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Starting a Consultancy? 5 Insurance Mistakes UK Professionals Make in Year One

consultancy

When launching a consultancy in the UK, it is easy to overlook the importance of arranging consultant and professional services insurance from the very beginning. Many professionals make avoidable mistakes during their first year of trading. These oversights could leave a business exposed to legal actions, financial losses, or reputational damage.

We highlight five common insurance mistakes made by consultants and explain how the right cover could help protect your business from day one.

1. Believing Professional Indemnity Insurance Is Only for Big Firms

New consultants often think professional indemnity insurance cover is not necessary unless dealing with large corporate clients. This is not the case. Any business that offers advice, designs, recommendations, or services involving specialist knowledge could face claims of professional negligence.

Professional indemnity insurance is designed to provide financial protection if a claim arises for:

  • Incorrect advice
  • Mistakes in professional service
  • Breach of confidentiality
  • Loss of client documents or data

Even a small error could lead to significant legal actions. Having this type of cover arranged from the outset offers valuable peace of mind.

2. Overlooking Public Liability Insurance for Small Consultancies

It is easy to assume that consultants working from home or online do not need public liability insurance. However, risks still exist if clients or third parties visit your premises or if you attend meetings at external locations.

Public liability insurance can cover:

  • Injury to clients or members of the public
  • Damage to property belonging to others

For example, if a client trips over equipment during a meeting, an insurance claim could be made. This insurance is designed to help cover the cost of compensation and legal fees.

3. Choosing Too Low a Level of Cover

Selecting an appropriate level of cover is key. Many new consultants arrange the minimum required for contracts or industry standards, but this might not reflect the real exposure of the business.

Consider the following when deciding on the amount of cover:

  • The size of client contracts
  • The nature of your professional service
  • Regulatory or industry requirements

We help businesses find a type of cover that matches their actual risk profile, offering a wide range of protection options.

4. Ignoring Cyber Liability Insurance

Consultants often handle sensitive data or use cloud-based systems without arranging cyber liability insurance. This is a growing area of risk that is increasingly important for small business owners.

Cyber insurance offers financial protection in cases such as:

  • Data breaches
  • Hacker damage to systems
  • Theft of personal or client information

If such an event occurs, insurance can cover the costs involved in recovering data, notifying clients, and managing any associated legal actions.

5. Relying on Personal Insurance Policies

Some consultants mistakenly believe that home contents or personal liability policies extend to cover business activities. In most cases, they do not.

It is important to arrange dedicated consultant and professional services insurance which may include:

This ensures that both personal and business liabilities are managed correctly, avoiding unpleasant surprises if a claim arises.

Making Insurance Part of Your Consultancy’s Foundation

Starting a consultancy involves careful planning. Arranging suitable professional services insurance is an essential step that could help protect your business against a wide range of potential risks.

By reviewing your type of cover, selecting the right level of cover, and understanding client expectations from the beginning, consultants can avoid costly mistakes. Whether you provide marketing advice, IT services, design work, or financial consultancy, we help find insurance policies that fit your needs, offering peace of mind while your business grows.