Accountant Professional Liability / Errors & Omissions (E&O) Insurance | Insureon (2024)

FAQs

Do accountants need E&O insurance? ›

Professional liability coverage, also called errors and omissions (E&O) insurance, is sometimes regarded as the most important coverage on an accounting and CPA insurance policy. That's because E&O insurance protects accounting businesses from claims of negligence, along with the cost of defending them.

How Much Does Errors and Omissions (E&O) Insurance Cost? The cost of E&O insurance can vary significantly based on several factors. On average, small businesses can expect to pay between $500 to $1,000 per year for coverage.

Depending on your business, you may hear the term errors and omissions insurance for professional liability. However, there is no difference in these coverages.

E&O insurance helps protect bookkeepers and tax preparers from claims that they made mistakes in the professional services or advice they provided.

E&O insurance doesn't cover claims for property damage, bodily injury, workplace injuries, data breaches, intellectual property violations, or criminal acts such as fraud.

Accountant's liability refers to the legal liability assumed by an individual when conducting professional accounting work. Accountants are liable for any misstatements that occurred while auditing and preparing financial documents for a client.

A deductible typically applies before your E&O insurance policy starts to pay out. Depending on your insurer's options, this out-of-pocket amount can be anywhere between $1,000 to $25,000. Insurers may also offer various types of deductibles, such as: Per-claim: Applies to every new claim you file.

As a business owner, you can face a lawsuit at any time. That's why you'll want errors and omissions coverage. This will help pay your legal fees if you're sued for mistakes or errors in your services. It's also important to remember that customers can sue you even if you didn't make a mistake or error.

California notary E&O policies range from $1,000 to $100,000 and can be purchased in terms of 1, 2, 3 or 4 years. Errors and omissions insurance is also referred to as professional liability insurance.

The coverage is the same, but the name may depend on the type of business that the coverage is for. For architects and consultants, this policy is called professional liability. In the real estate and IT sectors, it's errors and omissions. And, for medical and legal professions, it's known as malpractice insurance.

What are the two basic types of professional liability policies? ›

The two basic types of malpractice insurance are "claims-made" and "occurrence-made." "Claims-made" insurance protects you from malpractice claims only if the company that insured you at the time of the alleged "occurrence" is the same company at the time the claim is filed in court.

Marketing consultant providing advice that caused your client to lose money on their product or service. They file a claim against your marketing company as a result. Tax preparer making a calculation error which caused your client to have to pay a penalty. As a result, they sue your accounting firm.

Also known as professional indemnity insurance, error and omission insurance, or malpractice insurance, an accountants professional liability policy insures you and your accounting practice from clients or other third parties claiming that your professional services caused them financial harm.

Am I Responsible If My Tax Preparer Makes a Mistake? Yes. If you signed on the bottom line, you are responsible for a mistake on your tax returns and you are on the hook for any penalties the IRS charges. That said, the professional who prepared your return may offer to reimburse you for any losses due to errors.

According to a recent study by Gartner, nearly three out of five accountants (59%) make several errors every month. [1] The reasons include an increased workload, exacerbated by increased regulations and a shortage of skilled accounting talent.

Who Needs E&O Insurance? Errors and omissions insurance helps protect businesses from mistakes or errors in the professional services they provide. So, any small business that regularly gives their customers advice or offers services to clients should get this coverage.

Accounting errors can include duplicating the same entry, or an account is recorded correctly but to the wrong customer or vendor. An error of omission involves no entry being recorded despite a transaction occurring for the period.

Any company that sells a product to a third party – whether a manufacturer, reseller, importer or distributor – should look for a liability policy that offers cover for financial loss as a result of a faulty product or delays.

Your accountant has the information that an insurance agent needs to properly write an insurance policy for you. They have years of data and forms that they have filed on your behalf, which can greatly impact the accuracy of your policy.