Consultant indemnity insurance covers the one thing a consultancy sells: advice. Because there is no physical product and no site, the entire exposure is financial, which makes professional indemnity the primary cover rather than an add on. Everything else on a consultant's policy is secondary to it.
Why advice is the whole exposure
A consultancy's output is a recommendation, a report, a model or a plan. When it is wrong the client acts on it and loses money, and nothing has been damaged and nobody has been hurt. Public liability answers for the visit to the client's office; professional indemnity answers for everything the visit was about.
Declaring the activities
Management consultancy, IT consultancy, marketing, HR, health and safety, engineering and financial consultancy are rated differently, and many consultancies do two or three. List them all. A claim arising from an activity the policy does not name is the commonest avoidable failure in this part of the market.
Contracts, caps and how they interact with cover
Well drafted consultancy terms cap liability, often at a multiple of the fee, and that cap is the first line of defence. The policy limit should still reflect what a client could lose, because a cap is only as good as the contract it sits in and clients frequently insist on removing or raising it.
Subcontractors and associates
Consultancies that use associates need to know whether the policy covers work done by them, or whether each associate must hold their own. Both models exist and the wording decides it. A consultancy assuming the first while the wording says the second has a gap exactly where it does most of its delivery.
Questions people ask about consultant indemnity insurance
Is professional indemnity the main cover for a consultant?
Yes. The output is advice and the loss is financial, which is precisely what it answers for.
What if I do more than one kind of consultancy?
Declare each activity. Insurers rate them differently and a claim arising from an undeclared activity may not be covered.
Do my contract liability caps help?
They are the first line of defence, and clients often push to raise or remove them. Size the policy limit against what a client could lose rather than against the cap.
Are associates covered?
It depends on the wording. Some policies cover work done by subcontracted associates and some require each to hold their own cover.