The importance of insurance for professional services businesses

3 minute read  

Whether you’re a consultant or a copywriter, your business depends on your skills and talents — and your ability to keep clients happy. Unfortunately, we live in an increasingly litigious society, and while all businesses are at risk of being sued, professional services businesses also face professional liability exposures.

This is different from general liability exposures, such as a client slipping and falling on your property and injuring themselves (which professional services businesses also face); the commercial general liability (CGL) insurance form is designed to respond to these types of general liability exposures.  Professional liability exposures, on the other hand, would include claims resulting from your business’s errors and omissions that are responsible for causing financial harm to your client.

Let’s face it, mistakes can happen. Maybe a project was delayed resulting in a financial loss to your client. Maybe a client accuses you of providing bad advice. That’s where having the right insurance policy can help.  These types of claims would look to an Errors and Omissions or Professional Liability policy to respond.

If any of these accusations leads to a lawsuit, results could be costly — not just in legal fees, but in reputational damage as well. As a professional, your reputation is critical to your success. Damage to your reputation can seriously impact the viability of your business, so having the proper insurance coverage in place is critical to help ensure the continuation of your business should lawsuits arise.  Without the proper insurance, a lawsuit could cause financial ruin for a small business, especially if the courts rule in your client’s favour and you’re on the hook for damages.

What is professional services insurance?

In addition to important coverages like commercial general liability and errors & omissions, professional services insurance includes other key coverages like commercial property, business interruption, cyber insurance and commercial auto, among others.

If you use your personal vehicle for work, don’t assume your personal auto policy will cover you in the event of a loss.  If you do use your vehicle for business purposes, you’ll want to be sure to incorporate a commercial auto policy into your insurance package as well.

If you store clients’ private data on your computer, then you’ll also want to consider cyber insurance coverage.

Who needs professional services insurance?

If your small business provides a professional or creative service, gives advice or recommendations, or consults on technical topics, then you need professional services insurance. Professional service providers can range from copywriters and graphic designers to IT professionals and management consultants, and a host of other professions.

Why is professional services insurance important?

As a professional, clients rely on you for your specific expertise or set of skills. If they feel that your expertise or skills caused them harm or financial loss — even if it’s untrue or due to factors beyond your control — you need protection from costly litigation should lawsuits arise.

While this is reason alone to consider errors & omissions insurance, it’s not the only one. Some professions are governed by regulatory bodies that require their members to carry adequate insurance coverage. Even if this doesn’t apply to your profession, carrying the proper insurance coverage still makes a whole lot of sense!

In some cases, clients may require that you show proof of insurance and having that insurance coverage not only shows that you’re a responsible business owner, it can also give clients peace of mind (since it reduces their risk exposure). If your competitors don’t have insurance, it also gives you a leg up and can help open doors to new opportunities.

Perhaps equally important, carrying all key insurance coverages can give you peace of mind. Let’s face it, as a small professional services firm, you have enough on your plate. If there’s a nagging worry in your mind that you’d face financial ruin if you made a simple mistake, knowing that you’re protected can help to ease that worry. So, you can focus on what you do best, instead of worrying about worst-case scenarios.

Protect yourself with TruShield Insurance

Successfully managing your business involves more than just your skills and hard work. It’s also about being prepared for unexpected risks that come with providing your clients with your professional services. To learn more about how our tailored insurance coverages can help your business, visit our Professional Services Insurance page today.

This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.