Accountants may often be unsung heroes in the business world. They take complex, arcane financial data on taxation and budgets and make it digestible, straightforward, and clear. They serve as trusted advisors whose work and opinions help small business owners make informed decisions and avoid costly mistakes and potential risks.
Accountants emphasize accuracy, exhibit strong organizational skills, and strive to keep abreast of changing laws and taxes. In addition, they are creative number crunchers who generate new ideas and strategies to solve challenging business issues.
But much like any small business owner or independent professional, accountants, too, face financial risks. For example, it’s not uncommon for an accountant to be targeted in a third-party lawsuit by either a client due to financial losses or by their clients’ partners or financial lenders should their businesses go bankrupt. Even a lawsuit without merit can wreak financial and professional havoc on an accountant. That is why all accounting professionals need to protect their finances and reputation with a professional liability policy.
What Is Professional Liability Insurance for Accountants?
Professional liability insurance, also called errors and omissions (E&O) insurance or malpractice insurance, is designed to protect accounting professionals against claims or lawsuits alleging financial loss due to a service you provided, negligence, misconduct, or failure to deliver services as promised.
In many provinces, all accountants are required to have insurance. For instance, members of the Chartered Professional Accountants of Ontario are required to carry a minimum of $1 million worth of insurance coverage (for one accountant), $1.5 million (for two or three accountants), and $2 million (for four or more accountants). This requirement applies whether you’re running a business alone, in a partnership, through a professional corporation, or providing accounting services to the public in the province.
Most professional liability insurance policies for accountants are ‘claims-made’, which provides coverage for an incident filed during the policy period, and is supported by a six-year discovery policy, that covers accountants for six years after they stop practising.
What Other Kinds of Insurance Do Accountants Need?
It’s worth noting that accountants may also require commercial general liability (CGL) and commercial property insurance as part of their overall policies.
CGL, frequently called slip-and-fall insurance, provides financial coverage for claims of third-party bodily injury and property damage resulting from negligence or unexpected accidents. Commercial property insurance is necessary if you own or rent an office space. It includes contents coverage for your computing systems, office equipment, and furnishings if damaged by fire, water, or are stolen.
Avoiding the Pitfalls of Financial Management
Accounting is the language of business and is not unlike engineering in that you need a margin of safety.
Protect yourself and your finances from lawsuits and costly mistakes and give your clients confidence by getting an accountant insurance policy. Fill out an application to get a free insurance quote. Let our licensed brokers shop our partner network of more than 50 insurance companies to get you the customized policy you need to advance your career and protect your assets.
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