Accountants & Bookkeepers Insurance Ontario

What You Need to Know About Accountants & Bookkeepers Insurance

Are you an accountant or bookkeeper looking to protect your business and financial assets? As a trusted advisor to your clients, you know the importance of mitigating risk and safeguarding against unexpected events. 

That’s why obtaining insurance coverage for your business is a wise decision that can provide peace of mind and protect it from financial losses in the event of a claim. With the right insurance coverage, you can focus on delivering exceptional service to your clients and growing your business, knowing you have the support and protection you need.

Insurance Coverage Options

Accountants’ and bookkeepers’ insurance is a type of insurance coverage that is designed to protect accounting professionals and their clients against potential financial losses resulting from errors, omissions, or other types of professional liability claims. This type of insurance typically includes professional liability coverage, also known as errors and omissions (E&O) insurance, which provides protection against claims of negligence or failure to perform professional services to a client’s satisfaction. It may also include general liability coverage, cyber liability coverage, and business interruption coverage. The specific coverage and limits of the policy will depend on the needs of the accountant or bookkeeper and the nature of their business.

Do accountants and bookkeepers need insurance?

Yes, accountants and bookkeepers may need insurance coverage to protect themselves and their businesses from financial losses due to claims of negligence or errors and omissions in their professional services. Clients can sue accountants and bookkeepers for a variety of reasons, such as inaccurate financial statements, improper tax filings, or failure to provide sound financial advice. 

This is why it’s essential for accountants and bookkeepers to have adequate insurance coverage to mitigate the risks associated with their profession. Some common types of insurance coverage for accountants and bookkeepers include professional liability insurance, general liability insurance, and cyber liability insurance.

Why is accountant and bookkeeper insurance needed?

Accountants and bookkeepers need insurance to protect themselves and their clients from potential financial losses that can arise from errors or omissions in their work. Even small mistakes can lead to serious financial consequences for clients, so having insurance can provide a safety net and help build trust between the accountant or bookkeeper and their clients. Additionally, some clients may require accountants or bookkeepers to have insurance before working with them, which can be seen as a sign of professionalism and reliability.

What kind of insurance do bookkeepers and accountants need?

Professional Liability Insurance

Also referred to as errors & omissions (E&O) insurance, this shields accounting and bookkeeping professionals from financial loss claims or lawsuits resulting from professional negligence, misconduct, or failure to provide promised services. This insurance policy covers alleged or actual errors, breaches of professional duty, and misleading or misinterpreted financial statements. 

It provides financial protection by covering legal expenses, settlements, and judgments up to the policy limit if an accounting or bookkeeping professional is accused of errors or negligence. However, this insurance policy does not cover intentional misconduct and criminal acts.

What other coverages should bookkeepers and accountants consider adding to their insurance policies?

Commercial General Liability (CGL) Insurance 

Provides coverage for third-party bodily injury or property damage claims arising from the accountant or bookkeeper’s business operations. This insurance typically covers legal fees, settlements, and judgments. It may also cover claims related to false advertising, libel, or slander. General liability insurance is essential for accountants and bookkeepers as it protects their businesses from financial losses resulting from unexpected accidents or lawsuits.

Cyber Liability Insurance

Provides protection against cyber threats such as data breaches, cyber-attacks, and other malicious activities. This insurance helps to cover costs associated with responding to a cyber incident, such as investigating the breach, notifying clients, and providing credit monitoring services. It may also cover damages resulting from the breach, such as loss of income or reputational damage. As cyber threats continue to grow in frequency and severity, cyber liability insurance has become increasingly important for accounting and bookkeeping professionals who handle sensitive client information.

Commercial Property Insurance

Provides coverage for physical assets related to your business, such as your office space, equipment, and inventory. It protects against risks such as fire, theft, vandalism, and natural disasters and may also cover business interruption expenses if you are unable to operate due to property damage (if it is included in your policy). 

Business interruption coverage for an accountant typically covers loss of income or revenue resulting from a covered event that disrupts normal business operations, such as a natural disaster, fire, or theft. It can help to cover ongoing expenses such as rent, utilities, payroll, and other costs that continue even if the business is temporarily unable to operate. It may also cover expenses associated with relocating the business or providing temporary services to clients.

As an accountant and bookkeeper, having commercial property insurance can help ensure that your business can recover quickly and continue to serve your clients in the event of unexpected property damage.

Legal Expense Insurance

Provides coverage for legal costs and expenses in the event that an accountant or bookkeeper faces legal action. This insurance can cover a variety of legal expenses, including legal representation, court costs, and other related expenses. Legal expense insurance can be especially important for accountants and bookkeepers, as they may face legal action from clients or other parties in the event of alleged errors or omissions. With this insurance, accountants and bookkeepers can have the peace of mind of knowing that they are protected against potentially significant legal expenses.

Business Insurance – Home-Based

Provides protection for business owners who operate their accounting and bookkeeping business from their home instead of at a separate office. It can help cover damages or losses to business property, equipment, and inventory caused by unexpected events such as fire, theft, or vandalism. 

It may also provide liability coverage for accidents that occur on the property and can protect against business interruption losses. Home-based business insurance can provide peace of mind to accountants who operate their business from home by ensuring that their assets and income are protected in the event of an unexpected event.

Auto Insurance – Business Use

Provides protection for accidents or damages that may occur while using a personal vehicle for business purposes. As an accountant or bookkeeper, you may need to travel to meet clients or run errands for your business, and your personal vehicle may be the most convenient mode of transportation. However, standard personal auto insurance policies may not cover accidents or damages that occur during business use of the vehicle. Business use for personal auto insurance can provide coverage for these situations, ensuring that you are protected while using your vehicle for business purposes.

Is it mandatory for accountants and bookkeepers to get insurance?

Many professional organizations, such as the Chartered Professional Accountants of Canada, require their members to have professional liability insurance as a condition of membership. And to offer accounting services to the public, all firms in Canada must have professional liability insurance, and they need to present evidence of insurance to CPA Ontario when registering the firm. This requirement is mandatory for all public accounting practices or firms offering accounting services to the public.

What risks do accountants and bookkeepers face?

Accountants and bookkeepers face a variety of risks in their day-to-day work. One of the most significant risks is the possibility of making an error or omission in their work, which could result in financial harm to their clients. Even a small mistake, such as an error in a tax return or financial statement, could lead to significant financial losses or legal disputes.

Additionally, accountants and bookkeepers are often entrusted with sensitive financial information, such as tax returns, bank account numbers, and other confidential data. This makes them vulnerable to cyberattacks and data breaches, which can lead to identity theft, fraud, and other financial crimes.

Another risk for accountants and bookkeepers is damage or loss to their physical office space or equipment. Natural disasters such as fires, floods, earthquakes, theft, and vandalism can cause significant damage and disruption to their business operations.

Finally, like any other business owner, accountants and bookkeepers face the risk of business interruption due to unforeseen events such as power outages, supplier failures, or pandemics. This can lead to a loss of income and additional expenses, which can be financially devastating for small business owners.

To protect themselves from these and other risks, accountants and bookkeepers should consider obtaining a range of insurance coverage, including professional liability insurance, cyber liability insurance, commercial property insurance, business interruption coverage, and others. Working with an experienced insurance broker can help ensure they have the right coverage to protect their business and financial well-being.