Accounting professionals and firms face several exposures when they provide services such as tax preparation and bookkeeping. Despite their attention to detail and due diligence, they are still susceptible to claims that their services resulted in a client’s financial damage. Luckily, accountants’ professional liability insurance—also known as errors and omissions insurance and accountant indemnity insurance—may provide essential coverage, along with peace of mind, for financial losses associated with these situations. This article provides more information on accountants’ professional liability insurance, including how it works and its benefits and limitations. It also provides tips on how to select the best policy.
Overview of Accountants’ Professional Liability Insurance
Accountants’ professional liability insurance may generally provide coverage for claims that allege negligence, mistakes or oversights regarding services provided. These claims can be time-consuming and costly, even if they are eventually dropped. Having the right insurance policy in place may help mitigate the financial risks in these circumstances by covering:
- Legal defense costs
- Court costs
- Damages awarded to clients through settlements or judgments
- Claim expenses
When reviewing policies, it is also essential for accounting professionals to be aware of what is not covered by a typical accountant’s professional liability insurance policy, some of which can be covered by other insurance policies. Examples of common exclusions include:
- Intentional acts of wrongdoing
- Employment-related claims
- Illegal activities
- Bodily injuries to clients or employees
- Property damage
In addition to the financial coverage accountants’ professional liability insurance may provide, it can also offer several other key benefits. Examples include the following:
- Attraction to the business—Having this coverage can help attract clients who expect their accounting professional to carry a professional liability insurance policy.
- Access to risk management tools—Some accountants’ professional liability insurance policies include access to risk management resources, including consultative services and risk management education tools.
- Peace of mind—Having a policy in place can provide accounting professionals with peace of mind in knowing they are covered.
Choosing the Right Coverage
When purchasing an accountant’s professional liability insurance policy, several factors should be considered to determine which one may be the best fit. Variables to consider include:
- Coverage limits
- Claims handling process
- Insurer’s reputation and financial strength
Additionally, the time period of coverage provided by the policy can also be a factor to weigh. Professional liability policies are typically offered on a claims-made basis, which provides coverage if the loss occurred after the specified retroactive date and the claim is filed while the policy is active. On the other hand, an occurrence policy typically offers coverage for losses during the policy’s active period, regardless of when the claim is filed.
A qualified agent can provide valuable assistance to professionals and firms to assist them in choosing a policy that best suits their needs.
Contact CoverLink Insurance today to learn more about accountants’ professional liability insurance and for additional information regarding other insurance solutions