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Accountant Insurance

Having accountant insurance gives you the opportunity to focus on quality service delivery rather than worrying about a possible lawsuit.

Isn’t the stress of handling your clients’ complex finances hard enough? In addition, worrying about errors, misplacements, or omissions will be uncomfortable. The more reason you need to stay protected. 

Accountant insurance protects accountants and their firms from a variety of liabilities and financial losses. This type of insurance covers the cost of legal defence and settlements.

Some accountant insurance providers include Apollo, Marsh, Park, etc. Although, the coverage and limits of liability will depend on the policy purchased. However, it’s important you review different quotes before making a choice.

As an accountant, do you know many professional organizations and state licensing boards require accountants to carry insurance coverage? Yes! They do.

This article wishes to give you a textual tour of accountant insurance, its benefits and why buying one is a good investment for your practice. Keep reading!

What is Accountant Insurance? 

Accountant insurance is a type of professional liability insurance that protects accountants against a possible lawsuit that may arise from discharging their duties.

This type of insurance protects you from claims made by your clients for errors or omissions in your professional services. These services may include tax preparation, financial statement audits, and bookkeeping. 

Basically, as an accountant, when there’s a successful claim against your professional services, accountant Insurance will cover the costs of legal defence and possible damage claims.

Types of Accountant Insurance Policies 

There are several accountant insurance policies you can get to protect your legal practice as an accountant. These include

  • Error and omission insurance policy
  • General liability insurance
  • Cyber liability insurance
  • Property and content insurance
  • Worker’s compensation insurance 

Error and Omission Insurance Policy

Also known as professional liability insurance, error and omission insurance has coverage designed specifically for accountants. Although, your priority as an accountant is to be error-free while dealing with clients. However, an omission or two may arise, leading to a potential lawsuit. How do you stay legally protected? 

Imagine you made a mistake in one of your client’s tax returns and it resulted in a tax liability. Your client can decide to sue you or your firm for damages. This is where an error and omission insurance policy comes in. This insurance would cover the cost of defence and any settlement or judgment made against you.

Aside from protecting against possible lawsuits, errors and omissions insurance can also help preserve your and your accounting firm’s reputation and financial stability. It allows you to work confidently, knowing you are covered against claims related to your professional services.

General Liability Insurance 

When it comes to claims due to property damages or bodily injuries, general liability insurance will provide coverage for you, your firm or your business. In the event of an accident or incident that occurs in the course of carrying out your professional duties, having general liability insurance means you are financially covered.

Let’s imagine a client visits your office and trips over a loose carpet, and loses a tooth. However, this incident was out of your control. However, your client could potentially sue your firm for medical expenses or other damages.

If you already have a general liability insurance policy, it will cover the cost of defending yourself and settlement for damage claims too.

Aside from protecting against bodily injury claims, general liability insurance also covers claims for the following:

  • Advertising injury: this includes copyright infringement or slander
  • Property damage which includes damage to a client’s property during a site visit.

Cyber Liability Insurance

Cyber liability insurance is an insurance policy that protects you and your accounting firms from losses related to cyber attacks, data breaches, and other cybersecurity incidents beyond your control.

As an accountant handling your client’s sensitive financial information, you are at risk for a data breach which can break your confidentiality agreement. This exposure can result in financial losses for both you and your client. 

Imagine a hacker gaining access to a client’s financial records or tax returns in your possession. If your client decides to sue, you could be held liable for any damages. However, having cyber security liability insurance will cover the costs for the following:

  • Responding to a breach 
  • Notifying the affected clients
  • Credit monitoring services 
  • Legal fees. 

Investing in cyber liability insurance is a smart move for a growing accountant. In the event of a cyber attack, insurance keeps your mind at rest. You can focus on providing quality services to your client rather than worrying about the consequences of data breaches. 

Property and Content Insurance

Property insurance covers damage or loss to a building or its contents, while content insurance covers damage or loss to personal possessions within the building.

As an accountant, you need property and content insurance coverage to protect your office and its contents from damage or loss caused by fire, theft, or natural disasters.

As an accountant, certain unforeseen circumstances can result in losing or damaging your office space, furniture, and clients’ sensitive documents. Without property and content insurance coverage, you would have to bear the repair and replacement costs. 

However, with insurance coverage, your insurance company would compensate for your losses, allowing you to recover quickly and resume operations. So, if you run your firm from a home office, you can consider buying a personal property insurance policy to keep you fully covered.

Workers Compensation Insurance

Workers’ compensation insurance is a type of insurance that provides benefits to employees who are injured or become ill as a result of their job. This type of insurance is mandatory in most states for employers with employees.

As an accounting firm with several partners and accountant employees, it’s important to have workers’ compensation insurance to protect your employees in the event of injury or illness incurred while on the job. This insurance provides benefits such as:

  • Medical expenses
  • Lost wages
  • Rehabilitation costs

Having workers’ compensation insurance also protects you, the employer, by covering the costs associated with employee injuries and illnesses. This will help you reduce the risk of financial loss and lawsuits.

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Benefits of Accountant Insurance

As an accountant in Canada, Do you know the Chartered Accountants of Canada (CPA) legally mandates all accountants to have professional liability insurance? Well, you may want to ask about the benefits of owning this insurance. Then, allow me to satisfy your curious mind. Here are some of the benefits of buying accountant Insurance:

  • It gives you coverage against professional liability claims such as negligence, error or omission.
  • It protects you from unforeseen financial losses due to fraud, embezzlement, theft or damages from natural disasters.
  • Accountant insurance covers the legal costs of defending against lawsuits, even on groundless claims.
  • It helps protect your professional reputation and that of your firm.
  • It gives you peace of mind knowing that your insurance provider will give you coverage and legal support in the event of a loss.

How Much Does Accountant Insurance Cost?

The cost of accountant insurance can vary depending on the following factors:

  • The size of your accounting firm
  • The services you provide
  • The level of coverage you want
  • Your location
  • The claim history of your firm 
  • The form of purchase, whether as an individual policy or as part of a package with other types of insurance.

Some insurance providers may offer basic coverage starting at around $500 to $1,000 per year, while more comprehensive coverage options can cost several thousand dollars per year.

However, on average, accountant insurance providers can charge from a few hundred to a few thousand dollars annually. Therefore, before you buy accountant insurance, you should check to compare quotes from different providers with the most benefit at an affordable price.

What Does Accountant Insurance Cover?

Accountant insurance typically covers claims arising from errors or omissions in the accountant’s professional services. These claims may include the following:

  • Tax preparation errors
  • Mismanagement of clients’ funds
  • Misrepresentation or Negligence in Financial Statements or Reports
  • Breach of confidentiality or privacy of client information
  • Unauthorized Use Of Client Funds
  • Violation of Laws And Regulations

Tax Preparation Errors

Tax preparation errors are mistakes made when a tax return is prepared and filled. Some of the common errors include:

  • Incorrect calculation of taxes owed 
  • Incorrect reporting of income or expenses
  • Misclassification of a tax filer’s status 
  • Failure to report all sources of income
  • Claiming of ineligible tax deductions or credits.

Whether an experienced accountant or a newbie, you aren’t free of mistakes. Tax preparation mistakes may lead to overpayment of taxes, but more frequently, they lead to underpayment. When this occurs, the taxpayer may be subject to fines and interest in addition to the due taxes. 

Therefore, when reviewing a client’s tax returns, it is important to be diligent and proactive. You can avoid a tax preparation error by:

  • Double-checking tax forms and instructions
  • Understanding the information being reported
  • Keeping accurate records throughout the year

Mismanagement of Client Funds

Accountant insurance covers for mismanagement of client funds through compensation. In the event of a claim, the insurance company may pay out to the affected client to cover their financial losses. This compensation can help repair the relationship between yourself and your client and mitigate any damage to your professional reputation. 

Imagine one of your clients has entrusted you with managing their finances. If your client’s funds are mismanaged due to a mistake or an error on your part, your client could lose a significant amount of money and hold you responsible. How, then, do you pay for this?

With accountant insurance, the insurance company will provide coverage if a claim is made against you for mismanagement of funds. This means that they’ll help you pay for legal fees, settlements, or judgements that may arise from the mismanagement claim.

Misrepresentation or Negligence in Financial Statements or Reports

Accountant insurance can protect against negligent or misrepresentation in financial statements or reports by paying clients for any financial damages resulting from such errors. This kind of insurance defends you against liability should they fail to use reasonable care and skill or give inaccurate information in financial reports or statements.

For instance, if a client relies on the financial statements you prepared. Then make a business decision based on such information if he suffers a financial loss.

As a result, he may sue for misrepresentation or negligence. In this situation, an accountant insurance policy would provide coverage for the legal fees, settlements, or judgements that may arise from the lawsuit.

Therefore, it would be wise to consider getting this kind of insurance to protect you and your clients from any possible negligence or misrepresentation in financial accounts or reports.

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Breach of confidentiality or privacy of client information

Accountant insurance can protect clients from financial losses that may arise from violating the confidentiality or privacy of their personal information. This kind of insurance offers you a defence if you unintentionally reveal sensitive information about your clients.

Imagine a scenario where you lose your laptop containing your clients’ sensitive information. Or you mistakenly send confidential information to the wrong email. Your client can sue you for any financial loss resulting from this breach. 

In this case, your insurance provider can help cover the cost of compensating your client and any related legal expenses. 

Unauthorized Use Of Client Funds

Accountant insurance can cover for unauthorized use of client funds by compensating the client for any financial losses resulting from such misuse. This type of insurance protects accountants in case they misuse client funds or make unauthorized transactions.

Imagine you are in charge of managing one of your client’s finances then you mistakenly transfer funds from one account to another without authorization. When your client discovers this transaction, he can sue and make claims against you. 

Without insurance, you would be responsible for compensating your client out of your pocket. However, with the right coverage, your insurance company steps in and compensates your client for their financial losses.

Violation of Laws And Regulations

Accountant insurance can cover violations of laws and regulations by compensating clients for any financial losses resulting from such violations. This type of insurance protects accountants if they make mistakes or omissions that violate laws and regulations related to their profession.

Let’s take a look at this scenario: imagine you unintentionally bypass a tax law or regulation while preparing one of your client’s tax returns. If this violation causes your client to pay additional taxes and fines or incur penalties, your client can decide to sue and claim the financial loss. 

In this case, your insurance provider can cover the cost of compensating your client and pay for other legal expenses as a result of this claim.

Accountant Insurance Coverage Exclusions

Just like all insurance, there are limits and exclusions. This means that there are certain things that it does not cover. Some common exclusions in accountant insurance policies include:

  • Intentional acts: It includes claims arising from intentional acts or deliberate disregard of the law.
  • Criminal acts: This includes claims resulting from criminal acts, such as embezzlement or fraud.
  • Prior acts: It includes claims arising from work performed before the policy became effective.
  • Misrepresentation: This includes claims arising from misrepresentations or fraudulent statements made by the insured.
  • Punitive damages: It does not cover punitive damages awarded to punish the insured for wrongdoing.

What are the Deductibles in Accountant Insurance?

A deductible in accountant insurance is the amount the policyholder agrees to pay out of pocket before their insurance coverage kicks in. In other words, it’s the amount that you, as an accountant, would be responsible for paying in the event of a covered loss or claim before your insurance coverage begins to pay.

For example, if you have a $1,000 deductible and a covered loss of $10,000, your insurance company would pay $9,000 (the covered loss minus the deductible), and you would pay the remaining $1,000.

Deductibles are usually chosen by the policyholder and can vary in amount, with higher deductibles typically resulting in lower insurance premiums. However, the idea behind this is that by taking on more of the financial responsibility for a loss, you reduce the risk for the insurance company and, therefore, the cost of your insurance coverage.

accountant insurance

Where Can I Access Accountant Insurance in Canada?

If you are looking to get insurance coverage as a chartered accountant in Canada, Apollo is your best bet. As one of Canada’s largest online insurance providers, Apollo prides itself on the ability to provide effortless insurance policies to individuals and firms. 

With up to $14.5m in funding, Apollo has the financial capacity to cover several insurance policies. Some of its coverage for accountants includes:

  • General liability insurance
  • Worker’s compensation insurance
  • Content Insurance
  • Property insurance
  • Errors and omission insurance
  • Legal defence

You can purchase some accountant insurance with Apollo at a cost as low as $18.15 per month. Having insurance helps you stay focused on delivering top-notch accounting services while being protected on a budget.

Accountant insurance conclusion

As an accountant, having accountant insurance is important to help maintain the financial stability and reputation of your profession and your accounting firm. Although no profession is perfect. However, knowing you and your firm are liability-free will attract new clients and earn you more money. 

Therefore, in order to get the best coverage at an affordable cost, you should consider comparing quotes from multiple insurance providers. Although, working with an insurance professional can also help you find the right coverage. However, the choice is always yours.

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September 21, 2023
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FAQs about accountant insurance

Who needs accountant insurance coverage?

Whether you are a chartered accountant, chartered general accountant, bookkeeper, or chartered professional accountant, the Certified Public Accountant CPA requires you to at least have the minimum error and omission insurance coverage.

What are the factors to consider while choosing an accountant insurance?

There are several factors to consider when choosing accountant insurance. These include the cost of insurance, coverage options, reputation, financial stability of the provider and customer service delivery. However, you must carefully review the insurance policy and understand what it covers and doesn't to ensure you are properly protected.

What is CPA insurance?

CPA insurance, or Certified Public Accountant insurance, is a type of professional liability insurance that is specifically designed for certified public accountants (CPAs). This insurance is intended to protect Certified Public Accountants from financial losses related to claims of errors, omissions, or other negligent acts in their professional services.

What does CPA liability insurance cover?

CPA liability insurance policies can vary; the specific coverage offered may depend on the insurance provider and the purchased policy. However, the average coverage includes accounting services, Tax preparation, consulting services, data breach, legal defence costs, and financial planning.

Why is professional liability insurance important for accountants in Canada?

As an accountant in Canada, it is important to obtain professional liability insurance as a best practice. This is also a requirement of CPA Canada. This coverage does not just safeguard you against financial losses and mitigation. It also protects your professional integrity and gives you peace of mind.

What is accountant professional liability insurance?

Accountant professional liability insurance is a type of insurance that provides accountants financial protection against potential losses and helps to ensure the continued success of their business. Its coverage covers a wide range of accounting services, breach of contract, defamation and other legal issues on the job.

What is bookkeeper insurance?

Bookkeeper insurance, also known as bookkeeping liability insurance, is a type of professional liability insurance designed for bookkeepers. This insurance provides financial protection for bookkeepers against claims of errors, omissions, or other legal issues in their line of duty.

What does bookkeeper liability insurance cover?

Bookkeeper liability insurance provides coverage to bookkeepers against some legal issues. These include mistakes in bookkeeping or accounting services, errors in financial reports, and omissions of information and data.

Is professional liability a legal requirement for accountants?

Whether or not having professional liability insurance is a legal requirement will depend on the jurisdiction and organization to which you belong. However, it is common for most states and professional organizations to require you to own at least an error and omission insurance policy.

What are the minimum coverage limits accountants need in their professional liability policies?

Some professional accounting organizations may have recommended minimum coverage limits for their members, but these are not necessarily legally binding. However, some common coverage limits for accountant professional liability insurance include:

  • $100,000 per claim - $300,000 aggregate
  • $250,000 per claim - $750,000 aggregate
  • $500,000 per claim - $1,000,000 aggregate

Accountant Insurance made simple

Learn important tips for keeping your accounting business safe

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