Business Insurance for Consultants

Why might consultants need business insurance? 

While no one wants to consider the prospect, sometimes things can and do go awry. For example, if a consultant provides advice that leads to a client’s financial loss, or your client slips and falls while visiting your office.  

Business insurance – which includes a range of insurance types that may be relevant to your consulting job – could protect you and your business financially. It can cover everything from personal or third-party injury to equipment theft to lost income, potentially saving you hundreds or even thousands in expenses. 

This is especially the case if you work as a sole trader. Under this business structure, you’re legally and financially liable for any debts or legal claims¹Business.gov.au – Sole Trader – meaning if they arise, you risk losing your personal assets. 

What are some of the biggest risks of being a consultant? 

Working as a consultant can be really rewarding, but it may come with risks like: 

What kind of cover might be relevant for consultants? 

These risks might sound terrifying, but that’s where insurance comes in. It can offer peace of mind and financial protection if any of the above were to occur. Here are some of the most common types of consultant insurance. 

Professional indemnity insurance 

Providing consulting services is a significant part of your role. But if that advice or service were to lead to a financial loss for a client, how could you protect yourself? 

Professional indemnity insurance protects you against losses claimed by a third party due to alleged or actual negligence or errors in your professional services or advice. 

Several industries actually require consultants to have professional indemnity insurance with a minimum amount of coverage before they’re allowed to practice. Examples include medical consultants, accountants, legal consultants and construction consultants. 

Public liability insurance 

Public liability insurance is designed to provide protection for you and your business in the event a customer, supplier, or a member of the public is injured or sustains property damage as a result of your negligent business activities. Public liability insurance can help cover things like medical costs, property repair or replacement, lost income for the third party and legal fees. 

Tax audit insurance 

Sometimes, the ATO requests a tax audit to check that everything’s above board. Organising one can be an expensive, time-consuming and truly taxing experience (sorry, we couldn’t help ourselves). 

Instead of shouldering the costs yourself, tax audit insurance may cover a business for specified costs in the event that it is selected by the ATO for auditing, including the costs of accountants and other professional fees incurred during the audit. 

Cyber liability insurance 

Picture your computer getting hacked and all of your clients’ sensitive data – like their personal details and financial records – getting leaked. Not only would you be facing a massive headache, you might also be looking at significant legal and compensation costs. 

Cyber liability insurance could help cover some of the costs associated with the cyber event, such as data recovery fees, as well as the cost of notifying affected clients and crisis management. 

Business interruption insurance 

If you had to stop work due to a natural disaster like a fire, storm or flood, business interruption insurance may provide financial protection for the loss of income and increased costs of operating your business caused by a specified insured event (such as property damage or fire). It is also designed to assist your business to recover from an insured event by paying ongoing expenses such as wages or rent.  

Personal accident and illness insurance 

Personal accident and illness insurance covers you for loss of income if you are unable to work as a result of an injury or illness. 

Portable equipment insurance 

Everything from your computer and software to your equipment, or your tools if you’re a tradie consultant, are some of the most valuable parts of your job. Literally – you might be facing thousands of dollars in expenses to replace them! 

Portable equipment insurance (also known as general property insurance) covers you for loss and damage to items of portable equipment associated with your business. 

Is business insurance mandatory for consultants? 

While insurance is not legally required for most consultants, certain contracts or agreements, such as leasing commercial property, may stipulate insurance requirements. What’s more, having insurance coverage can help protect your business from lawsuits, claims and other unwanted financial surprises. 

Helpful tip from BizCover

Depending on the industry you work in, you might be required to take out certain kinds of insurance, especially professional indemnity insurance or public liability insurance. But even if it’s not a requirement, having insurance can provide peace of mind and credibility with potential clients.

What doesn’t business insurance cover? 

While insurance can certainly be a helpful addition to your consultancy, it won’t necessarily cover everything. Some exclusions to be mindful of include: 

• Professional indemnity exclusions: Depending on your professional indemnity insurance policy, certain scenarios and costs are typically not covered, such as fines/penalties, dishonest acts, claims that were already in progress before you took out insurance, and activities that aren’t related to your profession. An example would be if you were a marketing consultant and provided legal advice – that’s unlikely to be covered in your policy.
• High-value items: While many items will be included in a portable equipment policy, some may not be. If you’ve got particularly high-value items, such as specialised cameras or architectural tools, you may want to have them separately listed.
• Intentional acts: Honest mistakes that lead to client losses are typically insurable, but intentional or illegal ones aren’t. That means if you intentionally mislead a client and they lose money, your insurance is unlikely to foot the bill.
• Employee injuries or illness: This falls under workers’ compensation, which is mandatory across Australia if you have people working for you. 

What mistakes do people make when choosing business insurance? 

Don’t be caught out by one of these common pitfalls: 

• Underestimating your business risks: You don’t want to encounter any unexpected gaps if you make a claim. When you’re taking out insurance, consider all the potential risks to your business and how much it would cost to remedy any issues.
• Only considering the price: Price is absolutely an important factor, but a cheaper policy may have a higher excess, lower coverage limits or more exclusions.
• Ignoring policy exclusions: On that note, make sure you’re fully across what is and isn’t covered in your policy.
• Not updating your policies regularly: A good rule of thumb is to update your policy annually, which gives you an opportunity to regularly review your current business needs. Think about whether you’ve expanded your services, are working in new locations or have employed more staff, and make sure your business insurance is updated to reflect those changes.
• Assuming you don’t need insurance if you WFH: Even if you’re not working in an office or on-site with a client, different types of insurance (such as professional indemnity insurance and contents insurance) may still be very useful. 

How much does business insurance for consultants cost? 

This really comes down to the type of insurance you go for and the specifics of your business. The main factors that go into business insurance costs include the size of your consultancy business, the risks inherent to your line of work, your coverage limit, exclusions, add-ons, your location and your claims history. 

The cost can also vary between providers, which is why it pays to do your research and find a policy that balances your needs and budget. 

Where can I find and compare business insurance? 

Our business insurance comparison tool, which we’ve launched with BizCover, allows you to compare lots of different policies from some of Australia’s leading insurance providers, helping you find the policy that’s just right for your consulting business. 

This information is general only and does not take into account your objectives, financial situation, or needs. It should not be relied upon as advice. Insurance services are provided by BizCover Pty Limited under its Australian Financial Services Licence (AFSL 501769). iSelect acts as a white-label partner of BizCover, facilitating access to insurance products. As with any insurance, cover will be subject to the terms, conditions, and exclusions contained in the policy wording. 

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