Do accountants need to have insurance?
In short, it depends. Chartered accountants who are members of professional organisations like 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 other cases accountants professional indemnity insurance may still be wanted or needed, to provide protection against mistakes or negligent advice for both clients and accountants.
Beyond professional indemnity insurance, there are many other types of business insurance that an accountant might need or want.
Professional indemnity insurance for accountants
Professional indemnity insurance is crucial for many accountants, as it covers claims that their professional advice or service was negligent. An accountant who inadvertently provides negligent advice or makes a mistake 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 can be expensive, with premiums rising 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.
Accountancy insurance and legal
Beyond professional indemnity insurance, an accountant might also want other types of protection such as public liability, employers liability or legal expenses cover. Here are descriptions of what some of these other types of business insurance cover for an accountant.
Public liability for accountants
An accountant might need public liability insurance if they meet clients in person, or have other visitors to their business premises. It protects if a third party sues 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.
Property insurance
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. Data breaches can have a significant impact, even affecting large companies who have lots of protections in place such as eBay and Yahoo.
Legal expenses
Legal expenses cover can provide professional assistance to support an accountant dealing with issues like contract disputes or HMRC tax enquiries.
In summary, accountants who are either working on their own as self-employed or who own an accountancy business will need a range of insurance coverages depending on their unique situation. Whether you’re an accountant or a client, it’s good to be aware of the types of cover an accountant should have.
