Accountants have accountant professional indemnity insurance in order to minimize financial risk to them while they operate. There’s a lot of options for them to get insured, and it feels overwhelming sometimes.
But that’s a bad idea, not helped by not knowing enough about accountant professional indemnity insurance; it’s there to help.
Here’s some info to help out.
It doesn’t matter how good your operations as an insurance is, sometimes things will go wrong, and odds are, attention will turn to you. Regardless of the legitimacy of the claims, you’ll still want something to protect you from losses. Even the best firms in the world still have to worry about frivolous claims.
CPA lawsuits are almost always expensive and protracted. On top of dealing with the expenses, insurance will also minimize the risk of such lawsuits, which can come from
- Alleged errors;
- Professional negligence;
- Breach of professional duty;
- Misleading or misinterpreted statements, and;
- Performance-related claims.
When it comes to relationships like estate trustees, where the accountant-client relationship has a higher degree of trust than most, the accountancy practitioner must always adhere to a reasonable professional standard of care. This, however, can still lead to the CPA being considered as breached by aggressive plaintiff counsels or witnesses.
Type of insurance policies
CPA professional liability policies vary based on the accountancy insurer, which means that, for the most part, any accountant gets the insurance that they pay for. There are also some low cost provider programs that pop up on occasion, but these ones need to be watched with great care, paying attention to the key language in the policies, covering the following:
- Definition of ‘Professional Services’;
- Definition of ‘Claim’;
- Key exclusions, and;
- Insuring agreement overall.
Most policies are written on a claims made basis, meaning that the claims is bound to the policy period that was reported. This might be confusing, but not something that can’t be handled by a well-informed, strong, and trustworthy broker.
Premiums tend to go up based on the revenue of the firm, its location, number of practitioners, and other variables. Different carriers have different rating models, so shopping around for the best one for your needs is a good idea.