As an HR consultant, businesses look to you to solve their human resources needs, from hiring practices to implementing company policies. Although your consultancy may bring considerable expertise, there’s always a possibility that a client might be displeased with your services and sue your firm for damages. Even meritless lawsuits are costly to defend, and settlements can be expensive if you are found liable. There are a number of other risks that your consulting firm may face as well, from common liabilities like accidents and injuries to natural disasters or fires.

Purchasing a wide range of insurance coverage can provide your company with financial protection from a variety of risks. With the right insurance policies, your HR consulting firm will be able to operate with confidence, knowing that you would be protected if an unexpected disaster arises.

What insurance coverage do I need for my HR consulting company?

While there are many types of coverage for companies to consider, these insurance policies are particularly important for HR consultants:

Errors and Omissions Insurance

Errors and omissions insurance is a crucial coverage for any company that provides consulting services and professional advice. If a client hires you to implement new HR systems or make organizational changes and feels that your actions caused them financial losses, you could be sued for damages. Even if your company has done nothing wrong, a client could sue simply because they perceive negligence on your part. Errors and omissions insurance can protect your company from the risk of lawsuits brought on by dissatisfied clients alleging failures in services, advice, or professional work.

Example:

• Your HR consulting company recommends that a client hire a particular candidate for VP of sales. The new VP takes a number of actions that cause the client to lose money. The client learns that the VP had caused similar problems at a former employer and sues your company for damages, claiming that you failed to thoroughly investigate the candidate.

Commercial Property Insurance

If your business operates from leased or owned office space and relies on valuable property to perform its work, commercial property insurance is a key consideration. It’s also important to be aware that if you work from home, homeowners or renters policies may not cover your business property. If an unexpected disaster damages or destroys your property, it could be difficult to repair or replace. Commercial property insurance will provide funds to help your company recover from a variety of commonly covered perils, including fire, windstorm, hail, vandalism, and explosion.

Commercial property insurance covers the following:

• Buildings belonging to or leased by your company
• Contents of the building, including furniture, computer equipment, and artwork
• Property of others while it is under your care, custody, or control

Example:

• Your office building is struck by lightning, causing a fire to break out. The fire damages your building’s roof and causes smoke damage to the interior of the building. Your commercial property insurance would pay for repairs.

General Liability Insurance

As an HR consulting firm, you may meet with clients at your offices, their offices, or other locations. Although your work is not physically dangerous, there is always a possibility that someone could be injured or property could be damaged in the course of your work, and you could be held liable. Some of the most common injuries actually occur inside the office, from trip-and-fall accidents to objects falling and injuring others. This is why it’s a good idea to consider general liability insurance. This coverage provides funds if your company is held liable for third-party bodily injury, property damage, or personal and advertising injury.

Examples:

• Bodily injury: A potential client visits your offices to discuss hiring your firm for an upcoming project. She trips over a misplaced power cord and falls, severely spraining her wrist. Your general liability insurance would pay for medical costs and legal costs if the client sues.
• Property damage: An employee from your company visits a client’s offices to consult on the implementation of a new employee benefit plan. The employee loses his balance and accidentally knocks over a valuable piece of art, damaging it. Your general liability insurance would pay for damages.
• Personal and advertising injury: An online ad for your company’s services uses a logo that looks very similar to another company’s designs. The company sues you for copyright infringement. Your insurer would pay for legal defense and any settlements.

Business Owner’s Policy

A business owner’s policy (BOP) can be a great choice for small or midsize consulting practice. This type of policy can simplify your insurance choices by combining general liability, property, business income, and extra expense coverage into a single package. Since it provides a wide range of coverage, a BOP can help smaller companies avoid coverage gaps while paying a lower cost in premiums than buying each policy individually. To qualify for a BOP, your company would typically be required to operate from a physical business location, employ fewer than 100 people, and make less than a certain amount in sales per year (typically $5 million, but it can vary based on the insurer).

Example:

• Due to an overloaded circuit, an electrical fire starts in your offices. It spreads to the offices of a neighboring business. The general liability portion of your business owner’s policy would pay for damage to your neighbor’s property.

Additional Coverage

• Employment practices liability insurance (EPLI) protects your company if current, past, or prospective employees sue you for alleged wrongful treatment such as discrimination, wrongful termination, or sexual harassment. For an HR consultancy, the need or this type of insurance should be evident. EPLI will cover the cost of defending your firm against employment practices lawsuits, including legal fees and any settlements or judgments against your company.
• Cyber liability insurance covers financial losses that result from cyber events such as data breaches, hacking, viruses, denial of service attacks, and more. This is a critical policy to consider for HR consultants, as you may store sensitive client and employee data, including Social Security numbers and contact information.
• Business income insurance will reimburse you for lost income and operating expenses if your business is unable to operate due to a covered reason, such as fire, storm damage, or other property damage.
• Workers’ compensation insurance is legally required for companies with employees in most states. It covers the medical expenses and lost income of employees who are injured or fall ill while working. It can also provide funeral and death benefits in the event of an employee death.

Final Word

Your HR consulting firm could be heavily impacted by a variety of major risks, from clients who claim that your firm was negligent or failed to fulfill its duties to a slip-and-fall accident that occurs on your office property. Purchasing the right business insurance can help you respond to these unforeseen events. Lawsuits and resultant damages can be incredibly expensive, and without the right coverage, your business could be at risk of bankruptcy. It’s important for any company in the consulting industry to partner with a reputable insurance agent or broker and determine the right insurance policies that fit your business needs. The financial assistance your insurance will provide can help your business stay afloat if a costly disaster arises.