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Insurance explained
Liability insurance for consultants is the set of policies, led by professional indemnity, that protects a consultancy against claims from clients, the public and employees. It matters because each type of claim is covered by a different policy, and client contracts often specify which you must hold.
Part of: Professional indemnity insurance
In short
UK consultants usually need professional indemnity insurance first, because their main risk is a client claiming financial loss from advice. Public liability covers injury and property damage, for example on client sites. Employers' liability is compulsory if you employ staff, with at least £5 million of cover according to HSE, unless an exemption applies. Cyber insurance helps with data breaches and system attacks, and D&O protects directors of limited companies. Which mix fits depends on your work, staff and client contracts.
"Liability insurance" is an umbrella term. For a UK consultant it usually means a small group of policies, each covering a different way a claim can arise. The most important is professional indemnity (PI), which covers claims that your advice or service caused a client financial loss. Alongside it, many consultants carry public liability for injury or property damage, employers' liability if they employ staff, cyber insurance for data and systems risks, and directors' and officers' (D&O) cover if they trade through a limited company.
Which of these you need depends on what you do, where you do it and who you employ. A strategy consultant working from home has a very different risk profile from a health and safety consultant walking construction sites. Only one of these covers is generally compulsory by law, and that is employers' liability where you have employees. The others are driven by risk and, very often, by client contracts. Our guide to PI insurance for consultants covers the main policy in more depth.
This is a general guide only. Every policy is subject to its own terms, limits and exclusions.
| Cover | Usually protects against | Usually does not cover |
|---|---|---|
| Professional indemnity | Client claims for financial loss from negligent advice, errors, omissions or breach of professional duty | Injury and property damage; fee disputes; liability accepted by contract beyond the law |
| Public liability | Claims by third parties for injury or damage to their property, for example on a client's premises | Financial loss from your advice; injury to your own employees |
| Employers' liability | Claims by employees for injury or disease arising from their work | Claims by clients or the public |
| Cyber | Breach response costs, data restoration, business interruption and data liability claims after a security incident | Errors in your advice that do not involve a security incident |
| D&O | Claims against directors personally for wrongful acts in managing the company | Claims about the professional work itself, which sit under PI |
The line between PI and public liability is the one consultants most often ask about; see do I need public liability and PI for a fuller comparison.
The table below is illustrative. It shows the covers most commonly relevant, not a recommendation for any particular business.
| Consultant type | Typical core covers | Why |
|---|---|---|
| Management and strategy | PI; public liability if visiting clients; cyber | Advice drives client decisions; confidential client data. See management consultants PI |
| IT and technology | PI or tech E&O; cyber; public liability | System failures and data loss. See professional liability for tech consulting firms |
| HR and employment | PI; cyber | Advice on dismissals and policies; employee personal data. See HR consultants PI |
| Marketing and PR | PI including defamation and IP; cyber | Content and campaign claims. See marketing consultants PI |
| Health and safety | PI; public liability | Site visits and safety advice. See health and safety consultants PI |
| Environmental | PI; public liability; sometimes pollution cover | Survey and site work. See environmental consultants PI |
Any of these firms that employs staff will normally need employers' liability as well, and limited companies may want D&O.
The examples below are illustrative only and are not real claims.
Employers' liability is required by the Employers' Liability (Compulsory Insurance) Act 1969. The HSE's leaflet HSE40, Employers' liability (Compulsory Insurance) Act 1969: a brief guide for employers says you must be insured for at least £5 million and that you can be fined up to £2,500 for any day without suitable insurance. Failing to display the certificate, or refusing to show it to an inspector, can lead to a fine of up to £1,000. There are exemptions, including some family businesses where all employees are closely related to the owner, although that exemption does not apply to family businesses incorporated as limited companies. The HSE40 summary page links to the full guide. Our page on employers' liability insurance has more.
D&O is not compulsory. Under section 233 of the Companies Act 2006, the general restriction on a company indemnifying its directors does not prevent it from buying and maintaining insurance for them against liability. That is the legal basis on which UK companies commonly buy D&O. Consultancies with investors, non-executive directors or regulated clients tend to look at it most closely; see D&O for professional service firms.
Many consultants assume public liability covers them if a client sues. Usually it does not. Public liability covers bodily injury and damage to physical property. If a client says your report, plan or recommendation caused them to lose money, that is a pure financial loss claim, which is what PI is designed for. The reverse is also true: PI policies commonly exclude injury and property damage. Holding one does not replace the other.
A second misunderstanding is that a client's insurance protects you. Client policies protect the client, and many contracts require you to hold your own PI and public liability at stated limits. See client contract PI requirements and compulsory business insurance by business type.
Apex arranges PI, liability, cyber and D&O cover for UK consultants; a broker reads every enquiry.
Most consultants start with professional indemnity, because their main risk is a client claiming financial loss from advice. Public liability is common if you visit client premises. Employers' liability is legally required if you employ staff, unless an exemption applies. Cyber and D&O are often worth considering, depending on data held and company structure.
Not for most consultants. It is compulsory for some regulated professions, but general business, IT, HR and marketing consultants are not usually required by law to hold it. In practice, many client contracts and procurement frameworks require PI at a stated limit, so it is often a commercial necessity.
Usually not, if you are the only employee and own 50 percent or more of the issued share capital, according to HSE guidance. Once the company takes on other employees, the exemption normally falls away and the HSE says cover must be at least £5 million.
Usually no. Public liability covers injury to people and damage to their property. A claim that your advice caused a client to lose money is a financial loss claim, which falls under professional indemnity. Most consultants who face client claims need PI for that reason.
Many do. Consultants commonly hold client financial, personal or commercially sensitive data, and an attack on email or systems can lead to breach response costs, downtime and claims. PI may not cover your own costs after a cyber incident, which is the gap cyber insurance is designed to fill, subject to its terms.
Tell us what your business does, your turnover and any claims. A broker reads every enquiry and comes back with options. No fee for a quote. Or call 0117 325 0027.
Get a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
