and expenses while you are unable to work. It can also help cover the costs of relocating your business if necessary.

When it’s time to make a decision about purchasing insurance, the choice is between the following two types of insurers:

  • Traditional brick and mortar insurers: Traditional insurers, like Statefarm, have been in the market for years, and so have established business models that are typically focused on selling policies through agents or brokers.  These insurers often have higher overhead and thus higher premiums.
  • Online insurers: Insurtechs like Zipari and Next, on the other hand, are digital-first and use technology to streamline the marketing and distribution of insurance products. This most often leads to lower premiums, better tailored policies, and improved customer satisfaction.

Find the Right Policy at the Best Rate

Using a fully online insurance provider saves time and money and offers the most accurate quotes.

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Cost of General Liability Insurance

The average financial planning firm in America spends between $400-$700 per year for $1 million in general liability coverage.

Compare the average cost of general liability insurance for a financial planning firm business to other professional industries using the graph below:

Graph showing average price of general liability insurance prices per industry

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.

A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

Start an Online Quote for Insurance

Finding the most affordable premium starts with getting accurate quotes from highly rated providers.

Common Situations That General Liability Insurance May Cover for a Financial Planning Firm Business

Example 1:  A new client is visiting your office to discuss financial planning options. One of your employees rounds the corner while talking to someone else and runs directly into the client, knocking her back into a desk. She breaks her wrist, requiring medical care. She files a lawsuit against your company. Your general liability insurance will pay for your legal defense costs.

Example 2:  One of your long-term clients leaves to go to the restroom, slips on a puddle, and breaks his tailbone. He is upset about the accident, but decides not to file a lawsuit. However, he does ask your business to cover his medical bills. Your general liability insurance policy will likely cover his medical treatment.

Example 3:  You get an email from the attorney of one of your competitors, informing you that the competitor is suing your business for libel. You are not certain how your business may have libeled the competitor, but you understand that you need to get an attorney as soon as possible to ensure that your business is protected. The general liability insurance policy you carry covers your legal fees in this situation, paying for your attorney and for any payout or settlement that may be required.

Check out our review of the Best Small Business Insurance Companies.

Other Types of Coverage Financial Planning Firm Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all financial planning firms should obtain:

Workers’ Compensation Insurance

The state you do business in most likely requires that you carry workers’ compensation insurance if you have employees. The policy will benefit your business in several ways, including paying for medical treatment for work-related injuries your employees sustain. It will also help to cover the lost wages of injured employees while they recover.  

Professional Liability Insurance

Professional liability insurance is designed specifically for your business. It helps protect you from liability caused by errors or failure to perform. There is always the possibility that one of your clients will file a lawsuit against you, claiming you failed in your financial planning duties. With professional liability insurance, your policy will pay for your legal fees if you are sued and for any settlement that may be required.

Commercial Property Insurance

The computers, office furniture, and other equipment you have in your office were costly to purchase—and they would be costly to replace if they were damaged or destroyed. Commercial property insurance is designed to help pay for damage to property owned by your business that is caused by an event like a fire or severe storm, so you can get replacements without paying out of pocket.

Data Breach Insurance

Also called cyber attack insurance, data breach insurance provides protection for your business if you are the victim of a cyber attack. For example, if your clients’ financial data is compromised by a hacker and one or more clients file a lawsuit against your business, your data breach insurance would pay for your legal fees. Your data breach insurance would also pay for any payouts or settlements that might be required to protect your business and end the lawsuit.

Additional Steps To Protect Your Business

Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.

Here are several things you can do to better protect your financial planning firm business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
  • Stay up to date with business licensing.
  • Maintain your corporate veil.

Business Insurance Is the Best Way to Protect Your Business

If you're starting a new business, then you need business insurance. It's as simple as that. The protection offered by an LLC will protect your personal assets, but your business's assets are still open to liability in the case of a lawsuit or other loss.

Be sure that everything you've built is safe by getting business insurance.

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Financial Planning Firm Business Insurance FAQ

Can I buy business insurance online for my financial planning firm business?

Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.

What is included in a business owner’s policy?

A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

What is the difference between business insurance and general liability insurance?

"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

Do I need insurance before I start a Financial Planning Firm?

Yes, and there are good reasons why business insurance is a must. Your fledgling business will be exposed to risk even before its doors are open to the public. Making changes to the premises, hiring and managing workers, advertising and marketing initiatives: these are all activities that involve risk despite being preliminaries. 

In addition, state laws mandate the purchase of commercial auto insurance to cover company vehicles, and workers’ compensation insurance to cover employees. 

Will insurance protect my financial planning firm business from everything?

Not necessarily. Certain exceptions may be written directly into your financial planning firm business insurance policy, and some perils may be entirely uninsurable.

Do I need business insurance if I already have an LLC?

Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.

An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.

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