The terms "CPA insurance" and "accountants insurance" are referred to as the common types of coverage for accounting professionals, such as accountants, bookkeepers, and tax preparers need.
In order to cover their legal fees in the event that clients accuse them of carelessness, accounting professionals primarily need accountants professional liability insurance. Costs for CPAs and accountants professional liability insurance range from $900 to $2,500 annually.
How CPA and Accounting Insurance Works
The first insurance policy for CPAs is professional liability insurance, often known as errors and omissions insurance (E&O). This policy covers claims of carelessness and professional mistakes. It covers insurance for tax preparers, bookkeepers, and CPAs from one of their biggest exposures: claims that mistakes led to financial loss for clients. But this isn't the only coverage they might require.
A business owner's policy (BOP), which is a combination of commercial property and general liability insurance, is beneficial to accountants who own their own firms. Certain additional coverage may be added to the BOPs of some insurance companies. The type of coverage you can include will depend on your provider.
At the very least, bookkeepers should think about purchasing professional liability insurance because they may still be sued for mistakes and omissions made while performing their duties. They should consider errors and omissions insurance for bookkeepers.
CPA and Accounting Insurance Costs
For independent accountants, the cost of professional liability insurance for accountants in the United States ranges from $900 to $2,500 annually. Your overall cost is determined by a number of factors.
Accounting professionals who own their own businesses might also want to think about having a BOP, which has a $500 yearly premium fee.
Accounting firms in the US with workers should consider workers’ compensation insurance. It costs between $360 to $700 and does not have deductibles.
The cost range of commercial property insurance in the United States is between $550 to $1,500, and the deductibles vary based on property value.
Cyber liability insurance costs between $1,800 to $4,200, while deductibles vary based on the number and types of client personal data stored.
The annual premium cost for employment practices liability cost between $800 to $4,500. However, deductibles is $2,500.
The annual premium cost for Umbrella Insurance ranges from $500 to $6,000 while deductibles is $500 to $2,500.
Factors some insurance companies consider when writing CPA Insurance
When writing CPA insurance, some of the factors some insurance companies may consider are as follows:
- Services: Due to the higher demands of their clients and the tight professional standards in the field, CPAs often pay a larger premium for professional liability than bookkeepers.
- Number of employees: Having more employees raises the risk of errors. With more employees, you may not only want workers' compensation insurance but also general liability, professional liability, and cyber liability insurance, all of which could result in higher premiums from insurers.
- Claims history: Insurers often review three years' worth of data and raise prices if they notice a lot of claims or claims that are particularly severe or numerous.
- Policy terms: If you want a policy with higher coverage limits, you could have to pay more, but you might be able to reduce that cost by choosing a higher deductible.
Types of Accountants Professional Liability Insurance Policy
What insurance do I need as an accountant? Your principal risks can probably be covered by CPA professional liability insurance, depending on the nature and scope of your accounting firm. However, many CPAs, accountants, and bookkeepers need other coverage, particularly if they have an office and staff. Accounting professionals could therefore need property insurance, general liability, and workers' compensation.
1. Professional Liability Insurance
This coverage, which is also known as E&O insurance for accountants, protects you against financial losses from errors arising from mistakes while performing your accounting tasks. This coverage is important for bookkeepers, accountants, and CPAs, since even small errors during financial record-keeping can become huge lawsuits.
Claims against accountants typically center on their negligence or inability to uphold professional standards when serving their clients. Getting professional liability coverage helps protect you, especially if the charges are unfounded. Errors and omissions insurance for tax preparers is a type of coverage under Professional Liability Insurance.
An illustration would be if the IRS conducted an audit of your client because they failed to record income on the 1040 tax form you prepared. The client now owes late taxes and stiff penalties, but she holds you responsible for the mistake. You still have to defend yourself even when the customer is ultimately at fault. Professional liability coverage will take care of the legal fees.
A BOP is an insurance policy that combines both commercial property insurance and general liability insurance. Accounting professionals who own firms may decide to purchase a BOP because it offers a lower premium for the most common risks.
While commercial property insurance covers damage to the policyholder's property, general liability insurance covers property losses and bodily injuries. Accounting professionals might want to think about adding business interruption insurance to their BOP as a rider to cover lost revenue and ongoing costs resulting from risks that prevent the business from running.
3. Workers’ Compensation Insurance
Most states require workers' compensation for business owners who have employees. The cost of coverage is determined by risk exposures, payroll, and claims history. Worker's compensation premiums for accountants are frequently inexpensive because their work is low-risk in comparison to other professions.
In the event that they suffer diseases or injuries at work, your employees are covered by workers' compensation insurance. The range of benefits includes paying for medical expenses, missed wages, and more. Most states demand that employers with employees carry workers' compensation insurance. Most states mandate workers' compensation insurance for businesses with employees.
4. Commercial Property
In order to protect your company's assets, including your building and its contents, commercial property insurance may be necessary for your accounting business. Some risk exposures that the commercial property insurance policy covers include fire, theft, vandalism, and severe weather.
For instance, bookkeepers, accountants, and CPAs who own office space as well as valuable company personal property, such as furniture and computers, may suffer a large financial loss if a fire destroys their property. Commercial property insurance helps to cover the expense of repairing and replacing the structure and its equipment. Home insurance may not cover the business assets of accountants who operate from home.
5. Cyber Liability Insurance
Cyber liability insurance covers losses due to data breaches and cyber-attacks. It also covers extortion, data restoration, legal fees, and other expenses. Due to the frequent digital storage of personally identifiable information (PII) on computer databases, the majority of accounting companies need this increasingly crucial insurance policy.
Cyber insurance provides both first-party and third-party protection. First-party insurance pays for business losses like the cost of engaging with customers or keeping an eye on your credit. Third-party insurance covers damage that your company does to other people. This may include attorney expenses and other court costs if a client files a lawsuit because of an error from your company that caused them injury.
6. Employment Practices Liability Insurance
Employment practices liability insurance, also known as EPLI insurance, covers your accounting firm against claims involving work-related issues such as wrongful termination, discrimination, and sexual harassment. Owners of accounting firms who employ workers need this insurance, particularly when their businesses expand and they add more staff.
An important risk exposure for organizations with employees, for instance, is sexual harassment and discrimination. Although it is always good for larger organizations to have proactive policies, such as anti-discrimination policies, these cannot protect you from an EPLI claim.
7. Umbrella Insurance
You can extend the protection provided by your other liability plans by purchasing umbrella insurance. Some accounting firms might find it wise to add commercial umbrella insurance to their existing policies because third-party liability claims, such as the ones covered by general liability insurance, can result in multimillion-dollar lawsuits.
For instance, if a client sues your accounting firm for a slip-and-fall claim and the legal fees and settlement costs come to $1.5 million, but your general liability policy limit is only $1 million, you would be required to pay the difference out of your own pocket. But the extra $500,000 cost is protected by umbrella insurance. Keep in mind that umbrella policies don't include coverage for professional liability insurance.
Best Accountants Professional Liability Insurance Providers
When searching for business insurance, look for providers with experience handling cases similar to yours. Not all insurance providers have experience with insurance for accountants and bookkeepers, nor do they all have products tailored for the financial services sector. Furthermore, you want a top small business insurance company that you can trust.
The following are the best accountants professional liability insurance providers:
1. The Hartford
The Hartford ranks as the country's second-largest provider of workers' compensation. Injured workers can get assistance from a network of more than one million healthcare providers thanks to its pay-as-you-go workers' compensation programs, which help reduce premium discrepancies. Accounting firms are safeguarded from unforeseen lawsuits, particularly when an employee is hurt at work. Besides BOPs, commercial vehicles, and cyber liability insurance, they can also get additional insurance plans that are equally important.
Applying for coverage with Hiscox is advised for accountants, bookkeepers, and tax preparers who operate independently as independent contractors. Professional liability insurance for accountants begins at $186 per month, and business owners can select a monthly payment schedule at no extra cost. Hiscox is a popular option among small businesses thanks to its sound financial standing, specialized coverage, and user-friendly website.
For CPAs and tax preparers who have just established their businesses in the US, Travelers is a suitable insurance provider. The business is able to provide BOPs to start-ups and home-based companies that cover accounts receivable, employee dishonesty, as well as lost income following a covered loss. By registering for MyTravelers for Business, business owners may then personalize their BOPs with a range of endorsements and maintain their policies online.
For CPAs looking for affordably priced plans, CyberPolicy is a fantastic choice. CyberPolicy, as a broker, works with a huge network of insurers (such as Nationwide, Chubb, and Liberty Mutual) to get the best prices for your company on a variety of commercial insurance plans. Additionally, CyberPolicy has an internal team of actuaries that review your data to assure correctness and an online platform that processes applications in minutes.
The AICPA is the biggest professional membership association for CPAs with more than 429,000 members. Members are eligible for discounts on specialist insurance plans for accountant insurance, such as employment practices liability, professional liability, commercial property and liabilities, and business overhead expense.
In order to qualify for regular membership with the AICPA, you must:
- Pass the International Qualification Exam (IQEX) or the CPA Exam.
- Obtain the 120 hours of CPE (continuing professional education).
- Hold a CPA license or certificate that is active and in good standing, or you must have previously held one that wasn't suspended or cancelled due to improper conduct.
Annual dues for regular membership start at $295 while partner annual dues are at $485. It will only cost $155 (at full price) to join the AICPA for those who are retired or have temporarily left the workforce.
Accounting professionals need the best insurance to cover the risks involved in the job —this is an important aspect of starting or running an accounting business. The companies on our list are the best professional liability insurance providers that can meet your business needs.