Accounting Insurance

Safety in Money Matters

What is Accounting Insurance? 

Accounting insurance helps protect against the unique risks as well as uncertainties that come with running a bookkeeping or accounting business. As an accounting firm, your clients certainly trust you to manage their sensitive financial information. It is ironic how professionals who help minimize financial risks can also be prone to them. Years of work experience and relationships with your clients can go down the drain due to one mistake.

For instance, a missed deadline or an undiscovered fraud can raise serious legal issues for your business. In 2017 a Georgia accounting firm, Davidson Collins LLC, was held liable for $1.35 million because of accounting errors.

In this article

Why is Accounting Insurance Necessary?  

Whether you are an independent accountant or own an accounting firm, it is smart to get accounting insurance. Accountants insurance provides coverage against risks such as:

  • Claims of negligence, omission, or errors
  • Data breaches and data leaks
  • Property damage
  • Employment-related claims
  • Failure to detect financial irregularities
Accounting Infog_accounting-insurance_infographics

Whether you are an independent accountant or own an accounting firm, make sure you own an accounting insurance. 

Who Needs Accounting Insurance?  

Accounting insurance, also called bookkeeping insurance, or CPA insurance, is tailored to protect the unique risks faced by the following professionals:

  • Independent Accountants
  • Accounting Firms
  • Certified Public Accountants (CPAs)
  • Bookkeepers
  • Tax Preparers
  • Enrolled Agents

What Insurance Do Accountants Need? 

Accountants need the following insurance policies to protect themselves and their firms.

Accountants Professional Liability Insurance

Errors and omissions insurance for accountants or accounting malpractice insurance provides coverage for:

  • Omissions
  • Actual or alleged errors/mistakes
  • Professional negligence or claims of negligence
  • Breach of duty

The cost of a liability suit ranges from $54,000 to $91,000 or more for a contract dispute. Obviously, this cost does not include the time and emotional distress spent dealing with a lawsuit. Professional liability insurance covers legal fees, defense costs, as well as settlements for lawsuits arising from professional mistakes.

Commercial General Liability Insurance

Commercial general liability insurance protects your business from third-party claims damage. General liability insurance covers:

  • Bodily injury—Any third-party bodily injury costs like medical expenses as well as legal fees (in the event of a lawsuit) are covered.
  • Property damage—It covers the costs of any damage to third-party property made by either you or your business.
  • Personal injury—This policy also covers personal injury suits involving claims of slander or libel.

Commercial Property Insurance

If your business owns assets, then you should include commercial property insurance. It covers the building or office space and personal property, including computers, furniture, and equipment in the event of either fire, vandalism, or other named perils.

Commercial Auto Insurance

If your business uses automobiles for professional purposes, it’s mandatory that have you have this coverage unless your business resides in Virginia or New Hampshire. Commercial auto insurance provides coverage for damages in case of an accident. The coverage includes property and medical expenses.

Business Interruption Insurance

Temporary closure due to property damage or an unforeseen event can disrupt your business operations. As a result, business interruption insurance provides coverage when your income is interrupted because your business can’t operate due to a covered event.

Business Owners Policy

business owners policy is a combination of commercial general liability, commercial property insurance, as well as business income insurance. The coverages of this combined policy include:

  • Third-party liability coverage
  • Property coverage
  • Business interruption coverage

It is typically cheaper to buy a business owners policy than to buy the three policies separately.

Cyber Liability Insurance

Your accounting business most likely stores sensitive data like financial statements, credit card numbers, social security numbers, as well as other information. According to Statista, in 2020 the average cost to an organization in a data breach came to $8.64 million.

In the event of a data breach, cyber liability insurance covers losses relating to the breach and the ensuing cyber-attack, including the cost of communication to clients, data restoration, legal fees, as well as third-party damages.

Workers Compensation Insurance

Workers compensation insurance provides benefits to employees in case of a work-related injury. This coverage is compulsory for private employment in all states, except Texas. Its benefits include:

  • Medical bills
  • Lost wages
  • Funeral costs
  • Legal fees in case the employee’s family sues

Employment Practices Liability Insurance

Employment practices liability insurance protects accounting firms from employee-related claims such as harassment, discrimination, and wrongful termination. According to an article by the Society for Human Resource Management, the average cost to settle as well as defend an employment law case is $160,000. Hence, this policy is of great importance once your business starts growing and adding more employees.

Fiduciary Liability Insurance

If you provide services to your clients like general business consulting, asset management, and tax services, you may have a fiduciary duty to your clients. If so, you must act in your clients’ best interests, otherwise, you may be sued for breach of fiduciary duty.

For instance, former NBA star Kevin Garnett sued accountant Michael Wertheim and his firm Welenken CPAs for breach of fiduciary duty, aiding and abetting, and malpractice. According to Louisville Business First, the player alleges he suffered a $77 million financial loss because of the firm.

Professional liability insurance might limit or exclude coverages related to fiduciary duty. If you have a fiduciary responsibility to your clients, fiduciary insurance may protect you against lawsuits.

Commercial Umbrella Insurance

Commercial umbrella insurance adds an extension to the coverages of your other existing liability policies. In some cases, third-party lawsuits can cost upwards of millions, which is over the limit of general liability insurance. A commercial umbrella and excess policy can extend your coverage in such events.

Keep in mind that this policy does not extend professional liability coverage.

Valuable Papers Coverage

Accounting firms need to store a multitude of records and important papers for their clients like bank statements, tax records, and financial documents.  Purchasing valuable papers coverage as an endorsement to your BOP covers the costs if these materials are damaged while in your possession.

how much does accounting insurance cost

How Much Does Accounting Insurance Cost?  

Your accounting insurance can be tailored to your preferences and needs, but some factors will dictate its premium. Some of them include:

  • Payroll
  • Workforce size
  • Accounting and finance services provided
  • Revenue
  • Claims history
  • Equipment and property

Your career deserves a safety net. Get in touch with us today for an affordable and custom-tailored quote. 

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Your career deserves a safety net. Get in touch with us today for an affordable and custom-tailored quote. 

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