There are a few other considerations that might come up in regards to business insurance.

Client insurance requirements

When dealing with a client who requires you to have liability and/or other business insurance, sometimes their standard contract requirements are for much larger coverage amounts than most independent consultants carry (or need to carry).

Perhaps the company is set up for contracts with much larger vendors. If they request a very large insurance coverage (say, $5 million), you might try to negotiate that number down and share with the client the insurance coverage you do have.

The client may very well recognize the fact that for an independent consulting firm, and the work it will be doing, the insurance coverage you have will suffice.

Share any client contracts pertaining to insurance with their broker. That will give the broker the opportunity to understand your requirements, as well as point out any language they might take issue with.

Perhaps in some cases the client is willing to strike their requirement altogether. However, that doesn’t mean you don’t still have exposure. Regardless of client requirements, having at least basic business owner and liability insurance will help you mitigate that exposure.

Geographical work territory

Where you conduct work will often have some bearing on your insurance products and coverage. 

If you work outside your home territory, make sure the insurance you’ve obtained will apply in those geographies. If it doesn’t, you might want to consider some foreign coverage.

You might also want to consider some travel accident coverage if you travel frequently.

Advice from other consultants

Many independent consultants provided us with insights from their experience obtaining business liability and other professional insurance.

• Be proactive. Even if you don’t have clients that require liability insurance, having it in place ahead of time can prove a competitive advantage when making proposals to larger enterprises.
• Use a company that specializes in insurance for independence consultants. “They can evaluate the risks better and thus offer better pricing,” says Berthold Hannes.
• Pay attention to geographical limits. One consultant obtained an inexpensive quote, but found it was geographically limited and would not have covered all the countries he does business in. Brett Pentz, based in Canada but working mostly with U.S. clients, similarly found it difficult to find Canadian carriers that would insure him for work done in the U.S. Eventually, he incorporated in the U.S. to fulfill his liability needs.
• Consider Interims Manager insurance. Ulrich Riedel gets this insurance several months of the year. “It’s quite expensive, but allows you to expand your services to interims management type services. E.g. I did a 3 months strategy work, and took over the department for two weeks (until the successor arrived), with full rights & duties of a superior. At least in Switzerland, the moment you have authority to give directions you are not insured anymore with normal business liability insurance.”
• Mergers and acquisitions. “If you are working on M&A deals be sure you mention this to the insurance broker,” says Lester Mak. “Many underwriters do not cover this line of work, and you may find that you are not covered if you do not highlight beforehand.”
• Workers’ compensation. Andrew McKee suggests having independent contractors buy their own workers’ comp policies. “Otherwise, most legit WC carriers will make you pay for your contractors’ WC as if they were employees, which is not a good boundary to blur.” He adds that workers’ comp and disability can be covered by a PEO (Professional Employer Organization — see our list here).
• Clarification of your business activity. One U.K.-based consultant says that if your consulting practice provides services based on psychological research, be clear about whether you actually provide healthcare services (e.g. psychological counseling), or whether your work is training and consultancy (such as coaching and facilitation but based on psychological research). “Anything healthcare-related incurs greater risk and therefore needs a higher level of insurance.”
• Include clients on your Certificate of Insurance. One consultant’s clients regularly request insurance coverage in accordance with their standard procurement practices. “We have typically been able to have them agree to our standard coverage amounts (rather than a much higher request) upon explanation of the services we are providing and indicating they may be included as a named insured on our Certificate of Insurance.”
• Potentially change your coverage as needed. Jay Martin uses Hiscox and routinely changes his coverage according to client requirements, turning it on and off as needed and updating limits. “I just did a deal with a huge firm with a high bar, and had to up it to $200 a month, but it was only for a two-month gig.”
• Keep your revenue updated with your insurance carrier. Update your estimated revenue as your business grows, to ensure you have adequate coverage in the event of a claim.
• Personal protection. Ulrich Voss, based in Germany, suggests independent consultants carry personal disability and accident insurance. “Check whether any statutory social security insurance actually covers you already; in many countries that is not the case.”