Accounting professionals make the confusing, arcane and difficult world of budgeting, taxes and payroll understandable.
To do this, accounting professionals must keep up with laws and regulations, participate in continuous education and build great client relationships. With so many responsibilities, it’s easy to overlook the risks that come with your business.
That’s is what Accountant Liability insurance does for you. It protects you from financial risks, so you can continue to provide for your clients.
Accountant Liability insurance includes two main types of insurance coverages – General Liability insurance and Professional Liability insurance. As an accounting professional, you need both coverages to protect both you and your business.
You’ve made a lot of investments and sacrifices to have an accounting career and no matter the details of your services, you must protect yourself with good insurance.
Common Misconceptions about Accountant Liability Insurance
There are many misconceptions about Accountant Liability insurance and whether accounting and finance professionals must have it. Before we proceed, let’s examine some of these misconceptions and illustrate why every Accountant needs liability insurance.
“I don’t need Accountant Liability insurance because I work only part-time.”
How much you work really has nothing to do with whether you end up in a claim or lawsuit. Even part-time accounting professionals need liability insurance because you never know when a mistake or a claim can come up.
“I work from my home, so I don’t need Accountant Liability insurance”
Even a home office must be protected by insurance. As a home-based business, you should carry Accountant Liability insurance for when clients come to visit, and to cover your professional duties, advice, and work. You don’t have to work from an office or a commercial location to need proper Accountant Liability insurance.
“I won’t end up in a lawsuit.”
Lawsuits happen in every profession including accounting and finance. In fact, lawsuits may be more common in the professional advice and services industries because of the impacts of financial loss.
For example, if one of your clients suffers a fine from not having the correct payroll records or taxes, they are going to look for somewhere to pin the cost and fault. That someone can be you and your accounting firm.
Reasons You Must have Accountant Liability Insurance
Still not convinced? Let’s look at a few of the reasons Accountants are most commonly sued. Remember, even frivolous lawsuits must be defended. It is possible for you to have done nothing wrong in your professional responsibilities and still face a lawsuit. That is because a lawsuit is based on the misconception of wrongdoing. So, if a client or other third party just thinks you did something wrong that caused them financial damage, they may seek recovery for damages.
Changes in client relationships: Client relationships can change over time. Misunderstandings, financial losses or misconceptions can also take a toll on client relationships. Often, simple miscommunications can cause a good client relationship to deteriorate.
Defend yourself against this type of liability by putting agreements in writing. Follow up phone conversations with email. Make sure your clients consent in writing to accounting plans or changes.
Third party lawsuits are common: Accountants are often sued by not only clients but by third parties. Mortgage companies, lenders, shareholders, and your client’s business partners may all want to reach into your pockets if something goes wrong with your client.
For example, say your client’s business goes bankrupt. You may be open to lawsuits from their business partners and other debtors.
Lawyers may take advantage of your insurance: When a potential lawsuit comes up, Lawyers will file the suit against those with the deepest pockets. As an accounting professional, you can be an easy target in a lawsuit.
How Your Accountant Liability Insurance Steps in for a Fight
If you do end up in a lawsuit, or believe there is potential for one, the first step is to contact your insurance company. That’s because Professional Liability insurance can step in right away to help you. Here are a few ways your insurance goes to bat for you.
Get your insurer involved immediately: Don’t wait to involve your insurance company should a claim or lawsuit arise, contact them immediately. Even if you suspect something may come up, go ahead and put your insurer on notice. e Professional Liability cover can step in right away to provide you with counsel and defense costs.
Your insurance professional can help you weigh options: Good Professional Liability insurance gives you options about how you respond to a lawsuit. If you believe the client has a good case against you for an error or omission, your policy will help you prepare and pay for a settlement.
If you think the claim or lawsuit is baseless and want to fight it, your Accountant Liability insurance picks up your defense costs.
Professional Liability insurance prepares you for a long battle: Unfortunately, lawsuits can drag on for years, taking up time, driving up costs and stress. Even a frivolous lawsuit can be damaging. Being involved in a lawsuit is unpleasant to say the least, make sure you have Professional Liability insurance to see you through.
Accountant Insurance Coverage: The Details
The two main types of insurance Accountants must have are Commercial General Liability insurance and Professional Liability insurance. You can think of these two coverages as opposite sides of the same coin. The combination is necessary to insure your firm from risk.
Commercial General Liability: Basic Coverage for General Risks
General liability insurance is designed to protect your business from “general” or everyday risks. These risks can include slip and fall accidents or damage to someone’s property that occurs at your office.
Commercial General Liability typically includes cover for:
Bodily Injury Liability: Put simply, bodily injury liability protects you if you’re at fault for injury caused to a third-party.
How it helps: Bodily injury liability lawsuits are one of the most common types of lawsuits filed today. The coverage protects you if someone is trying to blame you for their injuries.
Let’s say one of your clients is coming to your office for a consultation on accounting review. They trip over a rug in the reception area and injure their knee. Now they are expecting you to pay for their medical costs.
Property Damage Liability: Property Damage Liability is also included in Commercial General liability coverage. This coverage protects you if you are being held responsible for damaging someone’s property.
How it helps: Property Damage Liability claims may not be common among accounting professionals, but it doesn’t mean they don’t happen. Say you’re doing some light remodeling in your office. One of your VIP clients shows up for a meeting and rests her designer purse on your freshly painted bathroom counter. The paint was still wet, the purse is ruined, and she wants you to pay for it.
Personal and Advertising Injury: Personal and advertising injury covers you for lawsuits or claims of libel, slander or an infringement on the rights of another.
Professional Liability Insurance: No Accountant Should be Without it
Remember, Professional Liability and General Liability are two very different policies which providing protection against different areas of risks.. You need both types of coverage to be completely insured. That’s’ because General Liability coverage extends protection for general types of liabilities that arise from your business premises or your regular day to day operations.
Professional Liability insurance, on the other hand, covers you for your actual professional duties. Here is a breakdown of what Professional Liability insurance does for you:
Defense Costs: Even frivolous lawsuits must be defended. Your Professional Liability policy picks up the costs for you.
How it helps: Let’s say a client is suing you for an error in tax preparation services. You do some research and find out it wasn’t your firm that prepared the statement containing the error. However, the cost to defend your business against the claim is still on you.
Errors and Omissions: Even the most conscientious accountants can make a mistake or fail to do something. That’s what errors and omissions coverage is for. It is the crown jewel of Professional Liability insurance.
Why You Must Have it: Let’s say its tax season. You and your small team of staff are overwhelmed by helping clients prepare their tax returns. In all the activity, you forget to file a client’s return before the deadline. Now the client is suing you.
Accountant Liability Insurance: Must – Have Protection for All Accountants
There are countless reasons you must have Accountant Liability insurance to protect your business. Mistakes happen, frivolous claims must be defended, and accidents can occur anywhere.
Good Accountant Liability insurance protects your business when mistakes happen.
BizInsure helps protect you by making Professional Liability insurance for accountants quick, easy and affordable. We make sure you get the best insurance at the best price.
Simply click here, answer a few questions and you’re covered!