Think Insurance What you really care about insurance is here...

If you're in the management consulting business, you probably have clients that require you to carry some level of insurance. Maybe you run a small firm with a few employees, or maybe you're an independent freelancer. Either way, you might wonder if you'll ever actually use all that coverage.

If your client says it's necessary, you will need to obtain professional liability insurance if you want to secure the job. The good news is that getting the required insurance coverage can be both affordable and good for your business.

Typically, companies want their management consultants to carry some or all of the following three types of coverage:

General liability insurance

General liability insurance covers businesses in the event of an on-site injury or damage to company property. Management consultants often wonder whether they really need this type of coverage. After all, what's the likelihood that someone giving a presentation or attending a meeting will damage a client's property or hurt anyone? Is there really a risk of liability for management consultants?

The fact is, client companies often require all of their vendors who may come on-site - from electricians to delivery personnel to management consultants - to prove they carry general liability insurance. In some cases, the mandate comes from the client's investors, who seek to reduce the company's risk of financial losses from lawsuits. And of course, accidents do happen, so there is as much risk of liability for management consultants as for any other office visitor.

If you have your own management consulting office, general liability insurance will protect you in the event of an accident or injury on the premises. If a client visits your office on a rainy day and slips and falls in the entryway, your general liability insurance will cover any related medical or legal costs - and possibly save your client relationship. And that's one invaluable reason why insurance for management consultants is good for your business.

Professional liability insurance

Professional liability insurance, also known as errors and omissions or E&O insurance, is essentially malpractice insurance for management consultants. It covers you for errors and omissions that you or your employees make on the job. There's a simple reason that clients require E&O insurance for management consultants: They know that people make mistakes.

Your client's greatest risk in bringing you in as a management consultant is liability -- the fact that your mistakes could spark a lawsuit or financial loss. For example, let's say you have revamped a company's budgeting process, but made a critical miscalculation in the new system that results in big problems when the budget is reconciled with actual expenses later in the year. Your client can claim that any resulting financial loss is due to a management consultant error or omission, and will expect you to compensate the company.

Having professional liability or E&O insurance for management consultants is a good idea. Without it, you could end up paying exorbitant legal defense costs if your client makes a claim against you. A misunderstanding is often all it takes to be served with a lawsuit. Once a client alleges that you were negligent and communication breaks down, your legal expenses start to grow. E&O insurance gives you peace of mind that should things go wrong, you're covered.

Workers' compensation insurance

Some states require workers' compensation insurance, while others do not. If your client is based in a state that requires it, your management consulting firm will likely be asked to carry it, even if your own home state does not require it.

That's because, in some states, if you're injured while on the job, your client must cover you with its own workers' compensation policy. Also, in some states, your client's insurance carrier will require the client to cover all contractors that don't have their own proof of coverage. Both scenarios increase your clients' premiums, so they often require workers' comp insurance of management consultants as well as other contractors.

Workers' compensation insurance covers medical expenses as well as disability and compensation in the event of on-the-job injuries. If you're a solo practitioner with your own health insurance, workers' compensation insurance may not be necessary - but your client may still require it if you want to get the work.

If your management consulting business has employees, protecting them with workers' compensation insurance just makes good business sense. From carpal tunnel syndrome to a slippery bathroom floor, even the smallest on-the-job hazards could result in an injury that could take them off the job. Workers' compensation insurance ensures that your employees are taken care of and saves your company from paying for their ongoing care. www.businessinsurancenow.com/professional_liability.aspx