Starting a new business is always a risky proposition. But the risks are even more significant when that business is a financial advisory firm. Financial advisors deal with people’s money; if something goes wrong, people can lose it. That’s why it’s important to have adequate insurance coverage before opening your business doors.
A few different types of insurance are important for financial advisory firms. Let’s take a look.
Financial Advisory Firm Insurance Policy Options & Cost
The four most common types of insurance for financial advisory firms are as follows: general liability, commercial property, workers’ compensation, and business income insurance.
- General liability insurance protects you from lawsuits arising from injuries or property damage resulting from your business activities. General liability insurance can also help protect your financial advisory firm assets in the event of a lawsuit. Typically, a small financial advisory firm costs $500- $1,000 per year.
- Commercial property insurance can help reimburse you for lost or damaged property caused by fire, theft, or other covered events. Typically, a small financial advisory firm costs $500-$1,000 per year.
- Workers’ compensation insurance helps financial advisory firms cover the costs of employee injuries or illnesses. This type of insurance can help businesses pay for medical expenses, rehabilitation costs, and other related expenses. Workers’ compensation insurance is required in all states except Texas. Workers’ compensation insurance typically costs 1-1.5% of your total payroll costs.
- Business income insurance is sometimes called business interruption insurance or business continuity insurance. This insurance helps businesses recover from certain losses caused by events such as property damage, theft, or business interruption. This type of insurance can help businesses cover the costs of not being able to operate for some time. It can also help businesses pay for employee salaries, rent, and other ongoing costs. Typically, a small financial advisory firm costs $500-$1,000 per year.
Other types of business insurance to consider based on the specifics of your financial advisory firm include:
- Product liability insurance helps businesses protect themselves from lawsuits that may arise due to products that they sell.
- Professional liability insurance, also known as Errors and Omissions (E&O) insurance, helps professionals protect themselves from lawsuits. Typically, a small financial advisory firm costs $1,000-$2,000 per year.
- Employment practices liability insurance, also known as EPLI, helps financial advisory firms protect themselves from lawsuits that may arise from how they employ their staff.
- Cyber liability insurance protects you from lawsuits that may arise from a data breach or other cyber incident.
- Business identity insurance protects your business from theft or misuse of your company name or logo.
- Commercial auto insurance and commercial fleet insurance protect you from lawsuits that may arise from accidents involving employees while driving for work.
- Key person insurance or key man insurance protects your financial advisory firm from losses that may arise from the death or illness of a key employee,
- Equipment breakdown insurance can help pay for the cost of repairing or replacing damaged equipment,
While this list of insurance options covers most financial advisory firms, you may be required to purchase additional coverage depending on the specific nature of your financial advisory firm. Speaking with an insurance company to determine which policies are right for your business is essential.
The cost of business insurance will vary depending on the type and amount of coverage you purchase. However, business owners can expect to pay a few hundred dollars annually for general liability insurance.
It is essential to talk to your insurance company to ensure you have the right coverage in place for your financial advisory company.
How Much Insurance Should a Financial Advisory Have?
This is a difficult question to answer, as the amount of insurance you need will vary depending on the type of services you offer and the size of your company. That being said, most insurance experts recommend that business owners purchase enough coverage to protect their assets in the event of a lawsuit.
When shopping for liability insurance, ask your insurance company about the coverage limits and available supplemental coverage options. Business insurance is an essential consideration for all financial advisory firms. An insurance professional can provide additional guidance.