We recommend that independent consultants obtain business liability insurance. This resource guides you through how to get business insurance as an independent consultant, and provides some context on the types of policies independent professionals typically need.
It also provides a directory of insurance brokers and carriers that are used and recommended by our members.
Most independent consultants do eventually obtain insurance — either when they set up their practice to protect themselves from liability, or because they encounter a client that requires it.
Scrambling to find insurance when that happens, especially considering it will take several weeks to set up, is not ideal and could cost you the project. We recommend you start the process early, before you run into a situation where a client requires you to get a policy.
We also recommend that you consult an insurance broker and an attorney to discuss your potential liability and insurance needs.
You can click any section to go directly there:
- When should I get insurance?
- How to navigate the insurance buying process
- Comparison sites for insurance quotes
- Working with an insurance broker
- Main types of business insurance you might need
- Other business insurance to consider
- Insurance information outside the United States
- Additional tips and advice for obtaining business insurance
When should I get insurance?
When considering how to obtain business insurance as an independent consultant, it’s ideal to set up business coverage when you start your practice. It can take four to eight weeks to obtain a policy.
You don’t want to run into a situation where you need insurance you don’t have — for example, a potential client requires it.
Trying to rush getting insurance set up could result in not getting the best policy and rates that you could if you went through the process judiciously.
What have other consultants done?
In our survey of independent consultants, about half of the respondents (49.4%) obtained business insurance because a client required it.
Forty-two percent said they set up business insurance to protect themselves, and 8% did so as they were setting up their business entity.
How to navigate the insurance buying process
There are a few options for shopping business insurance.
Consult with an insurance broker
Our recommendation is to work with an insurance broker who can get you quotes from multiple carriers. A broker can consult with you to understand your particular needs and provide valuable advice and recommendations that are hard to get when just shopping online.
In most situations, using a broker will not cost you more money. They provide the same quotes the insurance company would quote you directly.
A broker can even have insurance companies compete against each other to get the best price, program, terms, and conditions that are available for you as an individual independent professional.
See more about this option in the next section: Working with an insurance broker.
Go direct to an insurance company through its agent
Individual insurance agents are often referred to as “direct writers,” because they are only licensed to write business with one particular carrier. That carrier may or may not be the best fit for your needs, so talking to several different agents and carriers or using a broker is advisable.
Compare and get quotes online
If you’re confident about exactly the insurance you need, you can go online and compare plans at aggregator sites that offer multiple quotes based on information you supply.
Many of them provide specific solutions for consultants.
Some of the websites that provide business insurance quotes, including those used by our members, are:
Working with an insurance broker
Expect it to take three to four weeks to go through this process of consulting with a broker.
The broker should spend some time getting to understand your particular practice in order to provide the best advice to you. Expect it to take approximately four to eight weeks from the time you begin a conversation with the broker to having an insurance policy in place.
A broker should ask you about:
- The name of your business
- The state where the business is located
- The industries you work in
- The type of work you do
- Your revenues for the past few years
- If you have employees, and how many
- Projections and goals for the future of your company
Having this complete picture will allow the broker to source the best coverage for your needs, and also provide the right policies not just for today, but as your business grows.
The broker will then reach out to multiple carriers to get the best quotes, and put those quotes together in a proposal format for the independent professional to review in a side-by-side comparison.
How brokers get paid
In general you will not pay more when you go through a broker. In most jurisdictions you will pay the same rate whether you obtain insurance directly from the carrier or through a broker.
The insurance company pays a commission to the broker, but in most cases that does not affect your cost. Generally, carriers are required to offer you the same rate whether you go through a broker or not — so you might as well get the help.
A good broker will also provide value-added services over the years:
- Provide a Certificate of Insurance when clients request it
- Answer questions about your policy
- Assist with the renewal process
How to find a broker
We have compiled a directory of business insurance brokers that have been used and recommended by our members.
If you don’t see one that serves your location, ask other consultants or professionals for recommendations.
Additional tips on working with a broker:
- Find somebody that you’re comfortable with and that you trust.
- Interview more than one broker.
- Have a frank conversation; share your expectations and business information.
- Ask their advice on coverage you need.
- Once you decide on a broker, just work with that one. Avoid having multiple brokers work on your insurance program at the same time. One broker can get you multiple quotes from many carriers; you don’t need several brokers to do that and in fact it just hinders the process.
How have other independent consultants obtained business liability insurance?
In our survey, most independent consultants used a broker to set up their insurance policies (46.1%).
This was followed closely by going directly to an insurance company (38.2%).
About 13% of respondents used a comparison website to get quotes and set up their policies directly with an insurance company.
A short list of insurance companies were the most used and recommended by consultants:
- Hiscox (more respondents reported using this company than any other)
- The Hartford
For details on these companies, and a full directory of all the insurance carriers and brokers used by independent consultants, please refer to our directory here.
Types of business insurance you might need
Business owners/general liability
This policy provides general business liability coverage for bodily injury, property damage, personal and advertising injury arising from the insured’s premises or operations.
It’s required in most jurisdictions, and is the most basic and necessary policy to have.
- General liability
- Personal injury
“Every business has those liabilities out there, and the general liability policy protects you from them,” says Dorene Stockman, Vice President at Brown & Brown insurance brokerage.
“The minimum premiums are very inexpensive, considering the fact that lawsuits nowadays are in the millions of dollars. $1,000,000 dollars of general liability insurance, depending on your business the minimum premium is $500. So I would encourage you to think about general liability, even if you really don’t see the need.”
This policy provides coverage for some things the general liability policy above doesn’t cover. It is more applicable to your liability as a professional providing services, and Stockman considers it the second-most important policy to get.
Professional liability/errors and omissions covers claims that allege some type of financial loss due the alleged failure to perform or mistakes in the job performance.
Suppose, for example, that your client suffers some type of financial loss due to a mistake you made. The client could file a claim against you, and professional liability aims to protect you from that.
These policies are not “one size fits all,” but rather tailored to certain professions (such as medical, engineering, etc). Independent management consultants don’t really have their own bucket for professional liability, but are covered under “miscellaneous professional liability.”
The amount of coverage and the premiums may differ depending on the actual work each consultant is doing. For example, a consultant working in the financial services industry will probably need more robust coverage than consultants in other fields.
It is possible that this coverage could be added onto your existing business owners policy. Premiums will generally rise in conjunction with the revenues of your business.
Covers loss arising out of your organization’s failure to protect sensitive personal or corporate information in any format. Common losses emanate from failure of network security, including unauthorized access or unauthorized use of corporate systems, a denial of service attack, or transmission of malicious code.
Cyber insurance has risen in importance over the last decade, and is an emerging and constantly changing coverage.
These policies can sometimes even include protection for cyber-extortion or cyber-terrorism — for example, someone holds your files hostage and threatens to release them to the dark web unless you pay them a ransom in Bitcoin.
Even if you think you are protected because you have a firewall, a backup computer, and/or store your files in the cloud, cyber hackers are becoming more prevalent and sophisticated. It’s best to protect your company and your clients.
A cyber policy will not necessarily cover every claim or loss due to hacking or other privacy infringement. Investigate exactly what the policy will cover, which may be some of the following types of claims:
- Financial loss claims due to a cyber breach
- Your own losses if data was stolen or destroyed
- Income loss to you while your systems were down or data compromised
- Coverage to notify people who might be affected by your cyber breach
Some insurance companies even have data breach coaches who will help guide you through an incident if one should happen.
If you have full-time employees in your firm (for example, W-2 employees in the U.S.), there are several types of insurance to consider — some mandatory and others optional.
This coverage includes:
- Workers’ compensation: Provides wage replacement and medical benefits to employees injured in the course of employment. It is required by every state in the U.S. (except Texas). Check your state’s requirements for workers’ comp. You obtain this policy yourself.
- Unemployment: Provides short-term wage replacement after loss of a job. U.S. businesses with employees are required to pay into state unemployment insurance (SUI) and the Federal Unemployment Tax Act (FUTA).
The following employee-related insurance is optional:
- Disability: Available in all states but only required by law in a few jurisdictions. This provides wage replacement for non-work-related injuries or illness.
- Employment practices liability: Provides coverage for some types of human resources-related situation.
An umbrella policy provides additional liability insurance to protect policyholders for claims in excess of the limits on their primary general liability, automobile liability, and workers compensation policies.
You can also get additional umbrella coverage for your auto insurance if you have vehicles that are owned and operated by your business. In that case, we recommend looking into a commercial auto policy.
An umbrella policy will only provide excess coverage for general liability as well as workers’ compensation liability, and not for professional liability, cyber, or employment practices liability.
There are a couple of different types of disability insurance you might explore.
- Corporate life & disability buy-out: This coverage allows the business to continue remuneration for key executives and to buy out shareholders, in the event that death, illness, or injury precludes them from performing all of their usual business duties.
- Key person life & disability: This coverage covers an executive whose premature death or disability would have an adverse financial impact on the business. It’s important protection to consider to replace your income in the event you were temporarily or permanently disabled.
Directors & officers (D&O)
This insurance is designed to protect the company, its directors, its officers, and its employees against suits alleging that they were not prudent and reasonable in discharging their fiduciary and legal duties to the company.
This policy may be redundant to the professional liability policy for independent consultants. If you are unsure, consult with an attorney or your insurance broker.
Separately from your own firm, if you sit on a board (of a non-profit or for-profit organization), there are some specific and tailored insurance products available to cover any potential liability you might be exposed to through that role.
It’s recommended that you request D&O coverage from any organization that you are a board member of (whether non-profit or for-profit). You should share this with your insurance broker or agent for guidance that the coverage is appropriate and your service on that board is covered.
Business insurance carried by most independent consultants
For the independent consultants we surveyed, there were two main types of insurance that nearly everyone reported carrying:
- Professional liability (66%)
- General liability/business owners policy (63%)
In smaller numbers, consultant members also reported carrying the following types of insurance, in order of responses:
- Cybersecurity/privacy (19%)
- Property/business asset protection (12%)
- Umbrella policy (12%)
- Business auto (11%)
- Workers’ compensation (11%)
- Directors and officers (9%)
- Disability (7%)
- Employment practices liability (6%)
- Crime/employee dishonesty/theft (4%)
- Intellectual property (3%)
- Loss of business income/business interruption (2%)
Seven percent of respondents said they weren’t sure what policies they carry.
Cost of business insurance policies
Many independent consultants provided us with the annual premiums they pay for their business insurance (in U.S. dollars):
- Less than $500: 24%
- $500-750: 14%
- $750-1,000: 14%
- $1,000-1,250: 14%
- $1,250-1,500: 10%
Fewer than 1% of respondents reported paying more than $1,500 per year for business insurance.
Other types of business insurance
The above are the main types of insurance an independent consultant needs, but there are some additional types of insurance you might want to review to see if you need any of them. When in doubt, discuss them with your insurance broker.
- Auto Liability: You may consider separate insurance for any vehicles owned or used by the business. Additionally, a “Hired & Non Owned” policy provides liability for third-party bodily injury or property damage due to the negligent use and operation of an automobile you don’t own that is rented/hired or borrowed in the course of your business.
- Computer equipment: Although the Business Owners policy provides fire, theft and water damage coverage to the hardware, the policy does not provide coverage for brownout, mechanical breakdown or software reproduction.
- Crime: Insurance that covers an organization for its financial loss arising from different types of business-related crimes, such as employee dishonesty, theft of money and securities, robbery or safe burglary, and computer fraud.
- Employee benefits liability: To protect the corporation for errors in the administration of employee benefit plans.
- Fiduciary liability: Protection against claims for mishandling or misappropriating funds of other over which the company maintains control. A common fiduciary responsibility could be the management and control over a company’s 401K and pension plans. Officers and Directors can be held individually responsible for the mismanagement or misappropriation of assets held on behalf of others.
- Foreign liability: Provides liability and appropriate workers compensation coverage to cover overseas exposures. Lawsuits first brought outside of the United States are not typically covered by domestic policies.
- Intellectual property: Insurance covering an organization’s first-party or third-party risk of loss arising from the holding of patents and copyrights. First-party coverage covers the organization from financial loss due to the infringement upon its own patents and copyrights by others. Third-party coverage covers the organization when it inadvertently infringes upon the patents or copyrights of another party
- Loss of business income: Provides coverage for the lost income and associated extra expenses due to the suspension of business operations from a covered cause of loss.
- Political risk: Insurance covering financial loss to the insured organization due to a political crisis or conditions, including revolution, civil unrest, government confiscation of assets or contract frustration, in a specified country resulting in disrupted operations or lost revenue to the covered organization.
- Property: Covers direct damage to insured property due to covered causes of loss, except as excluded. Resulting loss of business income and certain extra expenses may also be covered.
Insurance information outside the United States
Most of the information in this resource is pertinent to U.S.-based businesses, although much of it applies to other countries.
In addition, here is some region-specific information for consultants based outside the U.S.
- Workers’ compensation insurance (if you have employees)
- Public liability insurance
- Third party personal injury insurance (if you own a motor vehicle; often part of the vehicle registration fee)
- Professional indemnity insurance
- Management liability insurance
- Illness, income protection, trauma and/or disability insurance
- Business interruption or loss of profits insurance
- Employee dishonesty
- Building and contents/burglary
- Electronic equipment and property in transit insurance
- Tax audit insurance
- Technology and cybercrime insurance
- Insurance in your state or territory
- Loss liability insurance
- Professional and public liability
- Business asset protection
- Legal insurance
- Retirement insurance
- Total permanent disability insurance
- Vehicle/fleet insurance
- D&O (directors & officers) liability insurance
- Business interruption insurance
- Electronic or special computer insurance
- Machinery insurance and machinery business interruption insurance
- Exhibition insurance
- Accounts receivable insurance
- Legal expenses insurance
- Operating costs insurance
- Absenteeism insurance:
- Third party car insurance (if you use and/or own motor vehicles)
- Buildings insurance if you own a commercial building or other immovable property
- Professional indemnity insurance or business liability insurance for some professions (required by the professional association)
- Disability insurance
- Business interruption insurance
- Export credit insurance
- Goods-in-transit insurance
- Loss-of-income insurance
- Machinery and equipment insurance
- Credit insurance
- Business legal expenses insurance
- Sick leave insurance
- Cyber insurance
- Buildings, goods, and inventory insurance
- Employers’ liability
NOTE: You may not need EL insurance if you only employ a family member or someone who is based abroad.
- Business car insurance (required if you use your car for business purposes)
- Contractor insurance
- Public liability insurance
- Professional indemnity insurance
- Business buildings/contents insurance
- Personal accident insurance
- Business interruption insurance
- Business legal protection insurance
Additional tips and advice for obtaining business insurance
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.”
The re-quote and renewal process
Your broker can help you navigate the annual renewal process. They can also advise you as to how often you should get a new quote for your business insurance.
Stockman advises against re-quoting every year. Insurance companies don’t like to see the same risk coming up year after year for new quotes. She recommends establishing a relationship with your carrier of choice and building on that.
If you do want to shop around for quotes after a few years, you will likely be in a much better position for renewal and little to no rate hikes.
We wish to thank the following members who contributed to this survey and agreed to have their names shared in the acknowledgements. Many other members completed the survey and asked not to be named — we thank them as well.
Michelle Mc Guinness
Maria Isabel Rios
Gian Luigi Borasio
Guillem “Bill” Garcia
Sarah Chapman Wilson