Does an Accountant Need Insurance?

Depending on their qualifications, an accountant may or may not be obligated to have professional indemnity insurance. Regardless, professional indemnity insurance is very important for anyone working as an accountant. And if you're running your own accountancy business, there are other types of insurance you may need as well. We explain all of this below.

PII Requirements for Non-Chartered Accountants

Many accountants start their careers at a large accountancy practice, then leave (with or without having become a chartered accountant) to set up shop on their own. Non-chartered accountants can set up a very successful small business, working to provide professional accountancy and taxation assistance to individuals or other small businesses.

A non-charted accountant will not be authorised to carry out any audit, insolvency, investment business and probate activities, but they can have a very active business engaged in payroll, VAT and bookkeeping activities as well as producing annual accounts for businesses.

Non-chartered accountants who run their own accountancy business are under no obligation to hold PII, since they're not members of the organisations that require it (e.g., ICAEW, ACCA)—but PII is still essential to protect an accountancy business and even personal assets.

In fact, PII is critical for accountants operating as sole traders because they do not have the protection of a company. If an uninsured accountant is sued for negligence by a client, their personal finances may be at risk—their home, savings, retirement investments and more. PII protects accountants if they're sued by a client for negligence by covering legal defence costs as well as settlement payments.

So while PII might not be required for non-chartered accountants, it is still a crucial aspect of risk management for any working accountant. For information on how much PII cover you should have as a non-chartered accountant, see our tables for chartered accounts here—they can be a good guide.

PII Requirements for Chartered Accountants

ICAEW Chartered and ACCA Chartered Certified accountants and regulated firms are obligated to hold professional indemnity insurance (PII)—in fact, membership with these organisations is dependent upon having qualifying PII cover in place. Chartered accounts must ensure they are covered by PII that:

Chartered accountants working for a practice or a private company will not need to buy their own PII, as their employer will provide this cover for them. But chartered accountants who have set up their own business must abide by the PII regulations.

Other Types of Business Insurance for Accountants

In addition to PII, any accountant running their own business needs additional types of business insurance as well. You can learn more about how these coverages work in our concise guide to accountant insurance.

For more information on insuring your car properly if you're an accountant, read our article "What Car Insurance Does an Accountant Need?"

Limits of Cover

The amount of PII a chartered accountant needs depends on the work they do and their fee income. The absolute the minimum levels of cover for small accountancy businesses are £50,000 for ACCA members and £100,000 for ICAEW members, but many accountancy businesses will need more depending on their fees and activities.

Run-off Insurance

Whether an accountant is chartered or not, if they retire or take a break from work they'll still need a form of PII to protect them in case a claim against them arises later on. Claims can be brought up to six years from the time the work occurred, so accountants need to buy run-off cover for six years. Run-off cover for accountants is professional liability insurance that a business or person uses after they stop trading. It protects against claims made against work done earlier, while the business was still actively trading (and fully insured).

Run-off cover is typically cheaper than full PII because there's a lower risk of claims as time passes. Most problems will have arisen closer to the time of the work, and the further away you get, the less chance you have of a claim.

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