Insurance for Accountants & Bookkeepers

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How Accountants and Risk Connect

Though each business operates somewhat uniquely, accountants broadly share the responsibility of managing clients' personal and financial information. Not only are your clients trusting you to help them by providing tax and financial services, but they’re also trusting you to handle their information responsibly and to report their finances in an accurate manner. All in all, your clients are trusting you with information that, if put in the wrong hands, could ultimately change their lives forever.

So this raises the question of how can we reduce the amount of risk faced by the accounting service provider? The solutions are simple: risk mitigation procedures and insurance. Essentially, by utilizing appropriate procedures and insurance coverages, accountants can reduce their own liability and have greater confidence in executing their job function.

The problem is, recent data has shown that of professional service providers who are contractually required to carry Errors and Omissions (E&O) insurance, only 55% do so. For starters, not fulfilling a contractual obligation is generally not a good idea. Secondly, risk in this field is inevitable and by possessing the appropriate insurance, you can significantly reduce the potential impact of an incident. Given that the average total cost of an E&O lawsuit comes to $180K, these claims may impact your firm in quite a substantial manner without coverage.

Insurance Policies for Accountants

While each business has different particular needs, there are a few policies that you’ll want to consider as you begin your search: E&O, Business Owners Policy, and Cyber Liability.

Errors & Omissions (E&O)

As mentioned, Errors and Omissions (E&O) insurance is generally considered a “core” coverage for professional service providers, and is often contractually required. If you make a mistake or a client believes your performance of services were non-optimal, E&O insurance helps to protect your business. As an accountant, your risk increases with the complexity of a given account and the number of stakeholders involved. For example, if you provide valuation services or financial auditing for businesses, the clients and potentially shareholders may hold you liable for erroneous results.

Business Owners Policy (BOP)

A Business Owners Policy (BOP) combines elements of General Liability, Commercial Property, and Business Interruption policies, and is particularly applicable if you operate out of physical offices or a storefront. First, this policy helps protect your business against third-party claims of property damage or bodily injury. If something were to happen to your client on your property and they tried to hold your business liable, a BOP would ultimately protect you and your company. In addition, a BOP provides coverage for the business’s property, and property coverage is often a lease requirement.

Cyber Liability

Cyber Liability insurance can be quite important for professional service providers that digitally collect or store valuable personally identifiable information on clients. In the event of a cyber attack or data breach, a business may have to pay significant legal fees in addition to the costs of compliance with notification requirements. Cyber Liability insurance is becoming increasingly valuable to businesses that handle financial and personal information as many manage these records digitally.

Overall, risk is an inevitable part of business, however there are available solutions to help mitigate risk and keep your operation running smoothly.

What type of insurance does this industry need?

  • General Liability: This policy protects your business in case of third-party claims, such as bodily injury or property damage. Getting the right General Liability policy in place can help you get more jobs and grow your business. General Liability insurance is often considered to be a core coverage, particularly for businesses that regularly physically interact with customers and do work at other people’s properties. In addition, a General Liability policy is usually required for you to get a job.
  • Commercial Property: This policy protects the business's physical assets and is appropriate whether you own or lease your space. Keep in mind that this policy will only offer protection in the case of covered events. If you need protection for certain scenarios, such as floods or earthquakes, you may need additional coverage. If you have a mortgage or a lease, you may be required to have property insurance. Even if you are not, this is the best way to protect the building you are in and the business property you have in case of a natural disaster or some other accident.
  • Workers Compensation: Workers Compensation covers an employee's lost wages and the cost of resulting medical treatment if they suffer a work-related injury or disease. It also covers services needed to help the employee recover and return to work. Workers Compensation coverage is mandatory in most states. The number of employees after which it's required differs by state, but you will generally need coverage once you have employees.

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