Why Do You Need It?
When discussing insurance, one of the most important things to remember is that claims filed against will cost you a significant amount of money even if you win. No matter how frivolous the lawsuit, there are still going to be legal defense costs. Even if you’ve not made any kind of error or professional misstep, you could still get sued, as long as your client is under the impression that you have done something that has resulted in a financial loss to them.
Accountant-client relationships are very delicate and any client relationship that is so intrinsically centered around money can take a turn for the worse very quickly. Simple miscommunications, misconceptions, even a lack of communication can cause an accountant’s relationship with a client relationship to sour and potentially lead to grievances.
There are best practices that accountants can follow in order to protect themselves from lawsuits. They can make sure to put all of their agreements in writing, communicate with clients via email so that written transcriptions exist, and make sure that if they need to make any changes to their plans to get the client’s consent in writing.
But even if you’re as vigilant as possible, clients can sue if they believe that you have not done a good job providing your financial services to them, even if they have nothing to base those claims on.
Having accountant liability insurance gives you financial protection from all liability claims and will pay expensive defense costs whether you win or lose the claim. If you do end up losing the claim or reaching an agreement to settle, insurance will pay those expenses as well.
Let’s break down the situations where professional liability insurance is crucial for accountants:
Professional errors
Accountants are highly detail-oriented people. And with good reason, as even a tiny mistake in their work can lead to serious financial repercussions for their clients. If a client thinks you have made an error in your work and decides to sue, the legal costs and potential damages could be enormous. Accountant professional liability insurance will respond to most professional errors, including errors in bookkeeping, omissions, duplicates, missed items on tax return states, and other mistakes.
Failure to deliver promised services
Accountants fill a significant role for their clients. With that importance comes a responsibility – clients rely on you to maintain the financial well-being of their business. If your clients don’t feel like you have fulfilled your part of the deal and didn’t deliver on your contract, they may decide to sue. Accountant professional liability insurance will respond to such allegations and financially protect your business.
Professional negligence
Professional negligence is a serious accusation that many accounting professionals need to deal with – whether they have done something wrong or not. If a client feels that your advice has caused them financial harm, they could accuse you of negligence and take you to court. Luckily, professional liability insurance will kick in and cover your legal expenses and potential settlements and damages.
