Do Accountants Need to Worry About Liability Insurance?

Accounting professionals are vital in a world of ever-increasing complexity.

They make the confusing, chaotic, and difficult landscape of budgeting, taxes, and even payroll easier to navigate for individuals and businesses alike.

To achieve this translation from technical jargon to understandable information and language, accounting professionals must stay up-to-date with the constantly-shifting laws and regulations, participate in continuous education, and build great client relationships.

Accounting professionals are flooded with responsibilities, making it easy for them to overlook the risks that come with the business. That’s where accountant liability insurance comes in protecting you, so you can focus on what you do best.

Consider accountant liability insurance a teammate that does the dirty work, so you can dedicate your energy to what’s important—looking after your clients.

When it comes to account liability, there are two distinct types to understand, General Liability insurance and Professional Liability insurance.  The important thing to remember about these coverages is that as a professional in the accounting industry, you’ll need to make sure you have both of these types to be fully protected.

Common Misconceptions about Accountants Liability Insurance

There are many of misconceptions about accountant liability insurance. While this exists in several industries, it’s important that we work to dispel the myths and misnomers surrounding this industry’s liability insurance. We’ve included a few common examples below.

 “I’m only part-time, so accountants liability insurance doesn’t apply to me”

The amount you work has no real bearing on whether or not you could end up with a law suit – the reality is, working any amount of time can result in a lawsuit. Even part-time accounting professionals need liability insurance to protect them from mistakes and legal issues.

“I work from my home, so I’m okay without liability insurance”

Working from home doesn’t make you less of an accountant. You don’t have to work from an office or a commercial location to need proper accountant’s liability insurance. As a home-based business, you should carry accountant General Liability insurance for when clients come to visit and Professional Liability insurance to cover your professional duties, advice, and work.

“I’m very thorough when it comes to my job – I won’t end up in a lawsuit.”

Lawsuits are a possibility for every industry and every profession – even perfect accounting professionals. They could be even more common in this industry because of the impacts of the potential financial loss for your clients.

Why You Must Have Accountants Liability Insurance

Unfortunately, accountants are commonly sued. It may not be fair, but it comes with the territory, and when it comes to the law, even frivolous lawsuits have to be defended.

Even if you’ve done nothing wrong and you’ve handled your professional responsibilities as expected, you could still face a lawsuit. Why? Because a lawsuit is based on the misconception of wrongdoing, not the assurance. Even if a client or other third party just thinks you did something wrong that caused them financial damage, they may seek recovery for damages.

Shifts in client relationships: Client relationships commonly adapt and shift over time. Things like misunderstandings, financial losses, and allegations of wrongdoings can – and likely will – take a toll on client-accountant dynamics. Even simple miscommunication can cause a solid relationship to dissolve.

There are a few ways to protect yourself from this type of liability. For example, always put agreements in writing, document your phone conversations with email to have something in writing, and make sure your clients are on board with and consent (in writing) to accounting plans or changes.

Third-party lawsuits happen: Accountants are typically sued by third parties more than by their own clients. Third parties include lenders, shareholders, mortgage companies and more. If your client goes bankrupt it’s possible that you’re open to lawsuits from their business partners or even debtors.

Lawyers may take advantage of your insurance: As an accounting professional, often you’re perceived as a scapegoat in a lawsuit. Typically, lawyers will target you and file a suit against anyone involved with deep pockets.

How Your Accountants Liability Insurance Can Help

If you somehow manage to get mixed up in a lawsuit – or a potential lawsuit – you’ll be glad you invested in personal liability insurance. This layer of protection can help to mitigate damage you might incur or even prevent damage entirely.

Involve Your Insurer Right Away: It’s important to act preemptively — don’t wait until a claim or lawsuit arises. Make sure you contact your insurer immediately, even if you simply suspect something may come up.  Putting your insurer on notice is the smartest move you can make, even if it ends up being difficult.

Your Insurer Can Help Weigh the Options: A good insurer will give you options and tell you the best ways you should respond to a lawsuit. Perhaps they’ll help you prepare for a settlement, perhaps they’ll help you fight it – either way, they’ll know exactly what to do and how to advise you.

Professional Liability Insurance Prepares You: It’s common knowledge that lawsuits are painful, but not everyone knows that they can last for years. Even lawsuits that might not have any grounds could take this long because every claim needs to be investigated. An insurer who has you in mind can help prepare you for the long haul.

Accountant Insurance Coverage: The Particulars

As we mentioned before, there are two main types of insurance you should be considering – General Liability and Professional Liability. Both are necessary to ensure you have full protection in your industry and mitigate risks.

Commercial General Liability: Basic Coverage for General Risks

This type of insurance is crafted specifically for day-to-day, blanket risks you might encounter. These can include all kinds of slip-and-falls, property damage, and anything else that could occur at your office. It usually covers things like:

Bodily Injury Liability: This protects you if, as a result of your business activities, you’re at fault for an injury that happens to a third party.

Property Damage Liability: Property Damage Liability insurance is included here, too. Coverage will help protect you if someone is looking to hold you responsible for damage to their property, again as result of your business activities.

Personal and Advertising Injury: This is covered by  General Liability, and it takes care of issues such as libel or slander, even going as far as covering infringement of rights.

Professional Liability Insurance: No Accountant Should be Without it

This type of liability insurance covers issues related to your profession directly.

This means it can cover things like:

Defense Costs: Remember how we mentioned frivolous lawsuits have to be defended even if they don’t have ground to stand on? This is where your Professional Liability policy picks up the tab.

How does it help? Imagine a client suing you for a so-called error for your service. You already did the research and you know you didn’t make the mistake, but the cost to defend that in court still exists.

Errors and Omissions:  The reality is that errors happen — even the most conscientious accountants can make a mistake. That’s what errors and omissions coverage exists for, to help protect you!

How does it help? Picture this: it’s tax season. You and your tiny team are overwhelmed. Amidst the hustle and bustle, you make a mistake and don’t file before the deadline. This results in a lawsuit. But alas, you’re covered!

Accountant Liability Insurance: Must-Have Protection for All Accountants

There are so many reasons accountants need to invest in liability insurance. Mistakes happen, and allegations can be made — this can happen to anyone, anywhere, in any business, no matter how thorough and conscientious you are.

BizInsure helps protect you by making professional liability insurance for accountants quick, easy, and affordable. We make sure you get the best insurance at the best price.