CPA Insurance for Accountants: Cost, Coverage & Providers

Certified public accountant (CPA) insurance generally refers to the common types of policies bookkeepers, tax preparers, and accountants professionals need. The primary coverage accountants need is professional liability insurance to pay for their legal fees if clients accuse them of negligence. Insurance for accountants typically costs between $500 to $1,000 annually.

Getting the right insurance for accountants is important. The Hartford is a terrific choice for accountants looking for insurance. Its team of insurance experts can help you with a free online quote.

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How Bookkeeper, Accountant, and CPA Insurance Works

CPA insurance usually starts with professional liability, or errors and omissions (E&O) insurance, which covers allegations of negligence and professional mistakes. This is because the greatest exposures bookkeepers, CPAs, and tax preparers face are accusations that errors caused their clients’ financial loss. However, this isn’t the only policy accountants may need.

Accounting professionals who own their own firm can benefit from a business owner’s policy (BOP), which is a package of general liability and commercial property insurance. Some insurance providers allow certain additional coverages to be added to their BOPs. Your provider can specify which coverage types you can include in the BOP.

Bookkeeper, Accountant, and CPA Insurance Providers

When looking for business insurance, you should seek providers that have experience working with businesses like yours. Not every insurance company offers products specialized for the financial services industry or have experience with insurance for accountants and bookkeepers. Additionally, you want to work with a top small business insurance company that you know you can trust.

The Hartford

The Hartford offers accountants broad coverage in its BOP, but accountants can make it even broader by choosing from a range of optional endorsements. In particular, accountants can add coverage for data breach, professional liability, and valuable papers and records—all items that are critical for accountants to protect. Opting to add these coverages to a BOP minimizes the chance of coverage gaps while also giving business owners one insurer to work with for claims and renewals.

Hiscox

Accountants, bookkeepers, and tax preparers who want to manage their cash flow and save money should apply for coverage with Hiscox. The company professional liability policies start at $270 per year, plus business owners can choose a monthly payment plan for no additional charge. Its financial stability, tailored coverage, and easy-to-use website makes Hiscox a popular choice in the small business community.

Travelers

Travelers is a good insurer for accountants and tax preparers who are just starting their firms. The company can offer BOPs to new ventures and home-based businesses that includes coverage for accounts receivable and employee dishonesty, plus lost income after a covered loss. Business owners can then customize their BOPs with a variety of endorsements and manage their policies online by signing up for MyTravelers for Business.

CyberPolicy

CyberPolicy is a great option for CPAs who want competitively priced policies. As a broker, CyberPolicy works with a large network of providers that includes Chubb, Nationwide, and Liberty Mutual to shop the best rates for your business on a wide range of commercial policies. Additionally, CyberPolicy has an online platform that processes applications in minutes and in-house actuaries who analyze your information to ensure accuracy.

American Institute of Certified Public Accountants (AICPA)

With more than 429,000 members, the AICPA is the largest professional membership organization for CPAs. Members can get discounts on specialized insurance offerings for accountant insurance, including professional liability, employment practices liability, commercial property and liability, and business overhead expense. Annual dues start at $285 for regular membership while students are free.

Types of CPA Insurance for Accountants

Depending upon the type and size of your accounting business, you can most likely protect your primary risks with CPA professional liability insurance. However, many bookkeepers, accountants, and CPAs need other policies, especially if they have office space and employees. In that case, accountants may need general liability, property insurance, and workers’ compensation.

Professional Liability Insurance

Also called E&O insurance or CPA professional liability, this policy covers legal costs and damages resulting from mistakes in your professional accounting services. This is important coverage for bookkeepers, accountants, and CPAs because even small mistakes in financial recordkeeping can turn into huge lawsuits.

An example is if your client fails to report income on a 1040 tax form that you prepared, and the IRS audits them. Your client now owes back taxes and severe penalties but blames you for the error. Although the client is ultimately to blame, you still need to defend yourself. Professional liability insurance helps cover your legal costs.

“Common mistakes made by accountants are usually in preparing tax returns. For example, transposition of numbers from a W2 or 1099 form to the tax return happens often. Also, misspelling of a client’s name or entering the wrong Social Security number not only delays the processing of a tax return but can sometimes trigger an audit. While these errors are unintentional, the IRS can assess interest and penalties if it results in an underpayment of taxes.”

—Crystalynn Shelton, CPA and Content Strategist, Technical Learning Resources, Inc

Commercial General Liability Insurance

Commercial general liability insurance covers third-party bodily injury, property damage, and related legal costs. Accounting professionals who need general liability are those who own or lease space that is open to the public. Accidents leading to injuries or property damage to third parties, such as your clients, are a significant risk exposure for these small business owners.

For example, if a client came to your accounting firm for a consultation and was injured in a fall in your lobby, general liability helps pay their medical bills and your related legal costs if they sue.

Workers’ Compensation Insurance

For business owners with employees, workers’ compensation is required coverage in most states. The cost of coverage depends upon risk exposures, your payroll, and your claims history. Because accountants’ work is low risk compared to other jobs, their workers’ comp premiums tend to be low.

Workers’ compensation insurance provides benefits to your employees in the event of work-related injuries or illnesses. Coverage includes medical bills, wages from lost work time, and more. If you have employees, most states require workers’ compensation coverage.

Commercial Property

Your accounting business may need commercial property insurance, which protects the assets of your business, such as your building and the contents within it. Risk exposures covered by commercial property insurance commonly include fire, theft, vandalism, and extreme weather.

For example, bookkeepers, accountants, and CPAs with office space and valuable business personal property, such as computers and furniture, face a significant financial setback if their property is destroyed by fire. Commercial property insurance helps cover the cost of repairing and replacing the building and contents. For those accounting professionals working at home, your home insurance may not cover your business assets.

Cyber Insurance

Cyber insurance covers losses resulting from cyberattacks and data breaches. Coverage pays for data restoration, extortion, legal fees, and more. Because accounting businesses often store personally identifiable information (PII) digitally on computer databases, most need this increasingly important insurance protection.

Cyber insurance offers protection on a first-party and third-party basis. First-party coverage pays for your business losses, such as the cost of communicating with clients or monitoring your credit. Third-party coverage is for losses your business causes others. These might include attorney fees and other legal costs if a client sues because a breach at your firm caused them harm.

Although many accountants focus on E&O coverage, they often overlook cyber liability insurance, according to Kevin Drews, head of sales at Insureon:

“Industry regulations require that you keep a record of any company audits you perform for seven years. If you are like many accountants, there’s a good chance that you store those records digitally, which means you are vulnerable to a data hack. Accountants can typically purchase cyber coverage either as a standalone policy or as an add-on to a business owner’s policy.”

Employment Practices Liability Insurance (EPLI)

Employment practices liability insurance, or EPLI insurance, protects your accounting business in employment-related claims, such as wrongful termination, discrimination, and sexual harassment. Accounting firm owners who hire employees need this coverage, especially as their practices grow, and they hire more staff.

For example, discrimination and sexual harassment are significant risk exposures for businesses with employees. While it is always advisable for larger firms to implement proactive policies, such as anti-discrimination policies, these are no guarantee against an EPLI claim.

Commercial Umbrella Insurance

Commercial umbrella insurance serves as an extension of coverage on your other liability policies. Because third-party liability claims, such as those covered under general liability insurance, can lead to multimillion-dollar lawsuits, extending coverage with commercial umbrella insurance can be a good idea for some accounting firms.

For example, if a client sues your accounting practice for a slip and fall claim, and the legal fees and settlement costs total $1.5 million, and your general liability limit is only $1 million, you’d have to pay the extra out of your own pocket. Umbrella insurance, however, covers the additional $500,000 expense. Please note, umbrella policies do not extend coverage on professional liability insurance.

Insurance for Accountants Costs

Insurance costs for bookkeepers, accountants, and CPAs run about $500 to $1,000 per year. Your total cost depends upon several variables. For example, independent bookkeepers who need only professional liability insurance may pay less than $500 per year, whereas a CPA practice could pay $1,000 or more per year.

Some of the factors that companies look at when writing CPA insurance include:

• Services: CPAs often pay more for professional liability than bookkeepers because their clients have higher expectations and the industry has strict professional standards
• Number of employees: Not only might you need workers’ compensation, but having more employees increases the likelihood of something going wrong, so insurers may charge more for general liability, professional liability, and cyber liability
• Claims history: Insurers generally look at three years’ worth of information and set higher premiums if they see either multiple or particularly severe claims
• Policy terms: You may pay more if you want higher coverage limits on a policy, but you may be able to offset that cost by opting for a higher deductible

How to Apply for Accountant Insurance

The process of getting the right coverage at the right price is fundamentally the same for most accounting businesses. For example, although an independent bookkeeper with no employees has simpler insurance needs than a CPA firm, the most common insurance types are fairly similar. These tips, then, most accountants and bookkeepers can use these to find the coverage they need.

1. Gather Information About Your Practice

Applying for CPA insurance should be one of the first things you do when starting any accounting business. Having the necessary information cuts down on your application time and results in accurate quotes as you shop for the best accounting insurance policy.

Information and documents needed to apply for accounting insurance include:

• Business contact information like address and tax ID
• Gross annual revenue for the last fiscal year
• Number of employees
• Number of years your accounting practice has been in existence
• Number and nature of client records you store and how you store them
• Details of any other insurance you currently have
• Three years of past claims history
• Any contractual or licensing insurance requirements

Be sure the information you provide is accurate and up to date. This helps an insurance agent recommend the appropriate insurance coverage. Worse, leaving out information can lead to negative consequences, such as being underinsured or having your insurer deny claims and cancel your coverage because of inaccuracies on your application.

2. Work With Providers That Know Accountant Insurance

Most providers offer the insurance policies that business owners need. However, you are better off looking for a provider or agent who specializes in coverage for accountants. An agent who has worked with other accountants will have a better idea of the unique risks in your industry and can identify the coverage options that are most appropriate for you.

3. Compare Quotes

It might be tempting to sign on with the first agent you speak to, but you should get at least three quotes from different carriers before you buy a policy. That way, you can compare both premiums and policy options so that you know if you’re getting the best value for your money.

Accountant Insurance Frequently Asked Questions (FAQs)

Insurance is an essential step when opening an accounting practice, so you want to make sure your questions are answered before you. Below we answer a few of the common questions accountants have about CPA insurance.

Does a bookkeeper need insurance?

A bookkeeper can be sued for errors and omissions in their course of work, so at the very least a bookkeeper should consider getting professional liability coverage. Professional liability insurance protects you from risks associated with the bookkeeping business that are not covered under general liability policies. These risks include accusations of shoddy work and failure to meet professional standards.

Why do you need E&O insurance?

E&O insurance, also called professional liability, covers you if you’re accused of negligence or failing to meet professional standards when providing advice or services to a client. These accusations are relatively common for accountants because they handle people’s money. Policies provide this coverage even when the accusations are baseless.

What kind of insurance does a CPA need?

Most accountants need professional liability and general liability insurance. Accounting firms that own the office they operate out of also need commercial property insurance. You may also need workers’ compensation insurance and employer’s liability coverage if you have staff.

Bottom Line

Professionals working in the accounting industry need insurance to cover their risks. Finding insurance for your business is a critical part of starting or running a bookkeeping or accounting business. Providers can help find the best CPA insurance to cover your specific needs.

The Hartford is a terrific choice for CPA insurance. It offers specialized coverages to provide the best protection for your accounting business needs. Accountants can get a quote online by using The Hartford’s easy-to-navigate website or find a local agent by using the company’s agent search tool.

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