If you’re an accountant, you are required by law to own professional liability insurance because you are providing a service (advice) to the public. Practicing with out having professional liability insurance coverage as an accountant is the law.
We’ve put together a list of things to know to better understand professional liability insurance for accountants.
Be definition, professional accountants in Canada are either of the following:
- Chartered Accountant (CA)
- The CA designation requires an undergraduate degree in accounting.
- 3 years of training in a designated accounting firm/practice.
- Pass a three-day exam known as the Uniform Final Evaluation.
- Recognized internationally.
- Chartered General Accountant (CGA)
- An undergraduate degree (any discipline)
- Two or more years of CGA-related courses.
- An entrance exam
- Two to three years of business experience at the managerial level.
- Chartered Managerial Accountant (CMA)
- For CMA certification the requirements were an undergraduate degree in a related discipline (such as a Bachelor of Commerce), an entrance exam, and suitable work experience.
IMPORTANT: In an effort to provide simplicity to the accounting industry, in 2012 the over 40 different provincial and national accounting associations representing the three designations agreed to merge under a single designation. As a result, members are now recognized as Chartered Professional Accountants (CPAs).
There Are Minimum Professional Liability Insurance Requirements for Accountants
In the province of Ontario, Charter Professional Accountants (CPAs) are required to own a minimum amount of coverage of $1 million (for one accountant practicing), $1.5 million (for two or three accounts practicing) and $2 million (for four or more accountants practicing). This applies whether you’re running a business alone, in a partnership or through a professional corporation or provide accounting services to the public in Ontario.
What Is Covered?
Most professional liability insurance policies cover economic (financial losses) which are suffered by third-parties. This type of coverage is meant to protect you by covering the costs associated with any errors in the services that you have provided. Along with accountants, this also applies to lawyers, brokers and financial advisors. (e.g. you prepare financial statements for your client, ensuring that they will not owe any money to CRA. This was bad advice as it was not true and as a result, they are required to pay—therefore, they want to file a lawsuit against you for negligence).
The most common exclusions in coverage for a professional liability police are:
- Bodily injury (BI) and;
- Property damage (PD)
The above are covered by Commercial General Liability (CGL).
As every policy is different, it’s a good idea to reach out to an insurance provider directly. Zensurance is available 24/7, so if you’d like to know what your professional liability insurance options are as an accountant, feel free to call us anytime at +1-888-654-6030.
What Is Typically Not Covered?
There are several types of insurance policies that could be coupled with professional liability insurance to protect you as an accountant. The following are common policies that a life agent should consider:
- General Liability Insurance (CGL)
This is the foundational liability insurance that any business should own at minimum. It coverts third-party lawsuits (bodily injury and property damage). (e.g. You meet a client in their home, slip and fall on something on their property and hurt yourself).
- Cyber Insurance
If your customer information is compromised and their personal information is used against them (e.g. fraud activity where their I.D. is used), your customer can sue you for the cost of the damages associated. The added protection is a smart move, especially since the number of cyber attacks continue to grow, costing businesses lucrative amounts of money.
- Business Interruption Insurance
If you rent an office for your business and a flood destroys your work space, business interruption insurance may cover the costs associated with loss of income due to operations put to a halt.
- Property Insurance
Any property that you own which is used for your business which is damaged or stolen may be covered. (e.g. You have a company laptop that was stolen when someone broke into your vehicle).
- Legal expense insurance
This type of insurance policy may cover legal costs allotted to defend your legal rights. This is especially targeted toward some claims relating to employment disputes, legal defence, contract disputes & debt recovery, statutory license protection, property protection, bodily injury and tax protection. (e.g. a former employee files a lawsuit against your company for wrongful dismissal. This policy will cover the cost of legal expenses).
“Is There a Specific Insurance Provider I Must Purchase From?”
No. You are free to select professional insurance liability insurance coverage from any provider. The first step is to better understand your business and write down a list of questions you may want to ask before making any calls or searching for any quotes.
“What Should I Look for When Searching for Professional Liability Insurance?”
When you are researching professional liability insurance to cover you or your business, there are a number of things you may want to inquire about.
Below are just some of the questions you may want to ask to better understand whether a policy is right for you:
- Is Directors & Officers coverage provided at no additional cost for qualifying boards?
- Are there any limits to claims submitted? If so, which ones?
- Is there a deductible reduction if a claim is successfully settled using an alternative method than to going to court?
- Are traditional and non-traditional CPA services covered by this professional liability insurance policy?
- Are defence costs covered in addition to the policy limit or is it a separate cost?
- Is innocent partner coverage available with this policy? Innocent Party Coverage protects members of the public and yourself against fraudulent, dishonest, criminal, or malicious acts or omissions of present or former partners, associates and your current firm employee(s).
- Does this professional insurance liability policy offer true worldwide coverage? (This is an add-on that responds to any lawsuits presented in a country outside of North America)
- Do you offer discovery policy as an add-on? If so, what does it cost? How can it affect coverage?
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“I Only Provide Public Accounting Service Part-Time—Am I Still Required To Purchase Professional Liability Insurance?”
Simply put, if you are providing public accounting services and advise to your clients, whether part-time or full-time, you are still required by law to own a professional liability insurance policy.
“I Have Plans To Retire Soon—Do I Still Require Professional Liability Insurance?”
Even if you decide to cease from provide accounting services, you are required to obtain discovery insurance coverage, which is meant to protect you for up to 6 years after you’ve stopped offering your accounting services.
It’s a good idea to speak to the insurance providers that you contact about what your options are!
More Than Just Professional Liability Protection
With the hundreds of options available to you but the most important thing to do is find an insurance provider that will make understanding your coverage and maintaining your policy as seamless and stress-free.
“Will I Have a Dedicated Broker Helping Me?”
Ask if there will be one specific broker whom you will be able to work with? While they are likely working with hundreds of other clients, developing a personal relationship with them will make interactions much more pleasant.
Does your broker have experience working with other accountants or accounting firms? If they have, they may be able to provide more insight based on their experience. This can save you time if you’re trying to understand any legalities surrounding specific requirements related to your profession as an accountant.
How Responsive Is The Insurance Provider?
Look for an insurance provider or broker that is available around your clock. What are their hours of operations? Can they be available outside of those hours? Does your call get filtered to other agents outside of any set hours?
It’s also a good idea to ask what their best method of communication is to see that it reflects with yours. So if you’re busy during the day and questions come to you in the evening, is sending an email efficient? Can they respond outside of dedicated work hours? Is live chat available if you’re looking to get quick answers without having to provide your policy information?
Transparency Is Key—Understanding Your Policy
While you may be more versed in understanding some of the jargon compared to the bigger population, there will still be a lot of questions specific to the type of coverage.
Here are some typically misunderstood terminology that are often overlooked:
- First Dollar Defense
- Applies to legal fees incurred by claims made and reported to the insurer. (e.g. Changes the deductible features to apply to damages only, allowing the insurer to step in at the first dollar of defense).
- Aggregate Deductible
- Limits the amount paid by the insured, during your policy period to the deductible amount regardless of the number of claims reported.
- Split Limits
- A limit of liability equal to the maximum amount that your insurance company may pay on all claims reported during your policy period. (e.g. The insurer will pay up to $1 million on a $2 million policy for all claims during the policy period).
- Defense Costs Outside of the Limit of Liability
- The defense costs will not erode your limit of liability.
- The defense costs will not erode your limit of liability.
Having a clear understanding of the professional liability insurance policy before applying isn’t the only time you’ll need to understand. How comfortable are you with the answers and explanations provided by the broker? Are they providing enough information to help you decide? The broker should not have trouble working with you to find and recommend the right solution for you.
Understanding your professional liability insurance policy is important.
We’re happy to help and answer any questions you have! Call us at 1-888-654-6030
Managing Your Policy—What Are Your Options?
There are plenty of insurance providers who offer time/cost-efficient solutions when it comes to managing your policy. Outside of dealing with your broker to get some hand-holding when it comes to understanding your insurance, there should be ways for you to access your policy information easily. Zensurance provides policy holders with an online digital dashboard, allowing you to access your policy information from anywhere as long as you’ve got an internet connection.
Money Talks—How Much Does Professional Liability Insurance for Accountants Cost?
The cost for professional liability insurance for accountants will vary from provider to provider. However, it can definitely be affordable, especially if the business you run is consider low-risk (e.g. you’re a sole proprietor and work for yourself).
Annual professional liability insurance for accountants can range in price between $600 (typical for low-risk) and $1000. To get a more accurate quote to reflect your business, visit online for your free quote!
What Kind Of Information Should I Prepare To Get a Quote for Professional Liability Insurance for Accountants?
To save yourself some time, it is a good idea to do some digging and gather some pertinent company information before requesting a quote. Here’s a list of several types of information about your business that you’ll need to gather in preparation for your search:
- Name of your company
- Address and locations
- Revenue—this is a driving factor for your policy premium
- Your company structure—(i.e. sole proprietorship, corporation, partnership, joint venture or franchise?)
- The date that your company was established
- Is your company registered in Canada?
- What is the number of employees working for your company? What are the number of partners?
- Do your employ subcontractors?
- Privacy—do you collect private information (e.g. customer data, financial information). What measures do you take to protect this information?
A Recap of What You’ve Learned About Professional Liability Insurance For Accountants
- Professional accountants by law are required to own professional liability insurance coverage.
- There are minimum requirements for professional liability insurance that you must meet as an accountant. $1 million liability coverage (one accountant practicing), $1.5 million liability coverage (for two or three accountants practicing) and $2 million (for four or more accountants practicing).
- You are free to search for professional liability insurance on your own but should be armed with the right questions to ask, reflecting your unique business needs. We prepared a list of questions to ask when inquiring for a quote.
- List any questions you have ahead of time. Some not-so-obvious questions are, “what does the claim process consist of?” to “is directors and officers insurance coverage provided at no additional cost to qualified boards?”. Be prepared with a list of very specific questions.
- Even if you practice part-time as a professional accountant, you are still required to own professional liability insurance.
- If you plan to retire or cease from providing accounting services, you should inquire about “Discovery Insurance Coverage”, which protects you for up to 6 years after you’ve stopped offering your accounting services.
- The service you receive from an insurance provider is a reflection of the customer experience you’ll have. Look for someone who is willing to take the time to answer any questions you have around your policy, claims, coverage and payment options. Also make sure to ask if one broker will be managing your policy and whether that broker has experience working with other accountants or accounting firms.
- Can you access your professional liability insurance policy from an online dashboard or is everything done through paper? Ask them what tools are available to you when you don’t need to speak to your broker!
- Resources available to you—are there any free resources (a blog or newsletter) that provide tips to help you with your business? Ask that your broker send you links to this information for you to bookmark for later.
- The cost of professional liability insurance can depend on a few variables, some of which include revenue, policy coverage amount or whether your business is low or high risk.
- If you’re going to inquire about professional liability insurance as an accountant, you should definitely come prepared with information about your company. We’ve provided a list of information that will likely be required of you when requesting a quote.
List of Resources for Accountants
Here is a list of helpful resources for Chartered Professional Accountants in Canada:
- Leverage your network! You’ve heard it before—it’s who you know! Luminari is the largest online community of CPAs and CPA Candidates, creating on-going opportunities to drive your career and business!
- Pivot Magazine is a wonderful online resource with up-to-date information about the industry, by way of CPA Canada.
- CPA Canada Handbook: The Standards and guidance collection
- A comprehensive list of networking and in-person professional development events for accountants in Canada.
- Are you an internationally trained professional accountant? If you’re interested in obtaining your CPA (Chartered Professional Accountant) designation, here are 5 steps to becoming a student of the CPA program. To get a list of the accounting bodies outside of Canada here.
- Interested in professional development for your career as a professional accountant? If you live in or plan to practice in Ontario, you can access the CPA’s Professional Development Portal to learn more. It’s also a good idea to take advantage of networking opportunities in your local chapter.
- Access the CPA store for a list of professional development publication covering tax, accounting, assurance, business, finance, practice management and an array of other business areas.
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