Accountant professional liability insurance helps protect accounting professionals and small- and mid-sized accounting firms from the risks related to performing tax preparation, bookkeeping and other professional services. <\/p>
As an accounting professional, you are committed to the accuracy and integrity of your work for your clients. Still, whether you are a bookkeeper, tax preparer, or Certified Public Accountant (CPA), you face potential exposure just by doing business.<\/p>
Accountant professional liability insurance will pay for legal fees related to errors on a tax return, or a missed filing deadline. It also covers risks that can affect any business, such as theft and injuries.<\/p>
This is typically the most important insurance policy a CPA and any other type of accountant or financial services professional can purchase to protect their firm. It is also known as errors & omissions insurance and accountant indemnity insurance.<\/p>
There are innumerable laws and regulations that accounting professionals must keep up with. They are constantly learning and keeping up with the changing regulatory climate, while also serving their clients as best as possible. The accounting profession is a complex one, and navigating the world of taxes, budgets, and payroll is never easy or simple.<\/p>
Mistakes will happen while performing these professional services. It does not matter how careful you are and how much experience you have as a professional accountant.<\/p>
That is exactly why professional accountants purchase professional liability insurance. This coverage provides the protection from claims and financial risks that accountants need to confidently perform their services and help their clients.<\/p>
Accountant professional liability insurance provides comprehensive protection against the specific risks of offering accounting services. This includes negligence and malpractice, and it also meets all CPA requirements.<\/p>
This policy package is specially designed for people whose duties include, but are not limited to:<\/p>
Any and all providers of professional financial services should be interested in purchasing professional liability insurance. The reality of a career in financial services, especially accounting, is that it\u2019s incredibly easy for a client, investor, or even a partner to file suit against you. <\/p>
No matter the quality of your service, the experience you have, and how well you stick to the scope of your engagement letter, you run the risk of getting hit with an expensive professional liability claim just by being an accountant in today\u2019s increasingly litigious environment. Whether you are a CPA, tax advisor, or bookkeeper, there is a good chance that you are going to be hit with a claim eventually. <\/p>
Even if you are a part-time accountant working from your home office, you are still at risk of getting a lawsuit from an agitated client at any time. <\/p>
Also, when discussing insurance, one of the most important things to remember is that claims filed against will cost you a significant amount of money even if you win. No matter how frivolous the lawsuit, there are still going to be legal defense costs. Even if you\u2019ve not made any kind of error or professional misstep, you could still get sued, as long as your client is under the impression that you have done something that has resulted in a financial loss to them.<\/p>
This makes insurance a priority for anyone working as a professional accountant in any capacity.<\/p>
Coverage is specifically designed to offer protection to accounting professionals for the array of emerging exposures that you face. It can help protect your firm against losses resulting from negligence, errors, and omissions in the performance of professional services. You can tailor this errors and omissions policy to fit your business needs.<\/p>
Key benefits of this policy include:<\/strong><\/p> This policy covers any type of professional errors that occur while performing your duties as an accountant. Accountant professional liability insurance kicks in to provide protection if a client sues you for negligence or perceived mistakes you have made in your work which they believe have led to financial damage for them.<\/p> Any good policy would cover errors and omissions, any acts of perceived professional negligence, and breach of duty and contract. It would also cover misleading information, bad advice, and any other issues with your performance.<\/p> If a client files a professional liability claim, your accountant’s professional liability insurance will cover all of your defense costs and potential rewards or settlements you might end up having to or choosing to pay.<\/p> A professional liability policy will only cover claims directly related to your professional work as an accountant. And while professional liability is probably the most important insurance policy that a CPA should have, it is certainly not the only one.<\/p> If you have an office that clients and partners visit regularly, then it\u2019s a good idea to purchase commercial general liability as well. This protects you if a third party or their property sustains an injury or damage at your place of work.<\/p> If you have a large accounting firm with directors, officers, and board members, you should purchase directors & officers insurance. This is because typical professional liability policies will not cover claims filed against management.<\/p> Any accounting firm that has more than a handful of employees should also consider employment practices liability coverage to protect itself from employee-filed claims of harassment, discrimination, wrongful termination, failure to promote, and more.<\/p> There are several important factors that insurers will look at to determine how much an accounting firm will have to pay for CPA insurance. <\/p> First and most important are the services that the accountant. A CPA will generally pay more for insurance than a bookkeeper, for example. This is because CPAs are certified professionals; therefore, clients have greater expectations and professional standards when hiring them.<\/p> If large corporations hire your accounting firm to perform audits and handle its taxes, you\u2019re obviously going to pay more for insurance than an accountant who performs bookkeeping services for private citizens. It should also be clear that the larger your firm is and the greater the number of accountants that need to be covered by the policy, the more you\u2019re going to pay.<\/p> Simply put, the higher the level of risk your professional services entail, the more your bill.<\/p> Your claims history is another very important aspect that insurers will look at closely. If you have a history of liability claims filed against you, especially severe claims, you will pay much more for coverage than what an accounting firm of the same size and profile that hasn\u2019t had many claims filed against them over the last several years will have to pay.<\/p> Professional indemnity insurance and liability insurance are different types of business insurance that cover compensation claims. It is often misunderstood how each of these business insurance policies protects businesses against risk.<\/p> Liability insurance protects businesses from legal claims and financial losses resulting from third-party injuries, property damage, or lawsuits. It covers legal defense costs, settlements, or judgments if the business is found legally liable for causing harm or injury to others.<\/p> Liability insurance is crucial for businesses that interact with customers, clients, or the public and helps protect their financial interests in case of accidents, injuries, or property damage claims.<\/p> Professional indemnity insurance, on the other hand, will cover claims made against you by a client for professional negligence or errors made in the work you have completed for your client. These claims can arise due to professional errors, defamation or libel, sub-standard work, or the perception that you gave your client poor business advice.<\/p> Professional indemnity insurance can cover the legal costs incurred in defending against a claim, compensation payments, and additional costs for rectifying an issue and loss of income as a result of the claim.<\/p> Accountant-client relationships are very delicate. Any client relationship that is intrinsically centered around money can take a turn for the worse very quickly. Simple misconceptions and miscommunications can cause an accountant\u2019s relationship with a client relationship to sour and potentially lead to grievances.<\/p> There are best practices that accountants can follow in order to protect themselves from lawsuits. They can make sure to put all of their agreements in writing and communicate with clients via email so that written transcriptions exist. They can also ensure that if they need to make any changes to their plans, they must first get the client\u2019s consent in writing.<\/p> But even if you\u2019re as vigilant as possible, clients can sue if they believe that you have not done a good job providing your financial services to them, even if they have nothing to base those claims on.<\/p> Having accountant liability insurance gives you financial protection from all liability claims and will pay expensive defense costs whether you win or lose the claim. If you do end up losing the claim or reaching an agreement to settle, insurance will pay those expenses as well.<\/p> Here are some situations where professional liability insurance is crucial for accountants:<\/p> Accountants are highly detail-oriented people. And with good reason, as even a tiny mistake in their work can lead to serious financial repercussions for their clients. If a client thinks you have made an error in your work and decides to sue, the legal costs and potential damages could be enormous. <\/p> Accountant professional liability insurance will respond to most professional errors, including errors in bookkeeping, omissions, duplicates, missed items on tax return states, and other mistakes.<\/p> Professional negligence is a serious accusation that many accounting professionals need to deal with \u2013 whether they have done something wrong or not. If a client feels that your advice has caused them financial harm, they could accuse you of negligence and take you to court. Luckily, professional liability insurance will kick in and cover your legal expenses and potential settlements and damages.<\/p> Accountants fill a significant role for their clients. With that importance comes a responsibility \u2013 clients rely on you to maintain the financial well-being of their business. If your clients don\u2019t feel like you have fulfilled your part of the deal and didn\u2019t deliver on your contract, they may decide to sue. Accountant professional liability insurance will respond to such allegations and financially protect your business.<\/p>What does professional liability insurance cover for accountants?<\/strong><\/h2>
What does it not cover?<\/strong><\/h2>
What does it cost?<\/strong><\/h2>
What is the difference between professional liability and indemnity?<\/strong><\/span><\/h2>
Why you need an accountant professional liability insurance<\/strong><\/span><\/h2>
Professional errors<\/strong><\/span><\/h4>
Professional negligence<\/strong><\/span><\/h4>
Failure to deliver promised services<\/strong><\/span><\/h4>
Recommended Articles <\/strong><\/span><\/h2>
References<\/strong><\/span><\/h2>