Accountants are constantly dealing with numbers, focusing on everything from financial regulations to budgets and tax law. But many Accountants aren’t aware of their professional liability, much less what they can do to protect themselves. It’s important to keep the practical aspects of your practice in mind no matter your experience level.
Whether you’re just starting out as an account or getting close to retirement, Professional Liability insurance is necessary for any Accountant. In fact, it is even recommended by the American Institute of Certified Public Accountants (AICPA). Incidents leading to lawsuits could happen to anyone, and it only takes one such case to put your business in jeopardy. Professional Liability insurance is an affordable, convenient way to keep you and your practice safe.
What Is Accountants Liability Insurance?
Accountants, like those in many other fields, need to be protected from various financial risks related to their professional responsibilities. Accountants Liability insurance covers you and your firm in case of allegations including negligence, errors, or omissions. Your policy will pay any legal fees along with settlements or verdicts against you.
Why Do I Need Accountants Liability Insurance?
Accountants face financial risk and liability every day simply by the nature of their work. Even the most accurate and fastidious Accountants are bound to make a single mistake at some point in their career. Seemingly minor misunderstandings or errors can escalate into expensive litigation. Even an allegation of a wrong doing could cost you thousands in legal fees to defend yourself and your reputation.
Every kind of Accountant, from Certified Public Accountants to Bookkeepers and Certified Tax Protectors, can benefit from an Accountants Liability insurance policy. With the increasingly complicated expectations clients bring to Accountants, every Accountant is vulnerable to claims of mismanagement.
What Is Covered by an Accountant Liability Insurance Policy?
The broader category of Accountant Liability insurance is further divided into two more specific types of insurance. First is Professional Liability insurance, which covers negligence and errors directly related to the policyholder’s duties as a professional accountant. There’s also General Liability insurance, which protects you from allegations that aren’t linked to your Accounting practice.
Professional Liability Insurance
Professional Liability insurance is designed to cover you from any claims and verdicts related to incidents that are part of your duties and advice as an Accountant. Claims that fall under Professional Liability insurance policies are explicitly excluded from General Liability insurance plans (and vice versa). These are some of the most common issues Accountants find covered under their plans:
If you or your Accounting firm are named in a lawsuit, a Professional Liability insurance policy will cover any legal costs related to your defence. Even if you eventually win your case, you will still need an insurance plan to pay for litigation fees, which can be extremely expensive.
Libel and Slander
Another allegation often protected by Professional Liability insurance plans is libel. This can happen when a client believes something you wrote or said about them caused them to suffer financial loss. Libel verdicts are partially based on the accuracy of the claims, meaning that effective legal counsel can be very helpful.
General Liability Insurance
By contrast, General Liability insurance is intended for situations you’re responsible for outside of your professional duties as an Accountant. Professionals in a variety of fields purchase General Liability insurance to protect them from possibilities that are present in any office setting. These can include things like property damage and bodily injury.
While it might seem like something that will never happen to you, bodily injury happens more often than you think and can be incredibly costly, even if you didn’t do anything wrong. Something as simple as a fall in the parking lot can lead to legal verdicts that leave you responsible for medical bills and lost wages.
Property damage is another common application of General Liability insurance policies. Like bodily injury, instances of property damage can happen without your being responsible or even aware. These random events may be unlikely, but a General Liability insurance policy is vital to making sure they don’t affect your business.
How Does Liability Insurance Work?
Not every Liability Insurance policy is written in exactly the same way, but there are some general parameters and similarities you can expect in any plan. Like other types of insurance, Liability Insurance policies typically come with a policy limit, representing the maximum possible coverage available for your claims.
Understanding the policy limit and other aspects of potential plans will help you make the right decision for your business. It will also make it easier to file claims if and when something does go wrong. A per-occurrence plan, for example, allows you to file a claim for a past incident even if your coverage ended before you filed the claim.
Claims-made policies, on the other hand, require you to be actively covered whenever you file a claim. This means that an incident on the last day of your policy being active would need to be reported that day in order to be covered under your plan. Carefully go over the details of your policy before making any commitments.
Getting Liability Insurance for an Accountant
Both General Liability insurance and Professional Liability insurance are common in a range of professional fields, and Accounting is no different. Finding a reliable and affordable Accountant Liability insurance plan will give you the peace of mind you need to simply focus on your clients and professional responsibilities, knowing that you’re covered if anything does go wrong.
Accountant Liability insurance plans are less expensive than many people assume, making them a common-sense option for every accountant. Given that these policies typically provide coverage up to a policy limit of $1,000,000 to $2,000,000, there’s no reason for even the smallest accounting firm not to get a policy.
If you and your firm are interested in Accountant Liability insurance, click here to learn more.