Professional Liability Insurance Cost for Consultants? (2023 Rates) (2023)

Consultants provide advice and services for their clients. Even the most careful and by-the-book consultants can make mistakes and get sued. These lawsuits are often for millions of dollars, enough to put a consultant out of business.

That is why it’s crucial to protect the consultancy you’ve built with professional liability or errors and omissions (E&O) insurance. This article will explain how much it costs, the value it provides, and what you need to know to get the right coverage to protect your consulting business.

  • How much does professional liability insurance cost for consultants?
  • How much professional liability insurance do consultants get?
  • What factors impact consultant professional liability insurance costs?
  • How to get cheap consultant professional liability insurance?
  • What does consultant professional liability insurance cover?
  • Are consultants required by law to get professional liability coverage?
  • Best professional liability insurance companies for consultants

How much does professional liability insurance cost for consultants?

Consultants pay an average premium of $58 per month, or $670 per year, for a professional liability insurance policy, also known as errors and omissions insurance. This is relatively little when you consider that it pays legal and settlement costs associated with lawsuits related to professional mistakes and accusations of negligence, which can run to a million dollars or more.

In one study, of all the consulting businesses that get professional liability insurance, 20 percent pay less than $600 per year, and 45 percent pay between $600 and $1,200 annually. The rest pay more than $1,200 for a year of coverage, usually because they work in risky industries or have made a professional liability claim in the last three years. Some of the risky industries for consultants are investment and finance, technology, and construction.

How much does E&O insurance cost for tech consultants?

The work that technology consultants do has a different risk profile because they have to make sure their work is not increasing the cyber risk and data breach risk for their clients. That’s the reason why tech consultants usually get an E&O insurance policy with additional cyber insurance coverage, which is usually referred to as tech E&O insurance.

The average cost of a tech E&O insurance policy is $95 per month, or $1,140 per year. Most tech consultants pay around $900 to $1,500 a year for their tech E&O insurance policy.

How much professional liability insurance do consultants get?

Policy limits are how much your insurer will pay on covered claims. A per-occurrence limit is a maximum amount an insurer will pay for a single incident. An aggregate limit is the most your insurance company will pay out on all claims during your policy period, usually one year.

(Video) What Is Professional Liability Insurance? Costs and Coverage #shorts

Over one-half of consultants purchase professional liability policies with a $1 million per-occurrence limit and a $1 million aggregate limit.

Higher limits cost more and provide more coverage. An insurance agent or representative at a business insurance company can help you select a limit to cover the risks you face without paying for unnecessary protection.

What factors impact consultant professional liability insurance costs?

This coverage is unique, just like every consulting business is unique. That’s why it’s challenging to provide a simple answer to the absolute cost of professional liability coverage. It will differ from consultant to consultant.

Here are a few factors typically used to calculate professional liability insurance premiums:

  • Industry
  • Business trade
  • Policy limits
  • Professional experience and education
  • Claims history.

How the insurer calculates consultant professional liability insurance premiums will impact costs. You must get several quotes from different insurers to ensure that you get the right coverage for you at the best possible price.

How to get cheap consultant professional liability insurance for consultants?

Below are a few tips to reduce the cost of consultant professional liability insurance:

Get the right policy terms

Different coverage limits and deductibles impact the cost of professional liability insurance for consultants. Make sure you get the right coverage limits and deductibles for your policy. Don’t get too high coverage limits or too low deductibles if you don’t need to. That can increase the cost of your consultant professional liability insurance policy.

Follow all risk prevention practices and standards in your industries

The practitioners in different industries are exposed to different types of risks. There are different risk prevention standards available in each industry and usually recommended by leading industry trade groups or associations. Be sure to implement and follow these risk prevention standards. That will help you prevent mistakes and claims and you may also get discounts for having these practices in place.

(Video) What Is Professional Liability Insurance? Costs and Coverage

Compare several quotes to find the cheapest policy

Last but not least, the oldest but also the most effective way to find cheap consultant professional liability insurance policy is to get and compare several quotes to find the cheapest one. It is relatively easy to get several quotes online from CoverWallet, Simply Business, or Thimble. Each of them shouldn’t take you more than 10 minutes. Comparing all of these quotes will help you find the cheapest one for your consulting business

Is professional liability insurance tax deductible?

Because the Internal Revenue Service (IRS) categorizes insurance policy premiums as business expenses, it should be okay to deduct the cost of professional liability insurance on your income tax return. It’s another way to “save money” on professional liability insurance coverage.

It’s essential to consult with a reputable accountant or tax professional to make certain that your business tax returns are filed correctly and that you’re only taking allowable deductions.

What is professional liability insurance?

Consultants provide advice or personal services to customers. That puts them at extraordinary risk because they could provide inaccurate or incomplete advice or make a mistake in delivering services.

In short, professional liability protects your business if you make mistakes or deliver services a client isn’t happy with. It covers legal and settlement costs if a client sues you over an error or misstatement.

What does consultant professional liability insurance cover?

Here are some scenarios that illustrate what this insurance covers:

You’re an accountant. You advise a client on a tax move that could save them a lot of money in taxes. They agree to it, but in the end, it costs them more. They sue you over the added expense. Professional liability insurance for consultants would pay legal and settlement costs over the incident.

You are a wedding consultant. A bride selects a wedding cake based on your recommendation. The baker makes a scheduling error, and the cake is not delivered to the wedding. The consultant sues you because of the missing wedding cake. Professional liability insurance would pay legal and defense costs whether you’re held liable for the incident or not. It will also pay damages if you are.

(Video) General Liability Insurance - How Much Does It Cost?

You work as an independent financial advisor. You advise a client to purchase a business because it could double their revenue. Instead, the company tanks. It almost puts the business you advised to buy it out of operation. They sue you over the wrong advice. Your consultant’s professional liability insurance will pay legal and settlement costs up to policy limits.

You work hard every day to deliver the best advice or services to your clients. But, you’re human, and mistakes occur. Professional liability insurance can help protect the business you’ve worked so hard to build if — or when — you make an error and are sued over it.

What doesn’t professional liability insurance for consultants cover?

Professional liability insurance has limits. It doesn’t cover:

  • Malicious, dishonest, criminal, or illegal activities you’re sued over
  • Copyright, patent, or trademark infringement
  • Bodily or physical injury
  • Property damage
  • And more.

Do consultants need professional liability insurance?

E&O insurance covers you if you make a mistake while offering professional services or provide incorrect or incomplete advice. People are only human, and they make mistakes. It’s why most consultants buy professional liability insurance. It provides a safeguard against expensive claims that may be filed against you resulting from errors or negligent actions.

Learn more at Why Do Consultants Need Professional Liability Insurance?

Are consultants required by law to get professional liability coverage?

Each state issues its laws governing the requirements of operating a small business, including which insurance coverage you need. An experienced business insurance agent or insurance company representative will let you know which coverages your state will require you to secure.

Remember: Even though you may not be legally bound to have professional liability insurance, the coverage can protect the consulting business you’ve worked so hard to build if you ever make an error and are sued over it.

Is professional liability insurance for consultants the same as errors and omissions coverage?

The insurance terms professional liability and errors and omissions are often used interchangeably. However, there are subtle yet significant differences between the two types of coverage. Overall, both policies cover mistakes and errors made by you when providing consulting services to clients. The chief distinction comes down to the type of consulting you do.

(Video) Small Business Insurance 2023/ Contractors General Liability insurance

Errors and omissions coverage is more commonly purchased by accountants, tax preparers, financial advisors, and business consultants, who provide more guidance-centered services. A professional liability policy is usually purchased by people who provide physical services, such as bakers and estheticians.

Best professional liability insurance for consultants

Professional liability insurance for consultants is a popular policy. Many insurance companies offer it, which can make it a bit confusing to find the best companies for your needs. We have done the research and here are the our recommendations of the best companies offering professional liability insurance for consultants.

  • CoverWallet: Best for Comparing Online Quotes
  • NAPA: Best for Investment Advisors
  • TechInsurance: Best for IT Professionals
  • The Hartford: Best for Accounting Accountants
  • Biberk: Best for Tax Preparers
  • Markel: Best for Financial Advisors

Learn more at the best business insurance for consultants and consulting businesses

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(Video) What Is Professional Liability Insurance? Costs and Coverage #shorts



How much does professional liability insurance cost for a consultant? ›

General liability insurance costs for consulting businesses

The average cost of general liability insurance for consulting companies is $30 per month, or $364 per year. A general liability policy can pay your defense costs if someone outside your business sues over bodily injury, property damage, libel, or slander.

How much does a $1000000 liability insurance policy cost? ›

On average, small business owners pay a few hundred to $1,000 dollars annually for $1 million of liability insurance coverage. However, liability insurance costs vary across businesses depending on factors like your: Payroll size. Claims history.

What insurance do I need as a consultant? ›

Sometimes called errors and omissions insurance (or E&O) for short, professional liability insurance is a must-have. That's because as a consultant, you're a professional. Which means you provide a service to your clients, using your expertise.

What is 1000000 professional liability? ›

It's simple: The $1,000,000 is the amount of professional liability coverage available for the settlement or a judgment against the insured in a single claim (this is known as the amount “per claim” rather than as occurrence in some places, but “occurrence” is the actual insurance term.)

How much should I charge per hour as a consultant? ›

To calculate your hourly consulting rate from your working week salary follow these steps: Determine what salary you'd like to make. Take that number and divide it by 52 (number of working weeks), then again by 40 (number of hours each week). Take that number and mark it up by 25% to 50%.

What are professional fees in insurance? ›

Professional fees insurance covers fees for experts such as attorneys, architects, engineers and accountants who are providing services for settling a claim.

How do you calculate liability insurance? ›

Calculate quotes by multiplying the rate by the size or revenues of your company. For example, if the quote is for 10 percent, multiply your gross revenues by 0.10 to calculate your cost. If the quote is $25 per square foot, multiply $25 by the amount of occupied square footage in your office.

How much is a $2 million dollar insurance policy for a business? ›

The average cost of a $1 million / $2 million BOP policy for a small business is $1,217 per year, and the median is $638.

What is professional liability insurance coverage? ›

What Is Professional Liability Insurance? Professional liability insurance helps cover you and your company if you make a mistake in the professional services given to a customer or client. This coverage is also known as errors and omissions insurance (E&O). Even if you're an expert in your business, mistakes happen.

How do I protect myself as a consultant? ›

You must always protect yourself by creating a contract the client will sign. After all, this is your livelihood at stake, and if something goes wrong, you'll need solid legal documentation to make sure you get paid. Contracts protect both the contractor and the client.

What insurance do I need as a self-employed consultant? ›

Professional indemnity insurance

Are you a professional who gives certain types of advice or services to your clients? Then you should have professional indemnity insurance. It can offer protection for your small business if a client claims you've been negligent, given poor advice or made a mistake.

What are the 3 most common insurance needs that all businesses must have? ›

When you're starting your own business, some types of coverage you should make sure to have are:
  • General liability insurance.
  • Professional liability insurance.
  • Workers' compensation insurance.

Is professional liability expensive? ›

Average cost by profession

Many small businesses can expect to pay somewhere between $350 and $1,800 per year for professional liability insurance. That's between $29 and $150 per month. Many of our policyholders are in the $400 range for a year's worth of professional liability coverage.

What is professional liability limit? ›

Liability limits are the maximum dollar amount of damages (“indemnity”) an insurance carrier will pay on your behalf.

What does 100k liability mean? ›

The Liability Insurance Formula

The 100 means the policy covers a maximum of $100,000 for bodily injury coverage per accident. The last 50 refers to the amount of property damage liability per accident, which would also be $50,000.

How do I determine my consulting rate? ›

If you're just starting a consulting business, the best way to determine your rate is to divide your former salary by 52 work weeks and then divide that number by 40 (the number of work hours in a week). This will give you the hourly rate you were making before.

How do I work out what to charge as a consultant? ›

How do I determine my consultation fees?
  1. Determine your hourly rate based on your experience and industry standards. ...
  2. Estimate the time that will be spent on the project. ...
  3. Factor in additional consulting costs. ...
  4. Decide on a pricing model. ...
  5. Consider retainers.
Dec 13, 2018

How do you price consulting fees? ›

Annual Salary divided by 50 weeks (the number of weeks in a year minus 2 for vacation) divided by 40 hours (the average number of hours worked in a week). Now that you've got your hourly rate, double it or triple it. That's your consulting rate.

What are examples of professional fees? ›

Legal and professional fees

These include fees charged by lawyers, accountants, bookkeepers, tax preparers, and online bookkeeping services such as Bench. If the fees include payments for work of a personal nature (for example, making a will), you can only deduct the part of the fee that's related to the business.

What are professional charges examples? ›

Some illustrative examples of professional fees are fees paid to a lawyer, doctor, engineer, architect, chartered accountant, interior decorators, advertisers, etc. Technical services would include the rendering of managerial, technical or consultancy services.

What type of cost is professional fees? ›

In general, professional fees should be categorized as operating expenses on a company's income statement. However, there may be some instances where professional fees are classified as other expenses, such as in the case of certain legal fees that are considered one-time charges.

How much does liability insurance cost in the US? ›

How Much Is General Liability Per Year? General liability insurance costs vary, so businesses pay different costs per year for coverage. Typically, businesses pay a few hundred to a couple thousand dollars a year. The average cost is $1,057 annually.

How much liability insurance do I need for net worth? ›

If your net worth is $300,000, for example, you should have an auto policy that includes liability coverage for bodily injury of $100,000 per person and $300,000 per accident. Likewise, your homeowner's liability coverage should be at least $300,000.

What is the formula for calculating coverage? ›

The interest coverage ratio is used to measure how well a firm can pay the interest due on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense during a given period.

How much insurance does a small business pay? ›

Small business insurance costs anywhere from about $14 to $124 a month, depending on which types you buy—general liability, commercial property, business interruption insurance, inland marine, cyber liability and/or workers compensation.

How much should I budget for business insurance? ›

Many small operations can expect to pay between $600 and $1,800 per year. Although, the policy average is around $900 per year (or $75/month) for professional liability (i.e. errors and omissions). Professional liability insurance cost factors: Your profession.

How much does employers liability insurance cost? ›

As of February 2022, employers' liability insurance in the United Kingdom cost an average of 61 British pounds for a single officer worker, whilst employers' liability insurance for one worker who performs tasks associated with your main line of business was set around 213 British pounds.

What professional liability insurance does not cover? ›

Generally, under a professional liability insurance policy, only the civil liability claims are covered. If the claim arises out of a criminal act or violation of law, then it is not covered under this policy.

What is the difference between E&O and professional liability insurance? ›

Professional Liability insurance, also known as Errors and Omissions (E&O) coverage, is designed to protect your business against claims that professional advice or services you provided caused a customer financial harm due to actual or alleged mistakes or a failure to perform a service.

Why should I have professional liability insurance? ›

A professional liability insurance policy helps with common claims like negligence, misrepresentation and inaccurate advice. It will also help cover violations of good faith and fair dealing. If a client sues you, this policy may help pay your legal expenses.

What are the three rules of consulting? ›

One of the best or at least most accessible theoretical frameworks I found was Gerald Weinburgers “secrets of consulting” which presents his three laws:
  • There's always a problem.
  • It's always a people problem.
  • Never forget they're paying you by the hour.
Jul 19, 2019

What is a good weakness for consulting? ›

The 25 Best Weaknesses for a Consulting Interview
  • Focusing too much on details and not enough on the big picture.
  • Difficulty presenting effectively in front of large groups.
  • Trouble working effectively with people that have different working styles.

What not to do as a consultant? ›

10 things you should never do on a consulting job
  • 1: Ridicule another consultant's work. ...
  • 2: Make deals you aren't authorized to make. ...
  • 3: Take shortcuts. ...
  • 4: Book time spent socializing. ...
  • 5: Act like employees are in your way. ...
  • 6: Flirt. ...
  • 7: Engage in political or religious discussions. ...
  • 8: Leave without explaining what you've done.
Jan 12, 2010

Why do consultants need general liability insurance? ›

If you or an employee at your consulting firm accidentally damages client property, your business could be held liable. General liability insurance helps cover costs related to third-party property damage. It also covers medical bills and legal expenses if a client or other non-employee is injured at your office.

How much do freelancers pay in insurance? ›

How Much Does Health Insurance Cost for a Freelancer? The current average cost for self-employed health insurance in the United States is $495 a month — $5,940 annually. The price can be much lower — about $200/month on average — if you qualify for a tax subsidy.

Am I self-employed if I am a consultant? ›

Contractors, freelancers, and consultants are self-employed individuals who work alone or as part of other businesses. These terms cause a great deal of confusion because they are often used interchangeably when discussing self-employment.

What are the 4 types of insurance that everyone should have? ›

There are, however, four types of insurance that most financial experts recommend we all have: life, health, auto, and long-term disability."

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

Unlike commercial property coverage, general liability only provides coverage for damage and injuries your business causes to a third party. It does not cover damage to your business' own property or injuries to your employees.

Can you claim professional liability insurance on taxes? ›

You can deduct the premium paid for professional liability insurance required to maintain your professional status.

Do I need both general and professional liability insurance? ›

If you have both types of risks, then yes, you do need both types of insurance. Additionally, in some cases, an employer or client may require you to carry professional liability, general liability or both as a condition of your contract.

How much is a $1000000 liability policy? ›

On average, small business owners pay a few hundred to $1,000 dollars annually for $1 million of liability insurance coverage. However, liability insurance costs vary across businesses depending on factors like your: Payroll size. Claims history.

What can professional liability also be called? ›

Professional liability insurance, also known as errors and omissions insurance, helps protect your business if your client claims financial damages from the professional service that you provide.

What are the 3 limits of insurance policies? ›

Types of Insurance Policy Limits

Per-occurrence limits: The maximum amount an insurer will pay for a single event/claim. Per-person limits: The maximum amount an insurer will pay for one person's claims. Combined limits: A single limit that can be applied to several coverage types.

Is it better to have full coverage or liability? ›

Full coverage typically gives you more protection and is likely required if you are still making payments on your car. If you're driving a vehicle that's more than 10 years old or has high mileage, or you have enough money to easily replace it, you may want to consider going with liability-only.

How much more is full coverage vs liability? ›

How much cheaper is liability than full coverage? Liability insurance is 64% cheaper than full coverage, on average. Liability car insurance costs an average of $720 per year, while full coverage car insurance averages $1,997 per year, according to WalletHub data for 2021.

Do I need professional indemnity insurance as a consultant? ›

Insurance you may need as a Consultant. This is one of the most important forms of cover for your business. Professional Indemnity insurance includes cover in the event a client alleges your service or advice caused them loss. This may be a requirement for any business that deals with members of the public.

Does a freelancer need professional liability insurance? ›

Liability insurance is required by many clients, and helps freelancers protect themselves and their business from the financial burden of mistakes and accidents — whether they were at fault or not.

What is a good hourly rate for freelancer? ›

According to the Payoneer survey, which covered 150 countries and over 7,000 freelancers around the world, freelancers on average make $21/hour. Freelancers around the world charge the following hourly rates: up to $5 - 16% $6-$10 - with 24%, most freelancer fall under this category.

What is the best hourly rate in freelancer? ›

To further emphasize the importance of work experience, these are all the average wages for all kinds of freelancers in 2021 across all age groups: 18-24 years – $16/hour. 25-34 years – $19/hour. 35-44 years – $24/hour.

Why is professional indemnity insurance so expensive? ›

If your professional indemnity insurance is expensive, it is likely reflecting the risk of your business being hit by a significant claim. This could be due to the historical precedent in your profession, the size of your specific business and the level of cover you require.

What happens if I don't have professional indemnity insurance? ›

To not have the insurance is usually a serious disciplinary offence which can result in a firm being fined or closed down by their regulator. In many unregulated services such as IT and Tech, professional indemnity insurance is not a regulatory requirement.

What is included in professional liability insurance? ›

Professional liability insurance typically covers negligence, copyright infringement, personal injury, and more. Claims covered by a professional liability policy can include damages caused by things you did and/or things that you should have done.

Is it good to have professional liability insurance? ›

Any business that sells its expertise should consider professional liability insurance. Also known as errors and omissions (E&O) insurance, this coverage protects your company and your bottom line from customer claims of late, incomplete, or unsatisfactory work. Accusations like these can lead to costly lawsuits.


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