An IT contractor rushes out a bad line or two of code, and his client loses a few hundred thousand dollars in revenue. A marketing consultant's customer is miffed because market share stays flat, and the consultant must hire pricey attorneys to fend off a nuisance suit. An independent financial planner steers her client to an investment that tanks, and the parties go three rounds in court.

What else could go wrong in your freelance career? We hope you won't find out, but there are thousands of real-world reasons why solo professionals should seriously consider buying professional liability insurance. This specialized form of insurance can protect you from claims of negligence, errors, omissions or wrongful acts committed as part of your business duties.

Many free agents believe that if they're sued for professional negligence, bankruptcy will save the day. Not so fast. "If you want to keep what you have, you should consider liability insurance," says David Russell, a consultant and assistant professor of finance, insurance and law at Illinois State University.

Forming a business entity may give your personal assets some protection, but "incorporation is not a surefire way to avoid the risk," says Russell. If a dissatisfied client's lawyers are successful in "piercing the corporate veil," you could still lose everything but the shirt off your back.

Do you believe that perfect mastery of your profession makes a suit unthinkable? Think again. "Even if you're innocent, you could spend tens of thousands of dollars to prove it," says Russell.

The odds are that your home and car insurance agent won't know much about liability insurance for the kinds of free agents the industry lumps together as "miscellaneous," graphic designers, computer gurus, human-resources consultants and so on. Better to find a broker specializing in professional liability insurance or to follow the recommendation of a professional association in your field. Frederick Fisher, a Los Angeles insurance broker and past president of the Professional Liability Underwriting Society, suggests you choose a broker who's a member of the society. "Group policies provided through professional associations can be much cheaper, but they may not give the best coverage," Fisher says.

"Associations can bargain for lower premiums," says Linda Swindling, an attorney based in Carrollton, Texas. Professional associations often partner with insurers to create policies that cover the idiosyncratic legal hazards of consultants.

If you do work with an agent, "you've got to have someone who knows what they're doing," says Swindling. "There are so many people who are sold policies that don't cover what they do" in their consulting work, she notes.

Often, it's left to insurance applicants to specify all the individual activities of their professions, any of which might expose them to liability, Fisher says. With management consultants, for example, "it can get really hairy" because of the wide range of services these professionals provide. Translation: If your business is complex, get ready to drop thousands of dollars per year in liability insurance premiums. By contrast, a computer contractor with a relatively modest income and a limited range of activities might pay about $1,000 per year.

Before you buy, get the policy from the insurer and "take it to a litigation attorney for review," advises Swindling. She estimates that such a legal vetting could cost $250 to $750. Finally, it's important to check the financial stability of the insurer with a rating service like A.M. Best.

How can you bear these heavy costs? If you're taking out the policy due to liability exposure from one major client, consider billing the client for the insurance expense. By getting insurance and thus making a pool of assets available to settle a lawsuit or pay a judgment, you're reducing the financial risk borne by the client. You may be able to persuade your client that reimbursement of the premium is a reasonable price to pay for risk management.

You may well need additional forms of business insurance, such as business and general liability, property, workers' compensation and so on. Consult with a professional advisor, and note that this article is not intended to provide legal or financial advice. Risky business, indeed!