Best Professional Liability Insurance for Accountants

For accountants, professional liability insurance is a non-negotiable policy that provides a crucial safeguard against the high costs of a lawsuit. Also known as Errors & Omissions (E&O) insurance, this policy is designed to protect an accountant from lawsuits that result from a mistake or omission in their professional work. The best professional liability insurance for accountants is one that provides comprehensive coverage, a strong legal defense, and is tailored to the unique risks of the accounting profession.

The primary function of professional liability insurance is to cover a wide range of risks that are unique to the accounting profession, including:

• Incorrect Tax Advice: A lawsuit alleging that an accountant provided incorrect tax advice that resulted in a financial loss for a client.
• Missed Deadlines: A lawsuit claiming that an accountant missed a filing deadline that resulted in penalties for a client.
• Failure to Detect Fraud: A lawsuit alleging that an accountant’s failure to detect fraud led to a financial loss for a client.
• Improper Financial Reporting: A lawsuit claiming that an accountant provided improper financial reporting that led to a financial loss for a client.

An E&O policy also provides a crucial safeguard by covering the legal defense costs of a lawsuit, regardless of the outcome. A professional liability lawsuit can be a complex and expensive process, and an accountant could not afford to defend themselves from a multi-million dollar lawsuit without this coverage. The insurance company’s legal team is trained to defend accountants in court and will cover all legal fees, court costs, and settlements, even if the lawsuit is baseless.

When an accountant is shopping for professional liability insurance, they should look for a provider who specializes in their industry and understands the unique risks of their profession. They should also consider a few key factors:

• Coverage Limits: The coverage limits should be high enough to protect the accountant’s financial assets from a worst-case scenario lawsuit.
• Retroactive Date: The policy’s retroactive date is crucial. It is the date from which the policy will cover claims, and it is important to ensure that the policy has a retroactive date that covers all of the accountant’s past work.
• Disciplinary Coverage: Some policies also provide coverage for the costs of a disciplinary hearing from a state or national licensing board.
• Tail Coverage: If an accountant is retiring or leaving the profession, they should consider purchasing tail coverage, which provides a “tail” of protection for claims that are filed after the policy has expired.

Some of the top providers in this space, such as CNA, Travelers, and The Hartford, offer a variety of policies for accountants, from small firms to large corporations. By investing in the right professional liability insurance, an accountant can protect their business from the unique risks of their profession and operate with confidence.