Accountant Insurance: Is it Worth It?


Running an accounting practice is complicated. Whether you are operating solo and you’re where the buck stops, or there’s a team around you, it’s a lot to deal with. Plus, when handling the financials for many companies, they expect you to be accessible at a moment’s notice. This can create a case of always being interrupted, making it harder to complete assignments.

In case of running into other trouble, accountants need protection from mistakes, errors of omission, and other unexpected outcomes creating a legal headache.

Who Should Get Accountant Insurance?

Accountant insurance is not just to cover one type of accountant or work related to it. Whether you’re a bookkeeper trying to keep up with the latest transactions, a CPA, or an advisor who provides useful information on taxes to clients, accountant insurance is worth getting as a form of protection. The idea is that should a client decide to file a lawsuit against you or the firm, there is some sort of protection in the form of general liability insurance cover. You can find accountant insurance online with the help of an online provider. They allow you to access your policy details online and file claims whatever time of day or night.

Unfortunately, while accountants are well-meaning, mistakes can sometimes occur. This can cause clients to become frustrated and possibly sue them. But also, sometimes people find themselves defending frivolous lawsuits without a solid basis, which still require considerable time and legal fees to satisfactorily resolve. Anyone providing accounting services needs to protect themselves from the possibility of being sued, however remote they may currently feel.

Is It Worthwhile Doing So Now or Is it Something to Leave Until Later?

When starting an accounting practice and even in the early years, there is sometimes a need to defer certain expenditures. It is possibly done out of a sense of prudence; something familiar to many accountants with their frugal recommendations to clients. When there’s insufficient capital to increase expenses early on, any business looks for cuts to make to avoid running out of funds before sufficient income arrives from new clients.

Another Deferred Expense?

The question in this situation is whether insurance for accountants is something to be deferred until a later time. The answer to that is, no. It should never be on the list of business expenses to delay until later.

Legal Defense is Expensive Even When Vindicated

The reality is that even if a lawsuit is won, the legal costs can turn it into a net loser. Plus, you as the accountant operating without sufficient general liability cover would need to find the funds to mount an adequate defense just to reach a point where the case is dismissed. Should experts be required to refute false claims by the person suing, then they need to be paid for too.

It all gets incredibly expensive, which is why policies for accountants typically provide sums like $500,000 up to $2,000,000 as an aggregate limit on coverage. This should tell you something important about the financial risk – even if you did nothing wrong.

What’s Covered with Accountant Insurance?

While policies do vary, as a rule of thumb, what’s covered should include the following:

  • Professional negligence
  • Incorrect information provided
  • Breach of duty
  • Breach of contract
  • Disputed mistakes of fact in work provided
  • Omissions or other errors

As you can tell, it’s a fairly broad list. Essentially, if you as the accountant or someone in your employ provides incorrect advice or fails in some other way, it should be covered.

What Accountant Insurance Doesn’t Provide Cover For

There are different risks associated with operating a business, outside of specific risks with clients themselves. For accountants who accept clients visiting a home office or their office space, then something might happen to the visitor. If they tripped and fell, or something else occurred, they could sue for damages, intentional distress, etc. To protect against this, taking out a commercial general liability policy provides coverage for that. It also would cover if their property was damaged there too.

Sometimes, officers or directors of a firm are the targets of a lawsuit. Professional liability policies don’t usually cover this. Therefore, taking out directors’ and officers’ insurance is beneficial for that. Furthermore, when dealing with any complaints from employees based on claims of harassment, wrongful termination, and other matters arising, employment practices liability insurance can protect from the cost of these issues too.

In closing, it’s worth getting insurance as an accountant. We’d go further and say it’s imperative to get it even when starting with your first client, because you never know when someone will seriously object to something. After all, their objection doesn’t even have to make sense either.