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Since accountants give professional advice and service related to their clients' finances, professional indemnity insurance can help protect an accountant. But is it actually required? And what other insurance will an accountant need?
Below we'll discuss these questions and more, as each business's needs differ depending on the type of work done and if clients are seen in person or there are employees or business property to protect. Here's all you need to know to find the best insurance for your accountancy business.
Table of Contents
- What insurance do accountants REALLY need?
- How much PII does an accountant need?
- How much does accountant insurance cost?
- Where can I get accountant insurance quotes?
- Which companies sell PII insurance to accountants?
- Other FAQs
What insurance do accountants need?
As with any occupation giving professional advice or service to clients, accountants may be obligated to buy professional indemnity insurance (PII). In fact, professional indemnity insurance is required for membership to the main UK accountancy bodies. Even when not required due to an exemption, accountants may prefer to have PII for protection.
Plus there are other types of business insurance accountants might need or want. If you work for a large accountancy firm you shouldn't need to buy these coverages yourself, but you would need to buy the cover you want if you run your own accountancy business. For example, if you have any staff you're probably required by law to have a valid employers' liability insurance policy, if you see clients in person you may want public liability insurance and expensive computer equipment can be protected with business contents insurance.
And any accountant, whether independent or working for a large firm, may even need to make changes to their personal car insurance if they visit clients or risk driving uninsured.
Below we explain each type of accountant insurance in more detail, answer FAQs and show sample quotes to give you an idea of insurance costs for an accountant. Finally, we'll show you the best way to get quotes.
Accountants Professional Indemnity Insurance
Professional Indemnity is one of the most important types of business liability insurance for accountants. It protects against clients who claim your professional advice or service was negligent. PII provides financial protection by covering the cost of defending a claim and also any compensatory damages you're required to pay.
PII is a requirement for members of The Institute of Chartered Accountants in England and Wales (ICAEW), the Association of Chartered Certified Accountants (ACCA), and other professional bodies. Not only that, but accountant PII has to meet certain requirements like meeting certain minimum limits of cover, being issued by a qualifying insurer and adhering to published minimum wording. You can read more at the ICAEW website here.
Professional Indemnity Claim Example for Accountants
- A retail company receives a loan from a bank based on financial information that had been audited by an accountant. The company later defaults on the loan, and the financial information was subsequently found to be fraudulent. The bank sues the accountant for their loss, claiming negligence.
- A startup company grows, seeing their turnover exceed £85,000 during the 2021 tax year. The company's accountant does not advise the startup to register for VAT since they have exceeded the VAT threshold. The client subsequently sues the accountant for the liability.
Other Types of Small Business Insurance for an Accountant
Depending on the size of your business, you may need or want other types of business insurance. Do you have any staff? Do you own or rent office space? Have expensive equipment to protect? Let's run through some of the options you might want to consider.
Employers' Liability Insurance for Accountants
If you hire employees or even an apprentice you'll probably need to buy employers' liability insurance (EL)—it's required by law in almost all cases.
EL insurance can feel expensive compared to other types of business insurance but it protects against compensation claims by current or former employees if they fall ill or are injured because of their work for you. It covers both legal fees in defending yourself from a claim and any compensation you're required to pay.
- Employers' Liability Example: An employee suffers from a back injury due to work. They blame you for supplying poor equipment and sue you for negligence.
Public Liability Insurance for Accountants
Public liability insurance can be useful for accountants who meet with their clients in person, whether at the accountants business premises or whilst visiting clients at their homes or businesses. If a client (or for that matter any other third party) is accidentally injured or their property is damaged and they blame your business, they can sue you.
Public liability insurance protects accountants against accidental injury and damage claims made by third parties, covering both legal expenses to defend your business and compensation claims if you're found liable. How much public liability insurance would you want as an accountant? It's up to you but keep in mind that public liability insurance is commonly available with £1 million, £2 million, £5 million and £10 million of cover in the UK.
Public Liability Claim Examples for Accountants
- Bodily Injury: A client visiting your accountancy offices slips and falls on a freshly mopped floor, seriously injuring themselves.
- Property Damage: A fire in your office damages a neighboring business. That business sues you for damages.
Contents Insurance for Accountants
Contents insurance can cover you against accidental damage, loss or theft of valuable equipment, furniture & furnishings, computers and other business items that can be expensive to replace. Having contents cover not only protects you financially for the value of these goods, it also helps get you back up and running if you do face a physical disaster like theft, fire or flood. Contents cover can be important for accountants, whether you rent or own your business premises.
Contents Insurance Claim Example for Accountants
- A fire in your accountancy office destroys everything. Your landlord is responsible for covering the damage to the building; you claim on your business contents insurance for the loss of your computers, printers, office furniture, phones and other business property.
Business Use Car Insurance for Accountants
Declaring business use to a personal car insurance provider is critical for covering driving between multiple work locations or to see clients. If you use your car in these ways but don't declare business use, then your regular car insurance (e.g., social, domestic and pleasure driving, commuting use) could be deemed invalid and you'd essentially be driving uninsured.
Read more in our article What Car Insurance Does an Accountant Need?.
Business Use Car Insurance Claim Example for Accountants
- You have an at-fault accident while driving your personal car to visit a client to go over their year end accounts. Luckily, you had previously declared and paid for business use on your car insurance policy so your insurance covers the damage to your vehicle and another vehicle involved in the crash.
Legal Expenses Insurance for Accountants
Roughly speaking, legal expenses policies cover many situations that are not covered by other types of liability insurance. Business legal expenses insurance (LEI) gives you access to an expert legal team and pays your legal defence costs in certain situations up to the policy limit for situations such as:
- Employment disputes
- HMRC tax enquiries
- Contract disputes
- Debt recovery
- Property protection
- Identity theft
- and more
Legal Expenses Insurance Claim Example for Accountants
- Legal Expenses Insurance Example: You have a dispute with a client that ends in them not paying you for your work. Your LEI insurance covers the cost of legal assistance to pursue a claim against the client.
IT and Cyber insurance for Accountants
Cyber insurance can be an important aspect of business insurance coverage for an accountant or any other profession that holds sensitive client information such as names, addresses, banking information and private financial details. Cyber insurance covers losses related to hacking, data breaches, viruses and other cyber crimes, paying both direct costs incurred by your business and also claims from third parties that were harmed by an attack on your business.
Cyber Insurance Claim Example for Accountants
- Cyber Insurance Example: You open an email attachment with a virus that allows hackers to gain access to company files and sensitive client information. Cyber insurance pays for experts to deal with the situation, including paying a ransom, credit score monitoring for customers, etc.
How much PII does an accountant need?
An age-old question—how much insurance do I need? Professional indemnity insurance for accountants is typically offered with a limit of insurance between £50,000 and £5 million, but large firms can source higher limits with excess cover.
The recommended amount of professional indemnity for an accountant is typically linked to the level of its fee income. Calculating the amount of insurance an accountant needs can certainly be a complicated answer and a broker or insurer can help you figure it out. Some professional bodies also give a good amount of guidance. For a full analysis see our article How Much PI Insurance Does an Accountant Need?
Accountants Insurance Requirements
Chartered accountants are required to hold PII as part of their membership, with limits of insurance dependent on the work they carry out and their fees. Let's have a look at the minimum PII requirements as stipulated by the Association of Chartered Certified Accountants (ACCA) for the UK, as well as ICAEW requirements.
ACCA limits of insurance
According to ACCA, the minimum limit of indemnity on PII for accountants in respect of each and every claim is at least £50,000, but most firms will require a much higher limit. A firm's requirements ultimately depend upon their annual fee income:
|Total Annual Fee Income
|Limit of PII indemnity for each and every claim is greatest of:
|Up to £200,000 a year
|£200,001 to £700,000 a year
Here are some examples to illustrate how these limits work for accounting firms of different sizes:
- £5,000 in total fees/largest fee of £500: PII min limit of indemnity is the bare minimum of £50,000
- £150,000 in total fees/largest fee of £10,000: PII min limit of indemnity is £375,000 (2.5 x total fee income of £150k)
- £150,000 in total fees/largest fee of £50,000: PII min limit of indemnity is £1,250,000 (25 x largest fee raised of £50k)
- £500,000 in total fees/largest fee of £10,000: PII min limit of indemnity is £800,000 (£300,000 + the total income of £500,000)
- £500,000 in total fees/largest fee of £50,000: PII min limit of indemnity is £1,250,000 (25 x largest fee raised of £50k)
- £1,000,000 in total fees/largest fee of £10,000: PII min limit of indemnity is £1,000,000
- £1,000,000 in total fees/largest fee of £50,000: PII min limit of indemnity is £1,250,000 (25 x largest fee raised of £50k)
ICAEW limits of insurance
According to ICAEW, the minimum limit of indemnity on PII for accountants in respect of each and every claim is at least £100,000, but most firms will require a higher limit. A firm's requirements ultimately depend upon their annual fee income and activities:
|Total Annual Fee Income
|Limit of PII indemnity for each and every claim is greatest of:
|If the gross fee income of a firm is less than £600,000
|If the gross fee income of a firm is over £600,000
|If firm is an accredited probate firm
|If firm participates in insurance distribution activities
Insurance requirements from professional accounting bodies
Member of a professional accountancy body? You'll need professional indemnity insurance and to follow the guidelines regarding minimum insurance requirements. For example, ACCA declares that cover must also include fidelity guarantee insurance (FGI) where a practitioner is in partnership, or has fellow directors in an incorporated firm, or employs full-time or part-time staff. (For an accountant, FGI would protect against the losses as a result of a dishonest or fraudulent act by an employee.)
And PII is compulsory for all ICAEW members with a practising certificate who are in public practice—and there are minimum requirements for this coverage.
Here is a list of the main professional bodies in the UK, with links to their professional liability insurance requirements so you can learn more:
|Professional accountancy body
|Link to information about PII requirements
|Association of Chartered Certified Accountants
|ACCA professional Indemnity guidance
|Chartered Institute of Management Accounts
|CIMA professional Indemnity guidance
|The Chartered Institute of Public Finance & Accounting
|CIPFA professional Indemnity guidance
|Institute of Chartered Accountants in England and Wales
|ICAEW professional Indemnity guidance
|Institute of Chartered Accountants of Scotland
|ICAS Professional Indemnity guidance
Average Cost of Accountant Insurance
The cost of professional indemnity insurance (PII) for an accountant starts from a range of £118 a year to £1,500 a year or more. Prices depend on lots of different factors, with your total annual fee volume and the size of your largest fee (e.g., from one client) being primary factors. As discussed above, these fee figures affect the limit of insurance an accountant is required to buy—and higher limits of insurance translate into more risk for an insurer, and therefore a higher premium.
The type of accountancy work performed also has a bearing on premiums, as well as the number of insurers willing to insure an accountant. For example, for our sample test case we found that Hiscox quoted for an accountant involved in audit work, general accountancy, payroll and personal tax consultancy—but wouldn't offer a quote for an accountant performing secretarial work or share registrations. Accountants involved in tax planning schemes will find it harder to get insurance, too.
You'll also find that premiums can be vastly different from one insurer to the next, which is not surprising because of the specialist risks involved. Insurers with less appetite for a certain risk profile (e.g., certain types of accountancy work) either won't offer a policy or may charge a significant amount more than alternatives in the marketplace. For this reason, it's very important to compare the market when getting PII quotes. A broker can help in this regard, if they work with multiple underwriters.
To illustrate the variability in costs for accountant PII, we recently ran some sample quotes through a large provider of PII insurance in the UK. We found that prices can vary by 7X or more for the same accountant profile from one insurance provider to another. And that premiums go up with coverage.
In the examples below, the £100K of PII coverage is for a small accountant business with just £40,000 of total fees per year (according to ICAEW requirements). The £250K PII limit is for a slightly larger business with £100,000 of total fee volume. As you can see, the premiums rise with the limit of insurance. And there's a wide gap between quotes from different insurers.
|Sample quotes for accountant PII
|£100,000 PII Limit of Insurance
|£250,000 PII Limit of Insurance
To learn more about costs of other types of business insurance for an accountancy business, read our article about typical business insurance costs in the UK.
Ultimately, the cost of insurance for an accountancy business depends on the risks involved. Quotes for your accountancy business might be significantly higher or lower, depending on how insurers calculate the risks involved. They each have proprietary risk models that use the details of an application to assess risk, so quotes can be highly variable from situation to situation.
Self-Employed Accountant Insurance
A self-employed accountant will generally need the same types of insurance as a larger accountancy practice:
- PII to protect against client claims of negligent advice or service
- Public liability to protect against third party personal injury or property damage claims
- Employers' liability to protect against work-related injury or illness of any you employ
- Contents and equipment cover to protect your business equipment and office furniture from a fire, flood, theft, etc.
- Cyber insurance to protect against cybercrimes like a virus or hacking
- Legal expenses to help with debt collection, contract disputes and other legal issues
- and more
Where Can I Get PII Quotes?
The PII market is specialised—there is a limited number of underwriters in the marketplace and you usually need a broker to access them. Brokers can be very useful for helping you answer important questions like 'How much professional indemnity insurance do I need?' If you don't have a broker or want to compare prices with another broker, we can help. Click here, where you'll fill out a short form and quickly be connected with some of the UK's leading accountant insurance companies and brokers to help you get the cover you need at the right price.
Get accountant professional indemnity insurance quotes.
Can you buy PII insurance directly or do you need a broker?
It depends on whether you're buying from a direct insurer, an insurance company that only works with brokers or a Lloyd’s Syndicate.
|Do I need a broker to buy PII insurance?
|You can buy direct
|Other Insurance Companies
|Broker only or broker/direct
Which Firms Provide PII Insurance for Accountants?
There are only TWO direct insurance company providing PII insurance to accountants in the UK, Channel Islands and Isle of Man:
ICAS has produced a list of PII insurers for accountants, which was valid as of November 2021.
|Type of Insurer
|Direct Line for Business
|Argenta Syndicate Management Limited
|Axis Specialty Europe SE
|Beazley Group Limited
|Canopius Managing Agents Ltd
|Everest Lloyd’s Syndicate
|Markel International Insurance Company Ltd
|Mosaic Syndicate Services Limited
|MS Amlin Underwriting Limited
|Probitas Managing Agency
|QBE Insurance UK Ltd
|W R Berkley Syndicate Management Limited
|Accelerant Insurance Limited
|Allianz Global Corporate & Speciality SE
|Allied World Assurance Company Ltd
|American International Group (UK) Limited
|AmTrust Europe Ltd
|Arch Insurance Company (UK) Ltd
|Aviva Insurance Limited
|AXA Insurance UK Plc
|Chubb European Group SE
|CNA Insurance Company Ltd
|Great Lakes Insurance SE
|HCC International Insurance Company PLC
|HDI Global Specialty SE
|Hiscox Insurance Company
|International General Insurance Company (UK) Ltd
|Liberty Specialty Markets (trading name for Liberty Mutual Insurance Europe SE)
|Royal & Sun Alliance Insurance Ltd
|Starr International (Europe) Ltd
|Travelers Insurance Company Limited
|Zurich Insurance plc
Professional indemnity insurance is a requirement for accountants who are members of the main professional bodies in the UK. It would be highly unusual for an accountant not to have some form of insurance. From the client's perspective, professional indemnity is the most important type of coverage that an accountant should have because this protects the client if they lose money due to the accountants negligence. Your accountant probably has other types of business insurance as well.
Typically. If you provide a professional service or give advice, as an accountant does, then professional indemnity insurance can protect you against liability claims that your work resulted in a financial loss for your client. PII is also a requirement of many accountancy professional bodies.
Sole practitioners with no employees would take out PII in their own name and any trading names, where appropriate. For accountancy practices employing more than one accountant, PII would be taken out in the name of the practice (that is, the limited company or legal entity partnership) ensuring that all practicing partners or principals are named individually in the policy.
Chartered accounts have professional indemnity (PI) insurance as a condition of their trade body membership. They may also have other types of insurance like public liability, cyber insurance and more. Accountants who are not chartered are not required to have PI insurance, but they can still buy a policy to offer protection to themselves and their clients.