Business Insurance for Local Business Consulting Firms

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Business insurance is designed to protect a business owner's financial assets and is an essential investment for a local business consulting firm.

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About General Liability Insurance

All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).

Some of the risks CGL insurance covers are:

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

While businesses aren't legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.

Learn more about the risks covered by general liability insurance.

COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A LOCAL BUSINESS CONSULTING FIRM

Example 1:  Your cleaning crew uses the wrong solution on the floor, causing a client to fall. Your general liability policy should cover her medical bills.

Example 2:  While delivering lunch to your crew, the delivery driver slips on the ice in the parking lot and breaks his arm. Your general liability policy should cover his medical bills. If he decides to take you to court, it will also cover your legal representation and awarded damages.

Example 3:  You are attending a job expo and the venue requires evidence of at least $1 million in liability insurance. Your general liability policy should help fulfill this obligation.

Example 4:  During a client’s event, you knock over a display, causing damage to both their property and the venue’s. General liability insurance pays the cost to repair or replace the damaged property.

Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It's always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.

Cost of General Liability Insurance

On average, local business consulting firms in America spend between $400 - $700 per year for $1 million in general liability coverage.

Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:

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.

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Other Types of Coverage local business consulting firms 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 local business consulting firms should obtain:

Professional Liability Insurance 

As a consultant, your clients rely on you for professional guidance. If services rendered do not meet their expectations, regardless of merit, they could name you in a lawsuit.  Professional liability insurance covers expenses and awarded damages, up to the limits of your policy.  

This policy is also known as Errors and Omissions (E & O) insurance. 

Commercial Property Insurance

Whether you operate out of an owned or leased building, commercial property insurance should be a part of your insurance package.  In addition to covering the cost to repair or rebuild owned buildings, it covers business-owned assets kept on-premises.  

Entrepreneurs should discuss the day-to-day operations and assets with their agent to ensure their business owner’s policy fits their insurance needs. 

Workers Compensation Insurance

Workers compensation is a state-mandated policy that covers employee illness and/or accidents while on the job. In addition to medical coverage, it pays a portion of the employee’s lost wages and provides legal representation to business owners sued because of an employee accident.  

Workers compensation insurance is usually purchased as a standalone policy.

Types of Coverage Some local business consulting firms May Need

In addition to the policies outlined above, there are a few other types of coverage your local business consulting firm may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Data Breach Insurance

Consultants rely on technology to store critical information on each client.  If your system suffers a data breach, your customers could hold you responsible. Since general liability policies exclude cyber attacks, businesses should purchase this coverage as an endorsement or a separate policy. 

Crime Insurance 

Regardless of who you surround yourself with, all businesses are vulnerable to employee dishonesty. Crime insurance fills the standard policy’s coverage gap, paying for damage to your property, or theft or damage to a client’s property, due to the dishonest acts of your employees.

Commercial Umbrella Liability Insurance

The consulting business leaves you vulnerable to professional lawsuits. If legal expenses exceed the limits of underlying policies, you could be held responsible. A commercial umbrella policy takes over where the general liability policy leaves off, keeping your personal and professional assets protected.

Additional Steps to Protect Your Business

Although it's easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business' financial losses after an incident occurs, but it's much better to avoid losses altogether.

 

With this in mind, here are three things you can do to better protect your business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
  • Streamline your business' internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.

Frequently Asked Questions

What is included in a business owner’s policy?

A typical business owner's policy includes general liability, business interruption, and 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 business?

You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it's best to be proactive when it comes to protecting your assets. After all, you can't buy insurance to cover a loss that has already occurred.

Will insurance protect my business from everything?

Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.