Insurance for Business Consultants: What You Actually Need

What insurance does a business consultant actually need?

If you're a business consultant — management, IT, HR, marketing, strategy, whatever the specialty — you've probably been asked for proof of insurance at least once. Maybe a client put it in the contract. Maybe your landlord asked for a certificate. Maybe you just Googled "do I need insurance as a consultant?" at midnight and got 47 different answers.

Here's the short version: most consultants need three core coverages, and depending on how you operate, possibly two more. This guide walks through each one, what it actually does, and how to know if you need it.

I work with a lot of consultants on the Peninsula and across the Bay Area. The conversations are usually the same — smart people who know their craft inside and out but have never had anyone walk them through the protection side without drowning them in jargon. That's what this is for.

The core three: what almost every consultant needs

These three coverages form the foundation of a consultant's protection plan. If you have nothing else, start here.

1. General liability (GL)

General liability covers bodily injury and property damage claims that arise from your business operations. It's the baseline coverage almost every client contract and commercial lease will require.

If a client visits your office and trips over a cord, that's GL. If you're presenting on-site at a client's headquarters and accidentally damage their equipment, that's GL. If someone claims your marketing materials made a misleading statement that caused them harm, that could touch GL too.

For most consultants, the risk profile here is relatively low — you're not operating heavy machinery or running a warehouse. But the requirement is nearly universal. Most contracts ask for $1M per occurrence / $2M aggregate at minimum.

What to check:

You have a GL plan in place with at least $1M/$2M limits (or whatever your contracts require)

Your business description on the plan accurately reflects what you do — "management consulting" and "IT consulting" are rated differently

You can produce a certificate of insurance (COI) quickly when a client or landlord asks

If you ever host events, workshops, or trainings, your coverage applies to those activities

2. Professional liability / errors & omissions (E&O)

Professional liability — also called errors and omissions — is the coverage that protects your advice. If a client claims your recommendation caused them financial harm, this is what responds.

This is the big one for consultants. GL covers physical stuff — someone slips, something breaks. Professional liability covers the work itself. If your strategic recommendation doesn't pan out and the client says it cost them revenue, if a deliverable contains an error that causes downstream problems, or if a client simply alleges you failed to perform — E&O is the plan that responds.

A real scenario: a management consultant recommends a vendor to a client. The vendor underperforms, the project stalls, and the client loses a contract worth six figures. The client's attorney sends a letter alleging negligent referral. Whether the claim has merit or not, your E&O coverage pays for the defense and any settlement.

What to check:

You have a professional liability / E&O plan — this is separate from GL and not automatically included

The plan covers defense costs in addition to the limit (not eroding it)

Your retroactive date goes back far enough to cover past work that could still generate a claim

The coverage matches your actual scope of services — if you've expanded into new consulting areas, the plan needs to reflect that

If you use subcontractors, your plan addresses that relationship

Why this matters more than GL for most consultants: Your biggest exposure isn't someone tripping in your office — it's a client alleging your advice cost them money. E&O is often the most important coverage a consultant carries, and it's the one most often missing.

3. Cyber liability

Cyber liability covers the costs associated with a data breach, ransomware attack, or other cyber incident involving your business or your clients' data.

If you handle any client data — financials, employee records, strategic plans, login credentials, personally identifiable information — you have cyber exposure. Period. Even if you're a solo consultant working from a home office with a laptop and a cloud drive.

The scenarios that trigger cyber claims for consultants are more common than most people realize: a phishing email compromises your inbox and exposes client communications. Ransomware locks your files and threatens to publish client data. A laptop gets stolen from your car with unencrypted client files on it. Your cloud storage gets breached because of a weak password.

What to check:

You have a cyber liability plan in place — even a basic one

It covers breach notification costs (legally required in California)

It covers forensic investigation to determine what happened and what was exposed

It includes business interruption for lost income during a cyber event

If you have access to client systems or data, the limits are appropriate for that exposure

You have basic cyber hygiene in place — MFA, strong passwords, encrypted devices — because carriers ask about this at application and it can affect claims

Three more to consider depending on how you operate

These aren't universal for every consultant, but they come up more often than you'd think.

4. Hired and non-owned auto (HNOA) endorsement

If you ever drive your personal car to a client meeting, a conference, or the office supply store for business purposes, your personal auto plan is primary — but your business could still be named in a lawsuit. That's where HNOA comes in.

Hired and non-owned auto covers liability when you or an employee uses a personal vehicle (non-owned) or a rental car (hired) for business purposes. It doesn't replace personal auto coverage — it layers on top, protecting the business entity.

This one surprises consultants. If you're driving to a client site and cause an accident, the injured party can sue both you personally and your consulting business. Your personal auto covers you as the driver, but HNOA covers the business.

What to check:

If you or anyone working for you drives for business purposes (even occasionally), you have HNOA

It's typically added as an endorsement to your GL plan — it's usually inexpensive

If you rent cars for business travel, the hired auto portion covers liability on those rentals

You understand that HNOA covers liability only — not damage to the vehicle itself

5. Workers' compensation — even if it's just you

In California, workers' comp is required the moment you have one employee — even part-time. But here's where it gets interesting for consultants: even if you're a solo owner with no employees, there are good reasons to carry a workers' comp plan.

This is where the "if any" policy comes in. An "if any" workers' comp plan covers you in case you hire someone — even temporarily — and provides proof of coverage when a client or general contractor requires it. Many consulting contracts, especially with larger companies or government entities, require a workers' comp certificate regardless of your headcount. An "if any" plan satisfies that requirement at a minimal cost, and it means you're covered instantly if you bring on a 1099 contractor or W-2 employee down the road.

California owner exclusion rules:

California allows certain business owners to exclude themselves from workers' comp coverage — but the rules depend on your entity type:

Sole proprietors are not required to carry workers' comp for themselves (only for employees)

Partners in a partnership can elect to be excluded

Corporate officers (including S-corp and C-corp) can file a waiver to exclude themselves, but it must be done properly with the carrier — and it only applies to officers listed on the waiver

LLC members — this is where it gets nuanced. California treats LLC members differently depending on how the LLC is taxed and structured. Talk to your broker about your specific situation.

The key thing: even if you legally can exclude yourself, you should make a conscious decision about it. If you're injured on the job and you've excluded yourself, your health insurance may or may not cover a work-related injury. That's a gap worth understanding before you waive coverage.

What to check:

If you have any employees (even part-time, even one), you have workers' comp — it's required in California, no exceptions

If you're a solo consultant, you've considered an "if any" plan to satisfy client contract requirements and cover future hires

If you've excluded yourself as an owner, you understand the implications and it was a deliberate choice — not a default

You know how your entity type (sole prop, LLC, S-corp, partnership) affects your exclusion eligibility

If you hire 1099 subcontractors, you understand whether California considers them employees for workers' comp purposes (this has gotten stricter under AB5)

6. Business personal property (BPP)

If you have business equipment — laptops, monitors, office furniture, specialized tools — that you'd need to replace if they were damaged or stolen, BPP is the coverage that handles it.

For consultants who work from home, this is especially important because your homeowners plan likely excludes or severely limits coverage for business property. That $3,000 laptop and the two monitors on your desk? Your home coverage may cap business equipment at $2,500 — or exclude it entirely.

If you operate from a dedicated office, BPP is typically part of your BOP (Business Owner's Policy) or commercial property plan. If you work from home, you may need a specific endorsement or a separate inland marine floater.

What to check:

You've accounted for the actual replacement cost of your business equipment

If you work from home, you've confirmed whether your homeowners plan covers business property (it probably doesn't cover enough)

If you have a dedicated office space, your BPP limit reflects what's actually in it

Expensive portable equipment (laptops, tablets) that you carry to client sites is covered off-premises

How these coverages work together

Here's how a typical consultant's protection plan stacks up:

🔶 Growing Up Covered insight

A note from Zach

The professional liability conversation is the one I have most often with consultants — and it's almost always reactive. Someone signs a new client, the contract requires E&O, and suddenly they need coverage by Friday. I get it. But the better time to set this up is before the contract arrives.

Here's the thing about professional liability that surprises people: it's usually a claims-made plan, which means coverage is triggered by when the claim is reported, not when the work was done. That means if you start a plan today, it typically won't cover work you did last year unless you negotiate the retroactive date. Starting early gives you a longer coverage window — and it's one of those things that's much easier to set up proactively than scramble for after the fact.

The consultants I work with who sleep best at night are the ones who have GL, E&O, and cyber in place before anyone asks for it. When the big contract lands, they just send the COI and get to work.

Read more at GrowingUpCovered.com