Do you own a business? Then you probably have all types of insurance policies in place. One insurance policy that matters the most when you own a consultancy or a firm is Liability insurance.
Two liability insurance coverage types that most businesses buy are product liability and workers’ compensation. These insurance policies protect you and your employees. Most firms don’t look beyond this and that’s a mistake. Liability insurance for your company’s reputation is equally important because that is what shapes it future.
Understanding Liability Insurance
In simple terms: liability insurance gives you protection against claims that might result from damage to the property, people and company image. The policy covers legal payouts and cost that you might incur during the battle.
Here’s how it works:
Let’s assume that you on a company that is in the business of making household cleaning liquids. During manufacturing, one of the batches was contaminated and before you knew about it, it was already sent out for distribution.
The people who bought a bottle from that particular bottle sustained small injuries. Several complaints were received and a few people filed a lawsuit against you. Since it was your fault, you had to pay huge amounts to all the families who use the cleaning liquid. Not only did your revenue drop after that but the company’s reputation fell too far, which resulted in slow sales.
When you are a business consultant, part of our job is to make sure that you prove to be a trustworthy and competent ally that your clients can rely on. How do you cover this? By improving your brand reputation and image, and showing them that you are ready to meet challenges. You might face some complex situation and this where you true skills will be tested.
The big question here is that – how you should go about doing this?
There are various ways through which you can make the clients trust you. Happy customer reviews, prompt feedback, a positive image, sharing ideas through a blog and industry updates… all are great ways to take your business to the top.
But is this enough?
There is one thing that is a deal breaker. How prepared are you for a setback? This is one question that every one of your new clients will ask. You might experience some push back on a matter that you are trying to handle, which can stop the overall process. There are many things that can happen such as shortage of personnel resulting in the client’s needs not being met or shortage of time, which might lead to incompetence.
The biggest issue arrives when the client isn’t happy with the work you did and is now actively pursuing a legal case against you because they believe your work destroyed their business’s reputation. What’s your backup plan here?
The Legal Risk
The risk of having a lawsuit filed against you is always around the corner. You might feel that you have given your best you know how the saying goes, “The customer is always right”. You might fall short on their expectations, which can lead to a lawsuit. So how do you get out of this situation?
This is where liability insurance comes to the rescue. The legal costs that threaten you and your consultancy can easily go away through liability insurance. So you should probably get this policy right now.
For example, you run a medical consultancy. There are a total of 50 employees working under you. Most of your work involves sending out medical reports. A client hires you for some tests that will be used in conducting a city wide research. A typing error occurs in one of the reports and by the time the client checks the real results, it’s already too late. The research has already been sent to the board and now the client is suing you. Without liability insurance, you will be paying all the expenses out of the consultancy’s account. Then there’s the matter of the case going on the news and destroying your reputation.
You are probably wondering how come a claim can be filed when you fulfilled the client’s needs and wants. No matter how confident you are of your skills, there will come a time when the client will be displeased with your service. Yes, it may seem unreasonable request because you did everything according to their plans but the client has the right to refuse the work if they feel like it.
Accepting this is important because it will help you have a realistic view of the situation. Liability insurance gives you a safety net that is big enough to drape over yourself and your business.
When Should You Buy Liability Insurance
The moment you open your firm… that fast! There are plenty of things that can go wrong from the get-go. You might satisfy your first client but the second one might not be that easy. To truly protect your business, you need to have liability insurance.
The reason why you need to purchase the policy from the start is that only those projects will be covered under after the policy comes into effect. Assuming that a project you took on before buying the policy is still in the works after the policy has been bought, there’s no saying whether you will be insured or not.
Even if a client files a claim against you after a few months of the project completion date, the policy will not cover. This is why a liability insurance policy should be in place as soon as your consultancy opens. Old reviews can be very damaging because an unsatisfied client often becomes disgruntled and no one will be interested in working with you if your reputation is down.
Another reason you should buy liability insurance is that it builds your consultancy’s credibility in the clients’ eyes. Here’s a scenario to help you understand better:
A client hands you a big project but they need assurance that you will do a good job. You outline the contingency plans in case things fall apart and the client is satisfied. However, when the time comes for execution, things don’t go the way that you had planned. This is grounds for a lawsuit but you can save your consultancy if you have liability insurance.
In conclusion, we would like to say that liability insurance should be your first priority when opening a consultancy. The knowledge that you have liability insurance in place gives the client the assurance that you have potential and are very competent. If you are looking for an insurance firm that will provide you with liability insurance, then visit Pawson. The company provides different types of liability insurance policies for all businesses. To know more about their policies, contact them at 203-481-8898.
Digital Marketing Director