CPA & Accounting Insurance: Cost, Coverages & Providers
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Certified public accountant (CPA) and accounting insurance generally refers to the common types of policies bookkeepers, tax preparers, and accounting professionals need. The primary coverage accountants need is professional liability insurance to pay for their legal fees if clients accuse them of negligence. Professional liability insurance for CPAs and accounting professionals costs between $900 to $2,500 annually.
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 CPA & Accounting Insurance Works
CPA insurance usually starts with professional liability, or errors and omissions (E&O) insurance, which covers allegations of negligence and professional mistakes. Having professional liability will cover the greatest exposures bookkeepers, CPAs, and tax preparers face: accusations that errors caused their clients’ financial loss. However, this isn’t the only policy they may need.
Accounting professionals who own their own firms 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.
Pro tip: Bookkeepers can still be sued for errors and omissions in their course of work so, at the very least, they should consider getting professional liability coverage.
CPA & Accounting Insurance Costs
Professional liability insurance for independent accounting professionals runs from about $900 to $2,500 per year. Your total cost depends upon several variables. Accounting professionals who have firms may also want to consider getting a BOP, with an annual premium cost of $500.
Insurance Type | Annual Premium Costs | Deductible |
|---|---|---|
Professional Liability Insurance | $900 to $2,500 | $0 to $1,000 |
BOP | $500 | Property deductible at $500 |
Workers’ Compensation | $360 to $700 | None |
Commercial Property Insurance | $550 to $1,500 | Varies based on property value |
Cyber Liability Insurance | $1,800 to $4,200 | Varies based on the number and types of client personal data stored |
Employment Practices Liability | $800 to $4,500 | $2,500 |
Umbrella Insurance | $500 to $6,000 | $500 to $2,500 |
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 insurance, 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.
Types of CPA & Accounting Insurance
Insurance Type | What It Covers |
|---|---|
Third-party claims of financial damages caused by your mistakes or negligence | |
Combination of general liability and commercial property for a cost-efficient insurance policy | |
Employees’ medical bills and wage replacement when they suffer work-related injuries | |
Damage to business-owned property, such as building, equipment, or inventory | |
Losses resulting from cyber attacks or data breaches | |
Employment-related claims, such as wrongful termination, discrimination, and sexual harassment | |
Extends coverage on certain underlying liability insurance policies |
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. If the business is structured as an LLC, you may want to look into LLC providers.
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.
Claims against accounting professionals usually involve negligence or failure to meet professional standards when providing services to their clients. Getting professional liability will cover you, especially when the accusations are baseless.
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.
BOP
A BOP consists of both general liability and commercial property insurance combined into one insurance policy. Accounting professionals with firms may opt to get a BOP, as it covers you from the most common risks at a lower premium.
General liability covers property damages and physical injuries, while commercial property covers damages to the policyholder’s property. Accounting professionals may want to consider getting business interruption insurance as a rider for their BOP to cover lost income and ongoing expenses due to perils that stop the business from operating.
Workers’ Compensation Insurance
For business owners with employees, workers’ compensation is required 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. Business assets of accounting professionals working at home may not be covered by their home insurance.
Cyber Liability Insurance
Cyber liability 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.
Employment Practices Liability Insurance
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’s always advisable for larger firms to implement proactive policies, such as anti-discrimination policies, these are no guarantees against an EPLI claim.
Umbrella Insurance
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, 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. Note that umbrella policies don’t extend coverage on professional liability insurance.
CPA & Accounting Insurance Providers
Insurance Provider | Best For |
|---|---|
Accountants who want quality workers’ compensation coverage | |
Flexible payment options with no additional fees | |
New tax preparers and accountants | |
CPAs who want to compare coverage options and costs from multiple insurers | |
AICPA members who want a discount on their CPA insurance |
When looking for business insurance, you should seek providers that have experience working with businesses like yours. Not every insurance company offers products designed for the financial services industry or has 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 is the second-largest provider of workers’ compensation nationwide. Its pay-as-you-go workers’ comp schemes help reduce insurance premium discrepancies, and it has a network of over a million healthcare providers to help assist injured workers. Accounting professionals with firms can be protected against unexpected claims, especially when an employee gets injured while at work. They can also get other equally important insurance policies such as BOPs, commercial auto, and cyber liability.
Hiscox
Accountants, bookkeepers, and tax preparers who work independently as contractors should apply for coverage with Hiscox. Professional liability for an accountant starts at $186 per month, plus business owners can choose a monthly payment plan at no additional charge. Its financial stability, tailored coverage, and easy-to-use website make 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 include 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 (including 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.
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.
To be eligible for regular membership with AICPA, you’ll need to:
- Pass either the CPA Exam or International Qualification Exam (IQEX).
- Meet the 120-hour continuing professional education (CPE) requirement.
- Have a current and valid CPA license/certification or have held a CPA license/certificate in the past that wasn’t revoked for disciplinary reasons.
Annual dues start at $295 for regular membership and $485 if you wish to be a partner. For those who have retired or temporarily left the workforce, you’ll only need to pay $155 (at full price) to be a member of AICPA.
Bottom Line
Professionals working in the accounting industry need the right insurance to cover their specific risks—this is a critical part of starting or running a bookkeeping or accounting business. The providers on our list can help find the best CPA insurance to cover your 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.
