As a CPA, bookkeeper, or financial professional running your own business, you know the value of smart investments, and professional liability insurance is one of them.
We know that shopping for insurance can feel overwhelming or like another cost to manage. That’s why we created this guide: to simplify what you need, why it matters, what to look for, and how to secure the right coverage from start to finish.
Professional liability insurance is a common type of insurance that service professionals, including CPAs, accountants, and bookkeepers, hold. It protects any business that provides professional services or advises their clients from claims of:
It can also cover attorney fees if a client decides to sue you. How would this play out in your business?
Imagine you’re a CPA. You file a client’s tax return, and they mistakenly believe an itemized deduction would have saved them more than the standard deduction. They claim you didn’t act in their best interest and decide to sue.
Despite multiple attempts to explain that they didn’t qualify for itemized deductions, the lawsuit moves forward. The case is quickly thrown out, but you still have to hire an attorney.
Luckily, your professional liability insurance covers the legal costs—saving you from paying out of pocket.
CoverHound Tip: It’s important not to let your coverage lapse. If you start a new policy with another carrier after a period of no coverage, they will not cover you back to the start date of your last policy. Believe it or not, if you switch carriers without a lapse in coverage, your new carrier will cover you for any incidents going back to the start of your old policy. That’s why we warn against lapsing – you never know when someone could bring the past back up, and you always want to be covered.
Some professionals assume they’re safe from lawsuits because of business structures or contracts, but that’s not true. Let’s break down some common misconceptions.
Fact: While an LLC or other business structure helps separate personal and business assets, it won’t protect you from legal fees if a client sues. You'll be responsible for costly defense fees if you don’t have professional liability insurance. Contracts aren’t bulletproof, either. Clients who believe your actions voided the contract may sue you anyway.
As a financial professional, you can’t just consider yourself when protecting your business; you have to consider the net worth of the clients you serve. Do they have the resources to take you to court if they feel you’ve been negligent? Do some of your clients stand to lose a lot of money if you give them inaccurate advice?
Insurance isn’t just about protecting yourself; it’s about being able to cover your clients’ losses, too.
CoverHound Tip: Not only do you need professional liability coverage, but you’ll also need a few other key policies, including cyber liability and general liability, at minimum.
Finding the right policy is essential, but many CPAs and accountants aren’t sure what to look for in an insurance policy for a financial business. At CoverHound, we believe there’s no one-size-fits-all solution. Every business deserves tailored professional liability coverage.
Here’s what to keep in mind as you shop:
Every policy has a claims limit, the maximum amount the insurer will cover. Higher limits offer greater protection but may come with higher premiums.
For accountants and CPAs, risk exposure is determined by:
A trusted insurance advisor can help you determine the best claim limit for your business. If you’d rather have more coverage than you may need, you can request a higher limit. Just keep in mind it may increase your premium.
Believe it or not, there are limits within the limits of your claim. Let us break it down: within the monetary amount of your claims limit - let’s say it’s $1 million - there is a certain amount of money carved out for defense costs.
This is your “defense limit”: the amount of money dedicated to defense costs, including attorney fees, settlements, and judgments.
When you’re looking at a professional liability policy, consider these questions:
You can buy defense limits separately from your professional liability policy so that the money in your policy goes toward covering other expenses, and you have a set amount just for defense costs.
When deciding whether or not to keep your defense limits within your claims limits or to buy them separately, it’s essential to consult a trusted insurance professional.
Some standard exclusions for a professional liability policy include intentional wrongdoing, bodily injury, and property damage. Getting another policy is best if you’d like coverage for these exclusions.
For example, if you want coverage for third-party injuries, you’d need general liability insurance in addition to professional liability coverage.
It’s always best to know what’s excluded from your professional liability policy coverage to avoid future surprises.
Now that you know what professional liability coverage is, why you need it, and what to look for, here’s how to put that knowledge to use to find the best policy for your business.
We recommend getting quotes for your professional liability policy from at least three carriers. Each carrier may provide slightly different coverage benefits and pricing options. Going from carrier to carrier for a quote can be daunting, but CoverHound’s all-in-one insurance platform makes it easy to compare quotes iYou may have questions about how the insurance process works, though. Many small business owners like you don’t always know where to start when purchasing a professional liability policy, or why they need it. And as someone who’s made a career dealing with money, you may be wary of overspending on coverage you don’t need.
By now, you have a good understanding of the risks your business faces, what affects the cost of your policy, and what to look for from your professional liability coverage.
While this knowledge is valuable, you don’t have to navigate business insurance for financial professionals alone. A trusted insurance advisor can review your quotes and provide objective recommendations based on your coverage priorities.
CoverHound makes it easy to get expert guidance. Our team helps CPAs and accountants find tailored coverage that meets their needs.
There’s a lot to understand about professional liability insurance, from what it is, why you need it, and what affects the cost of a policy for you as a financial professional and a business owner. With the help of a trusted insurance advisor, you can easily compare quotes and pick the best coverage for your business needs.
CoverHound makes it easy for business owners like you to get fast and accurate quotes from over a dozen A+ rated carriers. Start coverage within 24 hours when you use our all-in-one insurance platform to find a policy. Get started with your free quote today.
Insurance shopping simplified
Insurance shopping simplified
