Join Early Retirement Today
Thread Tools Search this Thread Display Modes
E & O insurance for consulting
Old 02-14-2009, 07:30 PM   #1
Full time employment: Posting here.
Join Date: Jan 2007
Posts: 582
E & O insurance for consulting

I recently established an LLC to do research and consulting for nonprofits. I expect the work will mainly involve program evaluation (documenting the results, or lack thereof, of nonprofits' services) and some organizational planning, grant advising, etc.

Among professional evaluators/consultants doing similar work, the consensus seems to be that having Errors and Omissions insurance is a good idea in case something goes wrong on a project and the client is inclined to sue you for being negligent. However, it's a very rare person who has ever needed to use the policy. They cost about $1200 annually, plus you have to buy professional liability before you can get the E&O policy, so that's another couple hundred per year.

Right now I'm covered through another consultant for whom I'm subcontracting. But when I (hopefully) get to the point of working on my own, I'll have to decide if the insurance is worth it. Does anyone have any advice about this?

My understanding is that part of the point of setting up the LLC is to separate my personal finances from the business finances. I'll also have a separate checking account just for the business. So that protects my personal assets, right? And the business won't ever have substantial assets, since I'll be working from home and require very little equipment and such - computer, printer, fax, and that's about it.

So what would be the benefit of having the insurance? Is it so that if I did ever get sued, the insurance company would handle the hassle of it? Is it that if I didn't have insurance and lost a lawsuit, I'd potentially have to declare bankruptcy for my LLC and start over?

Part of me buys into the idea that $1500 per year isn't that much to pay for additional security. But then I also wonder if people are just buying into insurance company scare tactics.

Thanks for any help or thoughts on this.


WM is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-15-2009, 06:41 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
Join Date: Mar 2003
Posts: 15,911
We pay several hundred a year to insure DW even though the likelihood of her ever being sued is beyond remote. Why? My understanding is that if you personally are providing professional servivces it is not that hard to pierce the corporate veil and go after you personally (not just your LLC). In addition, if you are sued, the costs of defense could break you if you didn't have an insurer on the hook for the defense.

BUy the insurance.

"Neither my companion or I carry firearms on our persons. We depend on the goodwill of our fellow man and the forbearance of reptiles."

- English Bob
brewer12345 is offline   Reply With Quote
Old 02-15-2009, 01:32 PM   #3
Moderator Emeritus
Nords's Avatar
Join Date: Dec 2002
Location: Oahu
Posts: 26,564
I think that:
(1 - chance of never being sued during yy consecutive years)x(cost of defense + cost of judgment)
is less than
(annual cost of insurance)x(yy consecutive years of insurance)
insurance is a bargain.

For example, I bet Legg-Mason's Bill Miller is beginning to wish he'd bought some sort of portfolio insurance for years #16 & 17...

The book written on, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 02-17-2009, 09:57 AM   #4
Full time employment: Posting here.
Join Date: Jan 2007
Posts: 582
Ok, insurance it is. Thanks!

WM is offline   Reply With Quote
Old 02-17-2009, 10:09 AM   #5
Recycles dryer sheets
Join Date: Nov 2005
Posts: 331
Good choice, in this society, when out on a venture, such as consulting, where your decisions can influence thousands, perhaps millions of dollars, buy the coverage. Good choice, just shop around a bit.

Prof liab and e & o is the way to go.

jug is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Shifting from W2 to 1099 consulting Kronk FIRE and Money 21 10-14-2007 12:49 PM
Part-time consulting work for nurses Tracy42 FIRE and Money 10 04-05-2007 09:15 AM
Consulting vs. part-time w*rk cj FIRE and Money 16 02-16-2007 12:32 PM
Consulting career at Accenture? soupcxan Young Dreamers 15 12-28-2006 01:21 PM
Starting a Consulting Business maddythebeagle FIRE and Money 2 11-17-2005 06:09 PM


All times are GMT -6. The time now is 04:36 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.