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If you work as an accountant – or run an accountancy business – then you’ll know that one rogue zero, or a misplaced decimal point, can cause a massive headache. And the last thing you want is that honest mistake to turn into a costly claim made against your business.
But don’t worry. You can protect your small business ahead of time with accountancy insurance, which will help cover the associated legal fees and compensation costs if such a claim were made.
Accountancy insurance isn’t a standalone product, but a group of policies applicable to your business needs within the accountancy profession. This includes professional indemnity insurance, which may be a requirement of your professional membership body.
If you don’t know how you could benefit from accountancy insurance – or if you’re worried that your existing coverage doesn’t go far enough – then read on to learn more about this type of small business insurance and why you need it.
What is accountancy insurance?
The term ‘accountancy insurance’ can be a bit misleading. Rather than being a type of insurance itself, it instead refers to the various policies you may want to consider if you work as an accountant or bookkeeper.
This means that if you are a sole trader, your definition of accountancy insurance may be slightly different to someone who owns their own accountancy firm with multiple employees.
Professional indemnity insurance for accountants
Due to the advisory nature of accountancy, professional indemnity insurance for accountants is probably the most important policy within your package.
Professional indemnity insurance is designed to cover legal fees and compensation costs arising from claims of professional negligence or bad advice that causes your client a financial loss. This could include a mistake you have made in your accounting, or a course of action you recommended that ends up costing your client money.
Unlike in many other roles, professional indemnity insurance can be a requirement for accountants. Not due to laws set out by the government but because of the membership rules of the professional bodies you may need to join to practice as a chartered accountant. Each body may also dictate the minimum level of coverage required, based on your income or trade status.
Professional bodies that require you to take out professional indemnity insurance include, but are not limited to:
- Association of Accounting Technicians (AAT)
- Association of Chartered Certified Accountants (ACCA)
- Chartered Institute of Management Accountants (CIMA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Chartered Accountants of Scotland (ICAS)
Before purchasing any cover you should familiarise yourself with the individual requirements of the membership body that relates to you. Some bodies may also stipulate who you can buy insurance from and may have a list of approved insurers.
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Other types of insurance for accountants
There are a number of other types of business insurance you might want to consider as an accountant.
Public liability insurance can protect you if you accidentally injure a third party, or damage their property, during your regular business activities.
As an accountant, your livelihood is likely to rely on access to a laptop or computer. The right level of equipment insurance can help get your items replaced if they were lost, stolen or accidentally damaged.
Cyber and data insurance, meanwhile, can cover the costs if confidential data was lost or shared, and a client makes a claim against you.
If you have a business premises, you may want to consider business buildings and contents insurance, which can be purchased separately or in tandem.
You will also legally need to take out an employers’ liability insurance policy worth at least £5 million if you employ anyone that isn’t a family member or based abroad.
Do I need accountancy insurance?
The one form of insurance that is legally required as an accountant is employers’ liability insurance, but that is only if you have employees who are not based abroad or a family member. Employers’ liability insurance kicks in to cover the costs if an employee injures themselves, or falls ill, due to your business activities. This could be as simple as someone tripping over some loose cables in the office and fracturing their wrist.
» COMPARE: Employers’ liability insurance
As mentioned, your professional institute may also require you to take out professional indemnity insurance. And there are a range of situations where you might be relieved you have.
For example, if you didn’t catch a miscalculation that ends up costing your client money in tax payments, and that client then makes a claim against you, professional indemnity insurance could cover the associated legal and compensation costs.
Just because other types of insurance aren’t required, that doesn’t mean they are not recommended.
Say you spill a cup of hot coffee on a client’s laptop when taking them through their accounts. Public liability insurance could cover the costs of a claim made against you.
Meanwhile, if your own laptop was stolen from the back of your car, equipment insurance could pay for the cost of a replacement.
And, if you accidentally click a phishing link and wipe a bunch of client data, cyber and data insurance may both pay for recovery costs, and the legal and compensation fees associated with a claim made against your business.
» MORE: Do I need business insurance?
What does accountancy insurance cover?
Although your needs will vary, depending on whether you are a sole trader accountant or running your own firm, the following is what you can typically expect from an accountancy insurance package:
- professional indemnity insurance
- public liability insurance
- employers’ liability insurance
- business buildings and contents insurance
- equipment insurance
- cyber and data insurance
What is usually not included in accountancy insurance?
What isn’t included in your accountancy insurance package is in large part determined by what you choose to pay for, and not to pay for.
So if your laptop is hacked and sensitive data is stolen but you haven’t chosen to include cyber and data insurance, you will have to pay for all associated costs out of your own pocket.
Another thing to be aware of, that might not be included as standard in accountancy insurance, is business car insurance.
If you regularly drive to multiple places of work – for example, the homes and offices of your various clients – you may need class 1 business car insurance.
How much does accountancy insurance cost?
Due to the flexible nature of accountancy insurance, the cost can vary from business to business. The following may affect the price of your premium:
- how many policies you choose to take out
- the level of coverage you want from each policy
- how many employees you have
- where your business is located
- the years of experience you have as an accountant or bookkeeper
- whether you are a sole trader, a limited company or a partnership
How to choose the best accountancy insurance policy for you
You know your business better than anyone. So you know which risks you are most likely to incur, and therefore the best level and range of cover for your accountancy insurance.
You should factor in the financial worth of your clients and the work you do for them, as well as your specific needs as a sole trader, limited company, or partnership.
Accountancy Insurance FAQs
Employers’ liability insurance is a legal necessity if you employ anyone who isn’t a family member or who isn’t based abroad.
Professional indemnity insurance, meanwhile, may be required by your professional body, including the AAT, ACCA, CIMA, ICAEW and ICAS.
You may also want to consider public liability insurance, cyber and data insurance, and equipment insurance.
Accountant insurance is simply another name for accountancy insurance. These phrases can all be used interchangeably to describe a range of insurance policies that may be suitable for those working within the accountancy profession.
Your professional body may require you to take out professional indemnity insurance as part of your membership. This includes the AAT, ACCA, CIMA, ICAEW and ICAS.
Even if you aren’t required to take it out, however, professional indemnity insurance for accountants is still recommended, due to the financial risks associated with the job.
While it is not a legal or professional requirement, due to the public-facing nature of your role you may want to consider public liability insurance as an accountant.
You’ll be covered if someone is injured or their property is damaged by you or an employee in the course of your business activities. This could range from spilling a cup of coffee in someone’s home to a client tripping over some cables and hurting themselves at your office.
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