At CoverHound, we help tax professionals protect their work, clients, and peace of mind. Unfortunately, many tax preparers treat insurance as an afterthought—until something goes wrong. It might feel like another expense or something you’ll figure out later. However, not having the right protection can cost far more than the policy itself.
Whether you’re working full-time, part-time, or just during tax season, getting your coverage right from the beginning matters. And not just for tax preparers; bookkeepers, Certified Public Accountants (CPAs), and consultants face similar risks, especially when handling sensitive financial data or giving professional advice.
Knowing what to avoid is just as important as knowing what to look for. Here are the most common insurance mistakes tax professionals make and how to avoid them.
One of the most common mistakes tax preparers make is assuming that general liability coverage is enough. It’s not. General liability covers things like bodily injury or property damage, which doesn’t do much for the risks you face as a tax professional.
What happens if you make an error in a return or a client claims your advice cost them money? That’s where professional liability coverage becomes very important. If you store client information electronically, you must have cyber insurance to protect against potential data breaches. And if you work from an office or have equipment like laptops, business property insurance will help cover any damage or loss.
The truth is, most small businesses (including solo tax professionals) need a combination of policies to stay properly protected.
How to avoid it: Talk to an insurance expert or licensed broker when you’re setting up your business and reassess your coverage at the end of each year. The right tax preparer insurance should reflect all the real risks that come with your work.
It’s easy to walk into a local insurance office or call a big-name brand and sign up for whatever insurance they recommend. It might feel quick and convenient, but that doesn’t always mean you’re getting the perfect fit. Many of the standard insurance providers don’t specialize in working with tax professionals, and because of this, their policies might not fully take into consideration all of the specific risks that you face.
Your work involves handling sensitive data, legal obligations, and strict financial accuracy. That means you need to ensure that your coverage is built around those realities and isn’t a one-size-fits-all plan. The first option you come across might sound like a good choice, but it’s not always the one that will protect your business the way it should.
How to avoid it: Take the time to shop around and compare different policies. Look for providers that focus specifically on small business needs and those that understand tax preparer insurance, like CoverHound. The right policy is out there. You just have to be willing to look beyond what’s closest.
It’s no secret that everyone wants to save some money, but buying the cheapest policy you can find isn’t always a win. In many cases, low-cost insurance comes with gaps, strict exclusions, or even coverage limits that won’t help you a whole lot when you need it.
Some low-rated insurers are also known for having poor claims service. Or worse, they might deny claims that actually should be covered. That means you could end up paying out of pocket for legal fees or client settlements, even though you thought you were protected.
With tax preparer insurance, cutting corners now can create big problems later. It’s worth spending a little more to make sure your coverage does what it’s supposed to do.
How to avoid it: Choose coverage from reputable, top-rated carriers. Focus on value, not just price, and work with someone who understands your industry.
CoverHound Tip: Our favorite saying? If you can’t afford (comprehensive) insurance, you can’t afford an incident. While insurance might feel like just another monthly expense, it only takes one incident to put most small businesses in debt or out of business. Insurance protects you from that.
Many tax preparers sign up for their insurance, pay the premium, and never actually read what their policy covers. It’s easy to assume you’re protected in every situation, but unfortunately, that’s not always the case.
For example, if a client sues you for giving inaccurate advice (even if you didn’t!) and your policy only covers bodily injury or property damage, you’re out of luck. Without professional liability coverage, you’d be paying all of the legal fees and damages yourself. That kind of surprise can be financially devastating.
Tax preparer insurance is meant to give you peace of mind, but only if you know what’s included and what isn’t.
How to avoid it: Ask your insurer to walk you through your coverage in simple terms that are easy to understand. If anything is unclear, review your policy with a lawyer or someone familiar with insurance for professionals. Taking the time to review your protection now can save you from a big headache later.
This is a very common assumption: if you have tax preparer insurance, everyone who works with you is automatically covered. But that’s not usually true, especially when it comes to subcontractors.
Most subcontractors need their own insurance policies, especially if they’re preparing returns or handling any client data. If they make a mistake and aren’t insured, you could still be held responsible for the error. Some clients may also require proof of insurance from everyone involved in the work.
How to avoid it: Always ask for proof of insurance before working with any subcontractor. It protects your business, your reputation, and your clients.
Letting your tax preparer insurance lapse can leave you completely exposed and vulnerable. It happens more often than you’d think. Maybe your credit card expired, you missed a renewal email, or you didn’t open a letter from your insurer.
The problem is that some claims are only covered if your policy was active when the issue occurred. That means even if you didn’t know about the problem until later, you’d still be on the hook for any legal or financial responsibilities.
How to avoid it: Set reminders for your renewal dates, keep your payment information updated, and always open mail or email from your insurance provider. A quick check now can save you from a costly gap in protection later on.
Whether you’re a solo tax preparer, CPA, consultant, or part-time bookkeeper, the right insurance gives you confidence and peace of mind. It protects your reputation, clients, and the business you’ve worked hard to build.
Don’t leave your business at risk because of a small oversight. Get fast, accurate quotes and same-day insurance when you start comparing insurance options with CoverHound today.
Insurance shopping simplified
Insurance shopping simplified
