The state verifies certified public accountants (CPAs) to serve public tax needs. In short, they are responsible for inspecting and maintaining the financial accounts of companies, government entities, and individual customers. Among the services they provide are auditing and review, tax preparation, consulting, and financial planning.
As they serve several demographics, from businesses to individuals, these accountants have enormous responsibilities, and with them, some risks. Although it’s a profession that requires in-depth knowledge of accounting principles and practices, unexpected mistakes can happen.
In 2020, there were more than 658,000 actively licensed CPAs operating in the United States. If you are one of them, understanding the proper insurance to acquire can save a world of trouble when it comes to liability.
General Liability Insurance
The primary insurance CPAs should invest in is general liability insurance, which helps cover claims that your business has caused bodily harm or material damage to another person or their belongings.
This can happen if, for example, someone falls and injures themselves in your accounting office or if you accidentally do some damage on the client’s property during a business visit. General liability insurance covers your costs if the injured client decides to take legal action.
The policy also guarantees protection for some issues involving the advertising of your business, such as copyright infringement or accusations of slander by someone who felt harmed by your ads.
Professional Liability Insurance
In addition to general liability, CPAs should consider professional liability insurance—which is also popularly known as “errors and omissions insurance.” This policy helps to protect consultants, accountants, lawyers, and any other independent professional contractors from claims of:
- Negligence
- Malpractice
- Misrepresentation
- Inaccurate advice
- Financial mistakes
Professional liability insurance for CPAs can protect against clients disappointed by their IRS penalties, for example. Even if you haven’t made a mistake, the time and cost to face the legal process can cause considerable damage to your business finances if you have to pay everything out of your pocket.
Workers’ Compensation Insurance
If you have employees, it is mandatory in most states for you to carry a workers’ compensation insurance policy. Workers’ comp insurance covers workers affected by work-related injuries or illness (repetitive strain injuries, for example) and team members who may sue your business for various reasons.
These benefits include:
- Payment of the necessary medical care
- Payment of the employee’s lost wages during the recovery time
- Disability benefits
Cyber Liability Insurance
CPAs usually have access to a large amount of confidential data about their clients. This valuable information is stored on the company’s computers or digital devices (sometimes even on a cell phone). Cyber liability insurance protects accounting professionals when sensitive data is stolen by hackers or compromised.
Even if you are not at fault in the episode—a hacker broke into the company’s computers, for example—customers affected by cyberattacks can hold you responsible and sue. This policy can cover legal fees and expenses in cases of data breach lawsuits and breach notification expenses. The Lemon Law North Carolina firm can do all the legal work for you in such cases.
Commercial Property Insurance
If you own or rent an office for your business, you will need commercial property insurance. This policy helps to cover damage to your property caused by fire, theft, and several natural disasters. In addition to the building itself, it also covers materials inside, such as office furniture, computers, documents, and more.
Employment Practices Liability Insurance
Regardless of the size of your business, increasing federal, state, and local laws that protect employees can put you at risk for job-related claims at some point. It can happen when an employee or jobseeker claims that you have maintained practices such as:
- Illegal discrimination
- Sexual harassment
- Undue termination
- Third-party wrongful acts
Such a lawsuit is quite expensive, but the worst part is that it can destroy your company’s image before public opinion. Employment practices liability insurance can assist you with claims alleging unlawful employment practices, covering damages and claim expenses (such as settlements or judgment costs).
Do the Math and Invest in Good Coverage
Accounting is no easy job, but it does reward well, in addition to being extremely useful for countless individuals and companies that depend on your services. As a professional whose job requires accuracy, it’s vital you understand what insurance types can help you run a more effective operation.
Most accountants should invest in professional liability and general liability insurance. If you run an accounting firm that operates in your own office, whether it’s owned or rented, it is also a good idea to have commercial property insurance. Finally, you will need workers’ comp if you have employees.
In addition to being covered for any unforeseen events, you will also project an image of safety and responsibility, ready to guarantee the rights of your employees and clients. And that can make all the difference between you and the competition.
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