Accountants carry a lot of responsibility on their shoulders. Just one minor mistake could end up costing a client — and your business — major losses. That's why having financial protection for these professional mistakes and oversights in the form of accountants professional liability insurance is crucial.
Fortunately, a local independent insurance agent can help your accounting firm get all the professional liability insurance it needs. They'll get you matched to a policy that offers the right amount of protection for your unique field. But first, here's a breakdown of what accountants professional liability insurance covers and why you need it.
Key Takeaways - Accountants Professional Liability Insurance
- Professional liability insurance can protect against losses from errors and omissions that occur while carrying out professional services for clients or customers.
- Many types of professionals need this coverage, at an average cost of $146 per month, or $1,754 per year.
- Professional liability insurance for accountants tends to be affordable, including CPAs, tax preparers, bookkeepers, and small to midsize accounting firms.
- This coverage can provide reimbursement for many different losses, including the cost to defend your firm in court and damages to the client.
- Consulting an independent insurance agent is highly recommended, as they can tailor coverage to your unique accounting firm.
What Is Accountants Professional Liability Insurance?
Accountants professional liability insurance, also known as errors and omissions insurance, is a special form of business insurance designed to protect accountants and accounting firms against third-party claims of negligence, errors, and omissions.
These mistakes can arise during the course of an accountant's professional services, such as tax preparation, bookkeeping, or offering financial advice. The client or customer must have suffered some type of harm, financial or otherwise, due to a professional error or oversight on the accountant's part for this coverage to apply.
Who Needs Accountants Professional Liability Insurance?
This type of insurance is needed by many different professionals in the accounting field, such as:
- CPAs
- Tax preparers
- Bookkeepers
- Small to midsize accounting firms
Basically, any professional who provides services that carry a risk of financial harm to clients needs to have accountants professional liability insurance. Talk to a local independent insurance agent today to find the right policy to protect you and your firm.
What Does Accountants Professional Liability Insurance Cover?
Accountants professional liability insurance covers several potential losses that can arise from professional errors or omissions.
Common risks covered:
- Legal defense costs
- Court settlements
- Court judgments
- Client damages
Costs that arise from client allegations of professional mistakes or oversights, such as missed deadlines, harmful or inaccurate advice, or breaches of duty, can lead to several types of financial losses for the client and the accounting firm. That's what makes having the right type of coverage crucial for your business to recover after such an incident.
What's Not Covered by Accountants Professional Liability Insurance?
This insurance comes with a few exclusions that are important to be aware of, such as:
- Intentional errors and omissions
- Criminal acts
- Employment practices claims
- Bodily injury to clients
- Personal property damage to clients
Some of these risks are covered by other types of insurance, such as employment practices liability insurance (EPLI). Bodily injury or personal property damage to clients and other third parties would be covered under your business's general liability insurance. However, it's unlikely that any type of insurance will cover your intentional harm to others or criminal acts.
Key Benefits of Having Accountants Professional Liability Coverage
Besides offering financial protection for you and your accounting firm, accountants professional liability insurance also offers a couple of additional benefits. This coverage can help you and your firm attract clients who require proof that accountants are insured before agreeing to their services.
Further, this coverage can grant your firm access to risk management resources like consultation and education, depending on the carrier from which you get your policy.
Types of Professional Liability Policies
There are two main types of professional liability insurance that accountants can choose from:
- Claims-made policies: These cover claims made during the policy period.
- Occurrence policies: These cover incidents that occur during the policy period, regardless of when the claim is filed.
Occurrence policies can offer your firm greater protection, because they still provide financial reimbursement for incidents that occurred during the policy term, even if a client doesn't file a claim until much later. This can be helpful because certain types of errors may not cause obvious harm right away, resulting in a claim filed several months in the future.
Additional Coverage Options and Endorsements for Accountants to Consider
Some accountants professional liability insurance policies offer additional coverage options, such as network security coverage, breach response services, investment advisor coverage, and crisis expense reimbursement tailored to evolving business risks. These additional coverages can help protect your firm from network security breaches that may expose your clients' personal and sensitive data to hackers and other unauthorized parties.
They can also reimburse your firm for professional services necessary to help your firm recover from a related incident. Ask your independent insurance agent if any of these coverage endorsements are a good fit for your accounting business.
The Importance of Accountants Professional Liability Insurance for CPA Firms
Having the right type of professional liability insurance tailored to your industry can help protect your firm's reputation and finances from the possibility of an unexpected, costly lawsuit. Even frivolous claims for which you are ultimately not found liable can still be expensive for your business, especially if you must defend yourself in court.
Despite your firm's high professional standards and attention to detail when carrying out professional services, mistakes can still happen. Without the right coverage, just one lawsuit could set your firm back thousands of dollars or even more. That's why it's critical to work with an independent insurance agent to get set up with the right policy tailored to your unique firm before ever opening for business to the public.
How to Choose the Right Policy for Your Firm
When selecting your policy, you'll want to consider all the following factors:
- Coverage limits: Your policy must include an appropriate amount of coverage relative to your unique firm's level of risk.
- Deductibles: Work with your agent to set an appropriate deductible that leaves you with a preferable premium rate and is affordable to pay out of pocket when filing a claim.
- Policy exclusions: Review your policy options to choose one that doesn't exclude coverage for something your firm really needs.
- Claims handling: Choose a policy from a reputable insurance carrier proven to deliver on its coverage promises to customers, including an efficient claims process.
- Insurer reputation: Research the insurance company selling the policy before you buy coverage, as some carriers have higher official ratings and better customer feedback than others.
- Risk management tools: Look for a policy that offers additional perks beyond the standard coverage.
An independent insurance agent can help you with each of these factors to find the ideal policy for your accounting firm. Your agent already knows which carriers have great reputations in your area and where to find the best coverage.
How Much Does Accountants Professional Liability Insurance Cost?
The average cost of professional liability insurance for accountants is $146 per month, or about $1,754 per year. Of course, the cost of your firm's policy can vary based on several factors, including your business's size and location.
Your firm's claims history can also influence your premiums. An independent insurance agent can help you find affordable professional liability insurance for accountants in your area.
An Independent Insurance Agent Can Help You Get a Quote for Accountants Professional Liability Insurance
If you're ready to protect your accounting firm with the right professional liability insurance, a local independent insurance agent can assist you. These agents have access to multiple insurance companies in your area, which means they're free to shop and compare accountants professional liability insurance quotes and policy options for you to find the best deal. And down the road, your agent can help you file business insurance claims and update your coverage when necessary.
Sources
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https://www.berkleyselect.com/products/accountants-professional-liability
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https://www.moneygeek.com/insurance/business/professional-liability-insurance-cost/
