A management consultant is a professional who helps organizations in various industries improve their business, including their strategies, objectives, and overall business plans. He performs duties like reviewing the business staff and structure, preparing development programs, increasing cost effectiveness, improving revenue and profits, reviewing strategies and objectives, looking for new techniques to hire personnel and provide incentives, recommending plans for improvement, and executing new projects.
As a management consultant, you have a lot of responsibility and the associated risks could cost you your business livelihood. For this reason, professional liability insurance is crucial and one of the most important insurance policies to obtain.
Management Consultants Risks
As with any business endeavor, you are open to a wide range of risk exposures. And, as a management consultant, you are open to your own set of risks. In your type of business, an alleged failure to perform a service or error or omission in the advice you provide could be cause for a client to bring a claim against you. Whether through negligence or not, any error you make with the management and advisement work you do for another business can cost you big in terms of legal costs, even if the claim turns out to be groundless. Therefore, legal liabilities are one of biggest risks your chosen profession has. Case in point: Should you recommend a new software system that fails to perform and ends up causing your client more complications and money, it could be cause for a potential legal action claim against you.
Professional Liability Coverage
Professional liability coverage is one of the most important business insurance policies for management consultants to obtain. Professional liability insurance will protect you and your business from legal claims made by a client based on the advice and services you provide. Even the tiniest mistake made, such as electronic error from a program you recommended which caused your client financial loss, can cause you to lose thousands of dollars in legal fees. These and other associated costs of the lawsuit can be covered by the professional liability policy. Professional liability insurance covers errors or mistakes made while performing certain tasks as well as failing to provide certain services. Also referred to as errors and omissions insurance, professional liability helps to prevent you from bearing the full bill of defending yourself against a negligence claim made by one of your client.
The rationale behind professional liability coverage is that the typical general liability insurance coverage policy is intended to protect against personal injury, property damage, or bodily injury, rather than an error or omission in services management consulting provided. Going back to the above example, the software program you recommended may fail to perform, but it didn’t cause bodily injury or property damage. Therefore, in this case, professional liability insurance will be the policy you need to provide coverage.
Why Management Consultants Need Professional Liability Coverage
As a management consultant, you are responsible for advising and managing other firms. If any type of mistake is made, the responsibility is in your hands. If you document something wrong, make mistakes in verification, misrepresent services or products, lose or misuse a client’s property, don’t protect the client’s property, or get involved in a breach of contract that causes financial harm to your client, you can be sued by the organization for damages. However with professional liability insurance, your business assets are protected. By choosing professional liability insurance, you’re protecting your business, assets, and your reputation.
Of all the different types of business insurance policies available, one of the most beneficial to you as a management consultant is professional liability insurance.