You’ve probably heard you need liability insurance for your human resources (HR) consulting work. Maybe an industry peer mentioned it, or a client asked for your proof of insurance before agreeing to work with you.
In any case, HR consultant insurance is a must-have. In just six minutes, you’ll know what’s covered, what’s not, and which types of insurance you can’t skip.
HR Consultant Insurance: Explained
Because you’re in the business of giving professional advice, one of the most significant risks you face is a client suffering financial damages because of something you told them to do (or not do).
Your career involves navigating complex situations and regulations, including:
- Federal, state, and local employment laws that change constantly
- Misclassification of employees
- Payroll disputes
- Handling sensitive or confidential information
- Emotionally charged workplace disputes
And that’s just to name a few. According to Guillermo Triana — Founder, Principal Consultant, and CEO of PEO-Marketplace.com — “Even if a consultant played no role in the decision-making process or approval chain, merely being listed on a slide deck is enough to open [them] up to subpoena exposure.”
Triana adds, “All of this is not conjecture. HR liability risk originates from judgment calls made under pressure-cooker circumstances where the legal, emotional, and financial stakes all land at the same time. The longer a consultant goes without professional liability insurance, the more they play roulette with their future earnings.”
Beyond needing coverage to protect yourself, it’s common for clients to ask you to provide a Certificate of Insurance (COI). This document includes all the important details about your coverage, from what types of insurance you have to your policy limits.
“In my experience, roughly 70% of companies I have encountered that are asking HR consultants for service agreements will request COIs for general liability and professional indemnity coverage before they will process invoices over $500,” says Triana.
To shield yourself against the biggest risks you face, there are two non-negotiable coverages: professional liability and general liability. Let’s take a closer look at these and other types of insurance for consultants, depending on your unique risk exposures.
How Professional Liability Insurance Shields Your HR Business
You may have heard of errors and omissions, or E&O, insurance. That’s just another name for professional liability coverage, which is designed to financially shield you if you make any mistakes or oversights in the advice you give clients.
This also includes any documentation errors or deadlines you miss for clients. If a client claims your mistake or failure to deliver caused them to lose money, they can sue. With professional liability coverage, your policy can cover the resulting expenses, including:
- Attorney’s fees
- Defense costs
- Settlements
- Judgments
How General Liability Coverage Protects HR Pros
General liability insurance is often considered the baseline coverage for all business owners. Sometimes referred to as slip-and-fall liability, it is designed to cover injuries you cause to other people while doing business. This could be as simple as someone tripping and falling in your office and injuring themselves.
It also covers damages you cause to someone else’s property while doing business, as well as personal and advertising injury. Unlike the injuries mentioned above, these ones aren’t bodily. They include defamation, copyright infringement, and violation of privacy.
General liability can cover costs such as:
- Medical bills
- Property repairs or replacements
- Legal expenses (attorney’s fees, defense costs, settlements, and judgments)
Optional Coverages to Extend Your Protection
While professional and general liability are the base coverages, most HR consultants need additional types of insurance to properly shield themselves against potential claims.
Additional Insureds
Additional insureds aren’t technically a type of coverage — they’re individuals, organizations, or venues that ask you to add them to your liability policy. This extends your coverage to them so they are protected against any damages you cause.
Cyber Liability
Anyone who stores information digitally or uses technology to run any part of their business is vulnerable to a cyberattack. This includes data breaches, phishing attacks, and ransomware.
These incidents can be extremely expensive, but cyber liability insurance can cover the cost of:
- Legal expenses
- Recovery expenses
- Notifying clients
- Credit monitoring
- Cyber extortion payments
Fidelity Bonds
If you run a consulting firm with one or more employees, there is unfortunately a risk that an employee could steal from a client. Many clients are wary of this, which is why it’s common for contracts to require a fidelity bond.
Fidelity bonds provide financial compensation for theft, embezzlement, and forgery. Even if your client doesn’t include one in the contract, having a fidelity bond helps build trust with them.
Tools and Equipment (Inland Marine)
If you travel to meet with clients at their workplaces, you’re probably bringing some of your equipment with you, too — a laptop, tablet, etc. If this mobile gear gets damaged or stolen, tools and equipment insurance can cover the cost of repairing or replacing it.
Workers Compensation
Any HR consultant with employees needs workers compensation insurance. In all states except Texas, this coverage is required — sometimes as soon as you hire your first employee.
Workers compensation insurance is designed to cover your state’s mandated benefits if an employee gets injured on the job, including:
- Medical bills
- Rehabilitation costs
- Lost wages
- Disability benefits
- Funeral costs
What Does HR Consultant Insurance Cover?
HR consultant insurance can cover a wide variety of scenarios, especially when you expand your coverage with policies like cyber liability and workers compensation.
| Scenario | Coverage Needed | What It Covers |
|---|---|---|
|
After a miscommunication, you file your client’s compliance report after the deadline passes, and they are penalized by the government. The client sues you, claiming your negligence led to the fine. |
Professional Liability |
– Attorney’s fees – Defense costs – Judgments – Settlements |
|
You accidentally knock an expensive painting off the wall in your client’s office. |
General Liability |
Repairing or replacing the painting |
|
You include a client’s logo and testimonial on your site without securing permission first, and they sue you. |
Personal and Advertising Injury |
– Attorney’s fees – Defense costs – Judgments – Settlements |
|
A client asks you to add them to your policy as part of your contract. |
Additional Insureds |
Your client’s protection from your liability |
|
A hacker accesses your work laptop and steals sensitive client information, including Social Security numbers, salaries, and employee addresses. |
Cyber Liability |
– Attorney’s fees – Defense costs – Judgments – Settlements – Notifying affected personnel – Credit monitoring |
|
Six months after a contract ends, a former client tells you they discovered one of your employees stealing from them while you worked together. |
Fidelity Bond |
Financial compensation for the money your employee stole |
|
While unloading your car at a client’s office, someone steals your work laptop. |
Tools and Equipment |
Replacing the stolen laptop |
|
One of your employees starts experiencing severe wrist pain. Her doctor determines it’s due to long hours at her computer-based job and recommends physical therapy and accommodations for several months. |
Workers Compensation |
– Physical therapy
– Ongoing care – Lost wages from decreased work hours |
Pro Tip: Learn more about the most common claims HR consultants face and how insurance shields you from their financial impact.
What Does Insurance for HR Consultants Not Cover?
All insurance policies have their exclusions. Here are a few exclusions from Insurance Canopy’s HR consultant policy:
- Independent contractors
- Intentionally dishonest or illegal acts
- Employment-related claims from your own employees, like wrongful termination (requires employment practices liability insurance, or EPLI)
- Contract disputes that don’t involve negligence or errors
Protect Your HR Consulting Business with the Right Coverage
HR consultants need insurance to protect their livelihood and meet contractual obligations. Insurance Canopy makes it easy and affordable.
Our consultant insurance costs as low as $21 per month and can be purchased entirely online in 10 minutes or less. That means you only need to speak with a licensed agent about your coverage if you want to!
This policy includes professional liability, general liability, and personal and advertising injury insurance as a base layer of protection. From there, expand and customize your coverage with our optional add-ons like cyber liability and fidelity bonds.
Plus, you can add unlimited additional insureds to your policy at any time, and access your COI whenever you need from your online account.
“Insurance also affords consultants freedom to operate without overthinking every recommendation,” says Triana. “It professionalizes the work, secures relationships, and keeps stress levels manageable.”
Enjoy the peace of mind that only comes with coverage. Get your free HR consultant insurance quote in minutes today!
Common Questions About Insurance for HR Consultants
Do HR Consultants Need Professional Liability If They Have General Liability?
Yes! Professional and general liability provide coverage for different risks. General liability won’t cover claims stemming from your professional services — only professional liability will do that.
Insurance Canopy’s HR consultant policy includes both coverages to offer the most comprehensive protection from risks you’re likely to face.
Is Cyber Liability Worth It for Solopreneurs?
Yes, cyber liability is worth it for solopreneurs because cyber attacks can happen to anyone. Cyber liability insurance can cover the resulting costs of an attack, from legal fees to credit monitoring, saving you from the financial burden.
How Fast Can I Get a COI and Add an Additional Insured?
You can get your COI immediately after purchasing your HR consultant policy from Insurance Canopy. You can add additional insureds during checkout or at any time afterward from your online account.
What Limits Do Clients Typically Require?
Most clients require an aggregate limit of $2,000,000 for general and professional liability. That means your policy would cover up to $2,000,000 for all claims within a policy period.
Additionally, they often expect $1,000,000 occurrence limits, meaning your policy will cover up to that amount for an individual claim.
What's the Difference Between a Claims-Made and Occurrence Policy for E&O Insurance?
Claims-made policies only cover claims that happened during your policy period and were reported to your insurance company during the reporting period. The reporting period typically includes a period of time after the policy ends.
On the other hand, an occurrence policy covers claims that happened during the policy period, regardless of when you reported them.
JoAnne Hammer | Program Manager
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
