Accountant Insurance

How to Find the Right Insurance for CPAs, Accountants and Bookkeepers

Certified public accountants (CPAs) play a vital role in managing the finances of the businesses and individuals that they serve. In your role as an accountant, you handle highly sensitive information about your clients. Making an error or failing to provide services as promised can cost your client – and you – millions.

CPAs can be considered low-risk businesses in terms of physical risks to people and property, but the liability risks you face are significant.

Accounting professionals should work with an independent insurance agent to uncover all of their exposures and find appropriate insurance policies to help mitigate them.

Accountants prepare and examine financial records for clients, ensuring that the reports are accurate and that taxes are paid properly and on time. They also assess financial operations and help ensure that organizations run efficiently.

Accountant insurance is a group of business insurance policies customized for the needs of certain professionals:

  • Certified public accountants
  • Bookkeepers
  • Tax preparers
  • Auditors

Is a Business Owners Policy Right for You? 

In order to protect their own livelihoods (while they look after their clients’ finances), many accountants purchase a business owners policy (BOP) to cover most of their basic business insurance needs.

A BOP is an insurance package that combines coverage for major property and liability insurance risks. It is ideal for small to medium-sized business that need comprehensive and affordable coverage.

Only certain businesses are eligible for a business owners policy. The size of the business property, the necessary liability limits, the type of business and the extent of the business’s off-site activity determine whether or not it is eligible for a BOP. Premiums are also based on the business’s location and financial stability and the building's type of construction, security features and fire hazards.

Business owners policies include:

  • property coverage for buildings and their contents, such as computers, calculators, office equipment and furniture whether the property is owned or leased.
  • business interruption coverage, which compensates for lost business income and pays for operating expenses if you must temporarily close following a covered loss (e.g., a building fire).
  • liability coverage, which pays for claims of bodily injury and property damage to third parties due to your negligence, such as when a client is injured at your office or an employee damages property while visiting a client’s home.

A CPA’s Most Important Insurance Need: Professional Liability Coverage

Our litigious society makes professional liability insurance often the most important insurance need for many professionals, including accountants. Accountants professional liability insurance protects accountants from the financial devastation that can follow a lawsuit.

An accountant’s most important asset is his or her clients. You work hard to provide high quality advice and service, but even the best accountants make mistakes. And when you are dealing with other people’s finances, mistakes can be extremely costly for all parties involved.

Accountants professional liability (or errors and omissions) insurance provides protection for you if a client sues you for negligence or other wrongdoing related to your work. Professional liability policies provide coverage for the following:

  • Actual or alleged errors
  • Omissions 
  • Professional negligence 
  • Breach of duty 
  • Misleading statements 
  • Claims resulting from the performance – or nonperformance – of professional services

CPA professional liability policies may cover your defense costs, including attorney fees and court costs, as well as settlements or judgments that you are required to pay. Insurance companies offer a variety of specialized policies that are customized for the particular risks faced by certain professionals, including accountants. Coverage is excluded for instances of intentional wrongdoing.

There are two types of professional liability policies:

  • An occurrence policy covers a business for harm to others caused by incidents that occurred while a policy is in force, no matter when the claim is filed. This means that even if the policy is no longer in force, it will provide coverage for a claim that is made for an incident that occurred while the policy was in force.
  • A claims-made professional liability policy covers the business for claims made when the policy is in force, regardless of when the incident happens. This means that if a claim is made for an incident that occurred before the policy was in force, the policy will still provide coverage.

Talk to your independent insurance agent about how occurrence and claims-made policies might apply to your business, and which is best for you.

A Note About Accountants and Fiduciary Duty

Accountants and CPAs may assume the role of a fiduciary for their clients. A fiduciary is a person or group which holds assets for another party, often with the legal authority and duty to make decisions for and protect the assets of the other party. An accountant who assumes fiduciary duty for his or her clients is obligated to act in the client’s best interest with the good faith, loyalty, skill and care of a reasonable person.

The accountant-client relationship typically is not fiduciary. Acting as a fiduciary comes with a great deal of responsibility and a great deal of risk for the accountant. Accountants often purposely avoid becoming a fiduciary precisely to avoid the added risk that it comes with. And in many cases, it is more important for the accountant to be completely independent from the client, rather than act on its behalf. However, accountants may assume fiduciary responsibility when they act as any of the following:

  • Executor or personal representative of an estate
  • Trustee
  • Investment adviser
  • Bankruptcy trustee or receiver
  • ERISA employee benefit plan administrator
  • Attorney in fact (one who holds power of attorney for taxes, financial matters or health care)

Even the most careful and responsible accountant can make a mistake, even when acting as a fiduciary. A mistake in these circumstances can expose you to lawsuits from clients or other third parties. Accountants professional liability policies may limit or entirely exclude coverage for claims related to breaches in fiduciary duty.

CPAs and accountants must consult with an independent insurance agent about coverage for fiduciary liability exposures. Customized coverage may be purchased or added as an endorsement to your accountants professional liability policy. In addition, an accountant who has a fiduciary responsibility for a company’s employee benefits plan in accordance with federal law can purchase fiduciary liability insurance.

Where Else Do You Have Exposures?

You might need other types of accountants insurance to ensure that you have no gaps in coverage. Talk to your independent insurance agent about the following:

  • Computers and media coverage – also called electronic data processing (EDP) insurance – pays for lost data and related lost income if your computers or network are damaged by theft, vandalism, viruses or malware. It may pay for loss of data, loss of software and physical damage to computers or hardware.
  • Cyber liability insurance provides coverage in the event of a data breach involving your business. It helps pay for the costs of notifying affected clients as well as costs related to public relations, forensics and more.
  • Valuable papers coverage can help you reproduce damaged paper documents as well as move records or provide temporary storage for ledgers, financial statements, bank statements and other confidential records if they are damaged by a covered peril.

Where Can You Find Tailored Accountants Insurance?

Just as you are a trusted adviser to your clients, you too need business advisers who know and help you make decisions about your business. A Trusted Choice® Independent Insurance Agent can work closely with you to learn about your exposures and find the right policies to fit your needs.

Independent insurance agents, like those in the Trusted Choice network, can work with numerous insurance companies that specialize in covering professionals like you. You can compare proposals and choose the one that meets your needs and budget.

Now, who's ready to get their insurance problems solved?