Accountant and CPA Insurance

In most states, accountants and CPAs aren't required by law to carry malpractice insurance, also known as accountants professional liability insurance, professional indemnity insurance, or errors and omissions (E&O) insurance. However, some local jurisdictions or specific clients—especially larger corporations or government agencies—may require proof of coverage before hiring you.

Even when it’s not required, professional liability insurance for accountants is a smart investment. It helps protect your business from the financial fallout of costly lawsuits related to your professional services, such as professional negligence, mistakes, or omissions. For example, this coverage can help if:

• A tax return error leads to penalties for a client, who then sues for damages.
• An alleged oversight in financial statements causes a business to make costly decisions based on inaccurate data.
• Missed regulatory deadlines result in fines or compliance violations for a client.
• Incorrect financial advice causes a client’s investment loss, even if it was an honest mistake.

A professional liability policy can cover legal defense costs, settlements, or judgments, helping safeguard your reputation and finances. Without coverage, a professional negligence claim could have a major impact on your business.

Yes, cyber insurance for CPAs and accountants is a critical coverage to carry.

Accounting professionals handle highly sensitive financial data and personally identifiable information (PII) for their clients. This makes them a prime target for hackers, phishing scams, and other cyber threats. Even a single breach can lead to costly legal requirements, damaged client trust, and lost business opportunities.

Cyber insurance can help protect your business from these liability risks. First-party cyber insurance covers the direct costs your business faces after a cyberattack or data breach, such as:

• Data recovery and system repair: Restoring files, software, and devices after a hack or ransomware attack.
• Breach notification costs: Covering the expense of notifying affected clients, as required by state data breach laws.
• Credit monitoring services: Offering protection to clients whose personal data may have been compromised.
• Business interruption: Compensating you for lost income if your systems are down due to a cyber event.

Having cyber coverage can also help attract new clients to your financial business who value knowing their sensitive information is protected.

In addition to malpractice coverage and cyber insurance, accountants should consider these insurance products as part of their risk management plan:

• Fidelity bonds, sometimes referred to as employee dishonesty bonds, protect against theft or fraud by employees. Any business with employees who handle sensitive financial information could benefit from carrying one.
• Business income insurance, also known as business interruption insurance, helps offset lost income if your accounting business is forced to halt operations due to a covered incident, like a fire, flood, or major property loss. It’s crucial for keeping your cash flow stable during unexpected downtime.
• Employment practices liability insurance (EPLI) protects against claims like discrimination, wrongful termination, harassment, or retaliation. It typically covers legal defense and settlement costs, and can be added standalone or as an endorsement to a general liability policy or a BOP.