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An alleged error that the bookkeeper is accused of making while providing expert bookkeeping services is covered by the bookkeeping insurance. Bookkeeping insurance is an insurance for bookkeepers tailored to the unique needs and exposures of bookkeeping, to guard bookkeeping specialists from the particular dangers associated with rendering financial services, like errors, negligence, or mistakes and omissions.


A bookkeeper can be defined as one who performs expert bookkeeping services, keeps complete sets of books, logs financial transactions, and checks the methods used to record them. Also, a person who can complete a full set of books, including a trial balance, is referred to be a bookkeeper. Tasks which include; calculating and preparing payroll checks, supplier invoices, government remittances, filling out and/or submitting tax remittance forms, setting up and maintaining financial records, and posting journal entries are just a few of the typical tasks carried out by a bookkeeper.

The bookkeeping insurance covers an alleged error that accuses the bookkeeper of making while providing expert bookkeeping services. Bookkeeping insurance tailors to the unique needs and exposures of bookkeeping specialists, guarding them against the specific risks associated with providing financial services, such as negligence or errors and omissions.

Errors and Omissions Insurance for bookkeepers also known as professional liability insurance or Bookkeeping professional indemnity insurance also helps protect bookkeepers from unintentional mistakes and errors. In the case of an unanticipated accident, errors, and omissions insurance is put in place to help protect the bookkeeping firm. It shields you and your business from legal lawsuits based on allegations of negligence, common errors, omissions, and misrepresentation. Bookkeeping insurance cost typically averages between $400 and $2000 per year which is about $35 per month which is relatively cheap and affordable by small and medium size firms.

Other Important Insurance Coverage for Bookkeepers

In addition to Errors and omission insurance coverage which is a must-have policy, bookkeepers should also consider having these extra policies in place;

#1. Business Owners Policy

General liability and commercial property insurance are two of the coverage kinds that make up this kind of insurance. This package covers theft, fires, storm damage, and the most typical types of claims that accountants and other financial professionals face.

A BOP offers premium protection against;

  1. Stolen or broken commercial property.
  2. Property damage and client injury.
  3. Libel and other harms from advertising.
  4. Closure imposed as a result of a property claim.

a)       Stolen or broken commercial property

A business owner’s policy’s commercial property insurance protects damaged, vandalized, or stolen company property. This comprises:

  • Both electronics and computers.
  • Furniture and equipment for offices.
  • Buildings owned by your business.

A BOP can pay renovation costs if a fire damages your financial company, even if it started in another building.

b)      Property damage and client injury

Legal costs associated with third-party injuries or property damage may be covered under the general liability element of a BOP. It would, for instance, cover the following events:

  • At a tax preparer’s office, a client trips over a dangling power cable and breaks his/her wrist.
  • Unintentionally, a bookkeeper drops a client’s laptop, breaking the screen.

c)       Libel and other harms from advertising

This policy’s general liability provision also provides coverage for injuries caused by advertising, such as:

  • Slander, which includes both oral and written libel.
  • Brand or copyright infringement.

A BOP would pay your legal expenses if, for instance, you unintentionally used another bookkeeping firm’s slogan in an advertising campaign.

d)      Closure imposed as a result of a property claim

A BOP can assist in covering daily costs and missed income if your company must shut down due to a fire, storm, or other covered property claim. This can aid your firm until you can resume operations.

For instance, if a storm damages the windows and floods a portion of the office, a financial planning firm may need to temporarily close. Operating costs while the office is being remodeled are covered by business interruption insurance, which is a common inclusion in BOPs. If you have to temporarily move your business, it might also help with the rent.

#2. Commercial Auto Insurance

This coverage, which functions similarly to personal auto insurance, would cover automobiles used for business purposes, including company vehicles if you had a number of staff who would travel for meetings or sales pitches. Commercial auto insurance covers expensive auto accidents for your financial business’s automobile. State law typically mandates this coverage for business-owned automobiles.

Commercial auto insurance covers part of the cost of lawsuits, property damage, medical costs, and other costs associated with an accident. It also protects your car in case of vandalism, theft, or weather-related damage.

Your insurance can be modified to fit your budget and business demands. For instance, you can select a coverage that only covers collision damage or one that covers car damage from all causes.

#3. Workers Compensation

Workers’ Compensation insurance will cover the care and compensation of staff members if they become injured while at work in your office or while traveling for work-related reasons, making it another insurance policy you’ll want to have if you own your own bookkeeping business and have multiple employees.

Most states mandate workers’ compensation for bookkeeping companies with staff. Additionally, it guards against expenditures associated with work-related accidents that health insurance could refuse to cover.

Medical expenses can add up rapidly if an auditor trips and falls at work or if your top tax preparer gets carpal tunnel syndrome. If a worker gets hurt on the job, workers’ compensation insurance may pay for some of their medical bills and lost wages. If an employee brings a claim for carelessness at work, it may also defend the employer.

Three main areas are covered by workers’ compensation:

  • Injuries and illness claims made by employees.
  • Lawsuits for workplace injuries.
  • Adherence to state law.

a)       Injuries and illness claims made by employees

Injured employees may receive assistance from workers’ compensation for:

  • Immediate medical bills, such as ambulance and emergency room fees.
  • The expense of ongoing medical care, including prescriptions and physical therapy.
  • Partial wages are lost while the employee is out of work.
  • Benefits from tragic accidents, including burial costs.

b)      Lawsuits for workplace injuries

If a worker at a bookkeeping, financial advisory, or other business decides to sue the owner, the employer’s liability insurance, which is usually part of a workers’ comp policy, will protect the company owner. Even if the employer was not negligent in causing the accident, the claim of carelessness could lead to a pricey legal dispute.

Employer’s liability insurance may assist with:

  • Fees for an attorney.
  • Court fees.
  • Either agreements or rulings.
  • Witness costs.

c)       Adherence to state law

For workers’ compensation standards, each state has its own distinct set of legislation. For instance, New York law mandates that accounting and finance firms carry workers’ compensation insurance for every employee, even those hired on a part-time basis. However, businesses in Alabama only need to obtain workers’ compensation coverage if they employ five or more employees.

Independent contractors, single proprietors, or partners do not require workers’ compensation insurance. To protect yourself financially from work-related accidents that your health insurance may not cover, it is still a smart idea to carry this coverage.

#4. Cyber Liability Insurance

Another thing to think about is getting cyber liability insurance. Since bookkeeping is no longer simply a stack of papers on a desk bookkeeping firms should take precautions to prevent unauthorized access to the sensitive financial records they work with on a digital platform.

Small bookkeeping business owners can survive data leaks and cyberattacks thanks to this policy. It can cover costs associated with client notification, data recovery, malicious software attacks, and other things. Cyber insurance covers accountants, auditors, and other financial professionals in the event that someone takes or compromises their confidential information. If a hack harms one or multiple clients, your business may be held accountable. This coverage can pay for your legal fees and costs while also giving you access to crucial services to aid in your recovery.

This policy offers liability protection for:

  • Cases of data breaches.
  • Cost of breach notification.
  • The expense of fraud monitoring.

There are two kinds of cyber liability insurance: first-party and third-party.

a) First-party cyber liability insurance

First-party cyber liability insurance covers cyberattacks and data breaches at your place of business. It offers essential security for any company dealing with finances, Social Security numbers, and other private client data. This policy covers the following expenses:

  • Consumer notification of a breach.
  • For impacted clients, credit monitoring services.
  • Demands from cyber extortion.

b) Third-party cyber liability insurance

If one of your customers has a data breach or hack and holds you accountable, you may face a lawsuit. An accountant might recommend compromised software, for instance. To recoup costs, the harmed client may choose to file a lawsuit against the tax preparer. Third-party cyber liability insurance covers the following charges, protecting your company from the costs that result from a data breach.

  • Judicial fees.
  • Attorney fees.
  • Resolutions or rulings.

Bookkeeping Insurance Cost

For tax preparers and bookkeepers, errors and omissions insurance rates vary. The average insurance cost for a bookkeeper starts at around $300 per year for an E&O policy with a $500,000 coverage limit. However, the precise cost of your coverage will vary based on a number of variables, including:

  • The type of enterprise.
  • Location of the business.
  • Limits on coverage.
  • Maximum deduction amount.
  • Number of personnel.
  • Years of operation.
  • History of claims.
  • Business Certifications.
  • Estimated and annual revenue.
  • Types of insurance purchased.

Depending on the amount of risk, including how much sensitive information you handle, bookkeeping insurance costs will vary from one firm to another.

Below is the average cost of the various insurance coverage policies for bookkeepers:

#1. Errors and Omissions Insurance Costs for Bookkeepers

E&O insurance for bookkeepers often costs less than $35 per month, or $400 annually. This policy may cover legal expenses for lawsuits involving your work performance. People also use the term “professional liability insurance” interchangeably to refer to this type of insurance policy.


  • Average annual cost: $400
  • Limits of the policy: $500, 000 per occurrence
  • $1,000 policy deductible

#2. General Liability Insurance costs for bookkeepers

For general liability insurance, bookkeepers typically pay a monthly premium of $30, or $350 annually. Injuries to third parties, third-party property damage, and advertising injuries are all covered under this coverage for bookkeeping businesses.


  • Average annual cost: $350
  • Limits of the policy: $1 million per occurrence
  • $500 policy deductible

#3. Cyber Insurance Costs for bookkeepers

When managing confidential data, bookkeepers must have cyber liability insurance, which has an average monthly price of $60 or $710 annually. This strategy aids businesses in recouping from cyberattacks and data breaches. If a customer sues your company as a result of a data breach, it may help pay for legal bills as well as the costs of notifying the impacted consumers.


  • Average annual cost: $710
  • Average policy cap: $750,000

#4. Workers’ Compensation Insurance Costs for bookkeepers

For bookkeepers, the average cost of workers’ compensation insurance is $30 per month, or $370 annually. Almost many states require bookkeeping enterprises with employees to have this policy. When people are sick or hurt at work, it can assist in paying for their medical bills and lost wages.

#5. Fidelity Bond Insurance Costs for Bookkeepers

For small enterprises, the median premium for a fidelity bond is $88 per month, or $1,055 a year. The size of the bond has a major impact on the price.

Fidelity bonds offer compensation in the event that one of your employees defrauds a customer or your company through theft, fraud, or forgery, including unauthorized electronic financial transfers. Client contracts frequently stipulate their use.

What type of accounting is insurance?

Insurance accounting can fall under any of the following types;

– Property and casualty (P&C) insurance accounting.

– Life and health insurance accounting.

What are the three functions of bookkeeping?

The three main functions of bookkeeping are:

  • Record expenses.
  • Manage accounts.
  • Producing financial reports.

How is insurance recorded in accounting?

Insurance is recorded in accounting as follows:

  • Prepaid insurance

Insurance premiums that have not expired as of the balance sheet date should be reported as a current asset. The prepaid amount will be reported on the balance sheet after inventory.

  • Expired insurance

Costs that have expired should be reported in income statement accounts such as Insurance Expenses, Fringe Benefits Expenses, etc.

What are the three types of bookkeeping?

Three types of bookkeeping include:

– Cash-basis accounting: Records income when received and transactions when paid

– Accrual accounting: Records financial transactions even if they’re not paid yet

– Single-entry bookkeeping: Used for businesses that have minimal or uncomplicated transactions.

What is accounting insurance?

Accounting insurance is a type of business insurance that helps protect your small business from the unique risks the financial services industry presents.

To Wrap Up

No matter what kind of bookkeeper you are—general, full-charge, or certified—your work responsibilities could endanger you legally. Your work involves handling sensitive data and a host of third-party finances. Errors not only hurt the client’s business, but they also put you in danger of legal action. For their clients, bookkeepers perform numerous crucial tasks and have access to sensitive financial information. It is therefore advisable to purchase a comprehensive bookkeeping insurance package or errors and omissions insurance for bookkeepers in order to protect your business against the financial loss that could result from your business operations, unexpected events, and any legal action taken against your business.

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