$1M Professional Liability (E&O) Insurance for Consultants

For consultants whose client contract asks for $1M: your policy must pay up to $1M per claim for client losses from your advice, and the clause may also want a $2M yearly total.

What does a $1M requirement mean for consultants?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your advice or services cost a client money. A typical clause looks like this:

• Per claim: the most the policy pays for any one claim. Here, $1M.
• Aggregate: the most the policy pays for all claims in one policy year. Here, $2M.
• Matching the numbers: a $1M/$1M policy does not meet a clause that asks for a $2M aggregate. A $1M/$2M policy has limits that match either of those two wordings, but your contract's wording controls, so check every other term in the clause too.
• Claims-made: the clause asks you to keep coverage for two years after the project ends because the policy pays only for claims made while it is active.

For more on reading limits, including $2M/$2M, see Professional Liability (E&O) limits explained. A typical consulting agreement puts the insurance clause near the indemnity and confidentiality terms, so scan those sections too.

Who asks consultants for $1M?

You will often see $1M from:

• Mid-sized companies hiring management or strategy help.
• HR departments hiring outside HR or benefits consultants.
• Marketing teams, nonprofits, schools and local government offices.
• Firms that subcontract work to independent consultants.
• Larger clients on smaller projects. Bigger projects often ask for $2M or more.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first), with no excess layers (extra policies stacked above it to raise the limit). Non-tech consultants usually buy Miscellaneous Professional Liability, made for service businesses without their own policy type. Software and IT consultants usually need Technology E&O (made for software and IT services) instead, often combined with Cyber (coverage for data breaches and related costs).

A single $2M limit is a bigger requirement: a $1M/$2M policy still pays up to $1M on any one claim, while a $2M limit pays up to $2M. See $2M Professional Liability for consultants.

A commercial umbrella almost never covers Professional Liability, so it usually cannot help (see Does a commercial umbrella cover Professional Liability?). Additional insured status (naming the client on your policy) is not automatic on Professional Liability, and many policies do not offer it. Some carriers may add a client, usually only for claims from your services. Many clients accept a certificate of insurance (a one-page summary that shows you carry the coverage), but check what your contract requires.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. At $1M, they usually ask for:

• Your services, with a rough share of revenue from each.
• Past and projected revenue, and your largest engagements.
• Industries you serve, noting any finance, healthcare or government work.
• Whether you use written contracts on every project.
• Prior claims, possible claims, and your current policy and retroactive date.

What affects the cost?

• Type of consulting. Financial or regulated work usually costs more than marketing or training work.
• Revenue and project size. Bigger contracts mean bigger possible losses.
• Claims history. Prior claims can raise the price.
• Aggregate and retention. $1M/$2M usually costs more than $1M/$1M. A higher retention (the amount you pay on each claim before the policy pays) usually lowers the premium.
• Defense and prior acts terms. Defense outside the limit often adds cost. So does full prior acts coverage (coverage for work done before the policy starts).

For more, see What affects Professional Liability (E&O) cost.

Frequently asked questions

Do I need $1M Professional Liability as a consultant?

Usually only if a client contract or your own risk review calls for it. Some consulting contracts ask for $1M, so read the insurance section before you sign.

What kinds of claims can a consultant face?

Claims usually say your advice or work cost a client money, for example a missed deadline or a report that fell short. Many policies exclude promised results, so avoid promising outcomes.

Is $1M/$1M enough if my contract asks for $1M/$2M?

No, a $1M/$1M policy usually does not meet a $2M aggregate. Request new quotes for a $1M/$2M policy. Morrow can request quotes from insurance companies (carriers) and ask them to keep your retroactive date and prior acts coverage where the market allows. Keep your current policy in force until the new one starts so there is no gap, and report any known incidents to your current carrier before it ends.

What happens if I cancel my policy after the project ends?

A claim first made after you cancel is generally not covered. An extended reporting period (a "tail") gives you extra time to report claims about past work, and usually must be bought soon after the policy ends.

This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.