Accountants starting their own business need a range of insurance products to protect against the risks of both working in the profession and running a business. And if you’re a client hiring an accountant, you’ll want to make sure the accountant is properly covered as well, since some of the protections an accountant needs serve to protect the client. This article recaps the types of cover an accountant needs. If you’d like to learn more we’d recommend reading the accountant insurance guide by NimbleFins.
Accountants professional indemnity insurance
Professional indemnity insurance is critical for an accountant, as it covers claims that their professional advice or service was negligent. An accountant who inadvertently provides negligent advice can be sued, especially if this poor advice or service translates into a financial loss for the client. As accountants deal with their client’s finances, giving the wrong advice or making a mistake can have a significant negative financial impact on the client.
Professional indemnity for accountants covers both the cost to defend the claim, such as legal fees and court fees, as well as any compensatory damage that the policyholder is found liable to pay. Professional liability is not cheap, and premiums rise as an accountancy practice becomes more successful and earns higher fees. But the cost of protection is outweighed by the protection afforded by a suitable indemnity policy – because even the most experienced and diligent accountant can make a mistake or lead their client astray.
Who needs accountants professional indemnity?
All members of the Association of Chartered Certified Accountants (ACCA) and The Institute of Chartered Accountants in England and Wales (ICAEW) are required to hold professional indemnity insurance. In fact, there are certain minimum limits of cover that depend on the fee income generated by the accounting business. The higher the fees, the higher the amount of cover is required.
Some other professional organisations require professional indemnity as well, so any accountant who is a member of a trade body should ensure they are meeting the minimum standards as required by their membership.
Accountants who are not members of a professional body that requires professional indemnity insurance should still strongly consider buying a policy. The requirements of these professional bodies are there for a reason – because accountants are at risk of providing poor or negligent advice or service to their clients, which can result in a financial loss to the client.
Other types of insurance for accountants
While professional indemnity is the first type of insurance most accountancy businesses think of, due to the requirements of professional bodies, there are other types of cover to consider as well. Because any small business needs to protect themselves against general liability as well as protecting their assets against loss, theft or damage.
Public liability for accountants
An accountant who meets clients in person, or has other visitors to their business premises, should have public liability in case they’re sued by a third party for accidental injury or property damage.
Employers’ Liability Insurance for Accountants
Accountants who hire any staff or assistants are typically required to hold an employers’ liability (EL) insurance policy. EL protects against claims made by an employee that was injured or made ill by their work and blames the business.
An accountancy business will need property insurance to protect assets from loss or damage due to events like fire, flood or theft. A business that owns its work premises will want building insurance to protect the actual building. An accountancy business that rents its premises will not need buildings insurance as this will be covered by the landlord.
Accountancy businesses will also want to look into contents insurance to cover their business equipment (e.g., computers, printers, fax machines, etc.) as well as furniture and furnishings in their offices.
Car insurance for accountants
An accountant who simply drives between home and their office should ensure that their private car insurance includes cover for commuting. However, an accountant who uses their car to drive to visit clients, or who travels between multiple places of work, must expand their car insurance to cover “business use”.
Business use car insurance covers the use of a private car used to travel to multiple work locations or visit clients; these types of trips are not covered by social, domestic and pleasure car insurance, even if commuting is added on. An accountant who engages in this type of driving must declare business use and pay the extra premium to be covered. Without it, they’d be driving uninsured.
Cyber insurance for accountants
Since accountants store sensitive client financial information on their computer systems, cyber insurance is another key area of cover. A hack, data breach or other cybercrime could result in a client’s information getting into the wrong hands., which could be devastating for both the client and the accountant.
In summary, an accountant who is not an employee of another firm but is either working on their own as self-employed or starting their own accountancy business will need a range of insurance coverages depending on their unique situation.