Insurance Tips

What Insurance Do Consultants Need?

Discover the must-have insurance policies that protect consultants from risks like liability, financial loss, and cyber threats. Your blueprint for secure consulting.

What Insurance Do Consultants Need?


Consulting is a business built on expert advice and trust. Clients rely on your professional guidance to make critical decisions affecting their businesses. However, the path of providing expert advice isn’t without its hurdles—legal risks, client disputes, and even financial loss loom on the horizon. This is where professional indemnity insurance steps in as your safety net.

This in-depth article aims to demystify professional indemnity insurance for consultants in Australia. We’ll delve into what it covers, why it's crucial for your consulting business, and how it complements other insurance policies like public liability insurance.

Key Takeaways:

  • Professional indemnity insurance is vital for consultants.
  • It safeguards against legal costs, client disputes, and financial loss.
  • It complements other forms of business insurance.

What is Professional Indemnity Insurance?

The Basics

Professional indemnity insurance offers protection against claims made by clients who have suffered financial loss due to your professional advice or services. In essence, it covers the legal fees and compensation payouts that could otherwise seriously impede your consultancy business.

Why Consultants Specifically?

The work of consultants involves advising businesses across various sectors. Given the impact of your professional advice on clients, the risks involved are high. Failure to deliver results as promised, or an error in the advice provided, can lead to serious legal repercussions.

Coverage Aspects

Typical components of professional indemnity cover include:

  • Legal Costs: The insurance takes care of your legal costs in defending claims.
  • Compensation: In case you’re found liable, it covers the compensation to be paid.
  • Professional Service Errors: Mistakes or oversight during professional service are covered.
  • Financial Loss: Covers any financial loss suffered by the client due to your advice.

How Does It Differ From Public Liability Insurance?

While professional indemnity insurance focuses on the risks tied to your professional advice, public liability insurance covers your business against claims for property damage or physical injury arising from your business activities. The latter is essential but won't cover claims related to professional errors or advice. In the best-practice playbook for risk mitigation, you'll ideally want both forms of insurance.

Note: Public liability insurance is vital but doesn't substitute for professional indemnity when claims are based on your advice.

Why is Professional Indemnity Insurance Crucial for Consultants?

Protect Your Financial Health

One of the major benefits of professional indemnity insurance is the financial buffer it provides. Legal costs can quickly add up, and without adequate protection, you might find yourself paying out of pocket. Such expenditures can be detrimental, impacting both personal and business assets.

Build Client Trust

Having insurance not only protects you but also builds trust with your clients. It serves as proof that you have a safety net in place, should things go awry. This is particularly valuable for consultants whose work involves dealing with sensitive information or high-stakes business decisions.

Partner with Australia’s Leading Insurers

Partnering with Australia's leading insurers ensures that you're getting the most comprehensive and tailored cover for your consulting business. It's advisable to seek specialist advice to understand policy wording, the exclusions contained, and how various aspects like cyber insurance can also be integrated into your insurance portfolio.

Identifying Potential Risks

Consultants in different sectors face various types of risks. Identifying these risks helps in selecting the right insurance cover.

  • Data and Cyber Risks: With the increasing reliance on digital platforms, the risk of cyber attack or data breach has escalated. Cyber insurance is an important form of cover that complements professional indemnity.
  • Financial Risks: Offering advice on financial matters can lead to substantial financial loss for the client and subsequent legal costs for you.
  • Intellectual Property: You may be held liable for unintentionally infringing on someone else's intellectual property rights.

Tailoring Your Policy

Consultants can tailor their professional indemnity insurance policy to include additional elements such as public liability, cyber insurance, and protection for business assets. This is often considered a holistic approach to covering all bases.

Tip: Tailoring your professional indemnity policy allows for a more comprehensive safety net.

Exclusions to Watch For

No insurance policy is a one-size-fits-all, and professional indemnity insurance is no exception. It’s essential to read through your policy’s exclusions, including:

  • Dishonesty and Conflicts of Interest: Acts of intentional dishonesty or conflicts of interest are generally not covered.
  • Known Circumstances: Situations that you were aware of before the policy's commencement are generally not covered.
  • Contractual Liabilities: Obligations that exceed what you’d normally be liable for under common law may not be covered.

The Importance of Accurate Documentation

When it comes to defending claims or disputes, documentation is crucial. Always ensure that you keep:

  1. Contracts: Clearly defined terms of your engagement with the client.
  2. Communication: Keep records of email exchanges, meetings, and any advice given.
  3. Tax Invoices: Maintain accurate and up-to-date financial records.

Understanding Policy Costs

Premium Factors

The cost of your professional indemnity insurance is determined by several variables including the size of your consultancy business, the industry you serve, and the level of risk involved. Businesses in high-stakes sectors like finance or healthcare often have higher premiums.

Note: Different insurers offer varying premiums, making it crucial to shop around for the best fit.

Deductibles and Excess

Remember, lower premiums often come with higher deductibles. It's essential to strike a balance so that you're not financially strained when it comes to making a claim.

Claim Scenarios: Hypothetical Cases

To understand the application of professional indemnity insurance, let’s consider a couple of hypothetical scenarios:

  1. Faulty Business Strategy: You advise a client to invest in a certain market, and it crashes. The client incurs a significant financial loss and sues you. Professional indemnity insurance would cover the legal fees and any compensation required.
  2. Data Breach: If confidential client information leaks due to an oversight on your part, your professional indemnity insurance, in combination with cyber insurance, can assist in damage control.

Tip: Claims can arise from various quarters. Be prepared with a well-rounded insurance cover.

Best Practices While Shopping for Insurance

Get Expert Advice

Consulting an insurance broker can offer you specialist advice tailored to your business needs. They can help you understand policy wording and guide you through the exclusions contained in the policy.

Read the Fine Print

Always read your policy details meticulously. Understand what is covered and what isn't, and make sure you're comfortable with the level of risk you're assuming.

Cyber Risks and Professional Indemnity

The Intersection of Cyber Risks and Professional Indemnity

In an increasingly digital world, cyber risks have become more prevalent. Consultants often deal with sensitive information that could be targeted in a cyber attack. While having cyber insurance is a must in this scenario, professional indemnity insurance can also offer a layer of protection.

Tip: If your work involves dealing with sensitive information online, it's advisable to couple your professional indemnity insurance with cyber insurance for more comprehensive coverage.

Role of Professional Indemnity in Cyber Cases

Say, for instance, you offer your client a strategy which involves data storage solutions. A cyber breach occurs, compromising the client's sensitive information. Your professional indemnity insurance can assist in defending claims against you for the advice given, while your cyber insurance will likely cover the costs associated with the data breach itself.

Building a Comprehensive Insurance Portfolio

Multiple Layers of Protection

Professional indemnity insurance is crucial, but it's only one part of a well-rounded insurance portfolio for consultants. You'll also need to consider other forms of business insurance to protect various aspects of your operations.

Note: An insurance package can include everything from property damage and business interruption to income protection and medical expenses.

Coordinating Your Policies

The aim should be to ensure there are no gaps in your coverage. For instance, public liability insurance covers you against property damage and physical injuries caused to third parties, but it won’t cover the risks associated with providing advice. Combining this with professional indemnity and other forms of insurance ensures you’re covered from multiple angles.

Smart Strategy: When building your insurance portfolio, consult with Australia's leading insurers to get the most tailored solutions for your consulting business.

The Bottom Line: Don’t Skip On Professional Indemnity

To summarise, professional indemnity insurance is not a luxury—it's a necessity. For a consulting business, the stakes are high. The risks of not having adequate cover range from financial loss to a damaged reputation and loss of client trust.

Conclusion: Professional indemnity insurance is your safety net against various risks that come with providing professional advice. It complements other essential policies like public liability insurance and safeguards both your financial health and professional standing.

Whether you're an established consultant or just starting out, this form of insurance should be a cornerstone of your business strategy. It not only protects you and your business but also enhances your credibility in a competitive market. So, do your due diligence, seek specialist advice, and make the investment—it's one you can't afford to skip.


The content provided in this blog is intended for general informational purposes only and should not be considered as professional advice. While we strive to provide accurate and up-to-date information, insurance is a complex field, and the applicability of the information can vary based on individual circumstances. Tank Insurance holds no responsibility for any actions taken based on the information provided in this blog.

Insurance Tips


Marel Pencev


Marel Pencev
Insurance Tips


Marel Pencev