Every Certified Public Accountant (CPA) knows the vital role they play in managing the finances of the businesses and individuals they serve. But with great responsibility comes great risk. And falling short on promised services or forgetting to carry the “1” 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 can be pretty hefty. Accounting pros should work with an independent insurance agent to uncover all of their exposures and find the right insurance policies to help protect themselves.
In order to protect their own livelihoods (while also looking after their clients’ finances), many accountants purchase a business owners policy (BOP) to cover the majority of their basic biz insurance needs.
A BOP is an insurance package that combines coverage for major property and liability insurance risks. It’s perfect for small- to medium-sized businesses that need comprehensive coverage at a reasonable price.
Only certain businesses are eligible for a business owners policy. The size of the property, the necessary liability limits, the type of business, and the extent of the business’s off-site activity determine your eligibility for a BOP. Premiums are also based on the business’ location, financial stability, and the building's type of construction, security features, and fire hazards.
Business owners policies include:
In today’s world, anybody can sue anybody. And this makes professional liability insurance often the most important coverage need for many professionals, especially accountants. Professional liability insurance helps protect them from the financial landslide that can follow a lawsuit.
You work hard to give high quality advice, service, and math, 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 if a client sues you for negligence or other wrongdoing related to your work. Your policy provides coverage for:
CPA professional liability policies may cover your defense costs, including attorney fees and court costs, and also settlements or judgments that you are required to pay. Insurance companies typically offer a number of different specialized policies that are customized for the unique risks faced by different professionals, including accountants. Of course, it goes without saying that coverage is excluded in any cases of intentional wrongdoing.
When it comes to professional liability insurance, there are two types of policies:
If you’re just not sure which is right for you, talk to your independent insurance agent about how occurrence and claims-made policies might apply to your business. They’ll help you sort it all out and get you the coverage you need.
First of all, a fiduciary is a person, or group, who holds assets for another party, often with the legal authority and duty to make decisions for and protect the assets of the other party. So kind of like a bank and consultant, all rolled into one. In some cases, accountants and CPAs may assume the role of a fiduciary for their clients. And if so, they are obligated to act in the client’s best interest with the good faith, loyalty, skill, and care of a reasonable person.
Accountants often purposely avoid becoming a fiduciary to avoid all the added risk that it comes with. And in many cases, it’s 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:
Now, like we said, anyone can make a mistake. And 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 of a fiduciary duty.
CPAs and accountants should consult with an independent insurance agent about coverage for fiduciary liability exposures to make sure they’re set up securely. Customized coverage may also be purchased or added as an endorsement to your policy.
On top of all of that, any accountant who has a fiduciary responsibility for a company’s employee benefits plan in accordance with federal law can purchase fiduciary liability insurance. Just another way to keep your accounting dreams protected.
An exposure in your liability policy acts just like a crack in the wall, if it’s not totally covered up, something bad can come pouring in unannounced. And when the exposure relates to your business, that could be bad news. You may need other types of insurance to make sure you have no gaps in coverage. Talk to your independent insurance agent about the following:
As you know, having a trusted adviser is key to your clients. And when it comes to insurance, you need an adviser, too. Someone who knows your industry and can help you make the right decisions about protecting your business.
Independent insurance agents are kind of like the Google of insurance quotes. You tell them what you’re looking for, and they bring in the results. And since they aren’t tied down to one carrier, they’re free to shop around and bring multiple policy options to the table.
And it gets better, you don’t have to review the policy options alone. They’ll walk you through everything you need to know about finding the right coverage, and price, for you. But it doesn’t end with your signature. Along the way, if something bad ever happens, they’ll handle the entire claim process for you and deal with the carrier, so you can focus on your number-crunching empire. How sweet is that?