The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.
How Much PI Insurance Does an Accountant Need?
The amount of insurance an accountant needs depends on whether or not they're a chartered accountant, with which professional body they hold membership and how much they collect in fees. Let's look at how these factors affect the limit of professional indemnity insurance (PII) an accountant needs.
Powered by QuoteZone.
Find accountant professional indemnity insurance today.
Get Quotes
- Rated 4.8 out of 5 stars on Reviews.co.uk
- 300,000+ quotes completed per month
- Fill out only one form
PII Limits for a Chartered Accountant
Chartered accountants must have a professional indemnity insurance (PII) policy, and this policy must meet certain requirements. For starters, PII for a chartered (or chartered certified) accountant must be considered 'qualifying insurance'. Underwriters issuing qualifying insurance agree to abide by certain minimum terms on accountant PII, to make sure all chartered accounts maintain a certain standard of protection.
Next, chartered accountants have to abide by certain minimum limits of insurance as stipulated by their accountancy body membership (e.g., ICAEW, ACCA). The required amount of professional indemnity dictated by these bodies is linked to fee income (both annual fee income and largest client fee income).
Accountancy Body PII Limits of Insurance
- Minimum PII for ICAEW: £250,000
- Minimum PII for ACCA: £50,000
- BUT many accountancy businesses need to hold more depending on their fees and the work they do.
Let's have a look at the minimum PII requirements as stipulated by the Institute of Chartered Accountants in England and Wales (ICAEW) and the Association of Chartered Certified Accountants (ACCA), since these are the two largest accountancy bodies in the UK.
ICAEW limits of insurance
The ICAEW is reviewing their limits of insurance, and these will change in September 2024. Now, the minimum limit of indemnity on PII for accountants in respect of each and every claim is at least £100,000, but the PII limit will end up being higher than this for any accountancy firm earning more money or that is an accredited probate firm or involved in insurance distribution. PII Regulations 3.2 and 3.3 specify that the minimum limits of cover are 2.5 x a firm’s gross fee income for the previous accounting period, subject to a minimum of £100k and a maximum requirement of £1.5m per claim and aggregate. An ICAEW firm's PII requirements ultimately depend upon their activities and annual fee income.
The proposed changes are as follows:
- The minimum limit of indemnity should be increased, so that generally, firms will be required have a £2 million any one claim and in total limit of indemnity. Defence costs will continue to be in addition to the limit of indemnity.
- If a firm's gross fee income is less than £800,000, the minimum limit of indemnity for any one claim and in total should be equal to two and a half times its gross fee income, with a minimum of £250,000.
- If a firm's gross fee income is over £50m it will be classified as a "large firm". Large firms will not be required to put in place qualifying insurance but they will continue to have the obligation to have in place reasonably appropriate arrangements for their exposure to risk which is qualitatively assessed.
ACCA limits of insurance
According to ACCA, the minimum limit of indemnity on PII for accountants is at least £50,000 in respect of each and every claim, but firms earning more than £20,000 in fee income require a 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 |
|
| Over £700,000 |
|
What if You're Not Chartered?
Accountants who are not chartered technically don't have any obligation to buy PII. That said, it is widely recommended for all accountants to have professional indemnity insurance. To figure out how much you need, you can still follow the guidance issued by the ICAEW and ACCA or speak with a specialist broker or agent regarding limits of insurance.
PII Limit of Insurance Tables for Accountants
We've calculated the minimum PII limits for accountants of various sizes according to ACCA and the proposed new ICAEW requirements in the table below. As you can see, we varied both the total annual fees and the largest fees earned from one client in the past year (which factor into the ACCA calculations).
While these figures show a range of accountancy business sizes, if your business size is not displayed here then you can use the formulas shown in the previous section to calculate what you would need. Use these figures as a rough-and-ready guide to give you an indication of what is basically required; calculating the amount of insurance an accountant needs can certainly be a complicated answer. A professional insurance specialist can help also you figure it out if you still have questions.
Accountancy Examples: Limits of PII indemnity for each and every claim
| Annual Fee Income | Largest Fee Income from One Client | ICAEW PII Minimum Limit per Claim | ACCA PII Minimum Limit per Claim |
|---|---|---|---|
| £25,000 | £2,000 | £250,000 | £62,500 |
| £25,000 | £5,000 | £250,000 | £125,000 |
| £25,000 | £10,000 | £250,000 | £250,000 |
| £50,000 | £5,000 | £250,000 | £125,000 |
| £50,000 | £10,000 | £250,000 | £250,000 |
| £75,000 | £5,000 | £250,000 | £187,500 |
| £75,000 | £10,000 | £250,000 | £250,000 |
| £100,000 | £10,000 | £250,000 | £250,000 |
| £100,000 | £15,000 | £250,000 | £375,000 |
| £200,000 | £20,000 | £500,000 | £500,000 |
| £500,000 | £10,000 | £1,250,000 | £800,000 |
| £500,000 | £50,000 | £1,250,000 | £1,250,000 |
| £1,000,000 | £25,000 | £2,000,000 | £1,000,000 |
| £1,000,000 | £50,000 | £2,000,000 | £1,250,000 |
| £2,000,000 | £50,000 | £2,000,000 | £1,250,000 |
| Plus | |||
| £500,000 for accredited probate activities | |||
| €1,250,000 for any one claim (€1,850,000 in total per annum) for insurance distribution activities | |||
Powered by QuoteZone.
Find accountant professional indemnity insurance today.
Get Quotes
- Rated 4.8 out of 5 stars on Reviews.co.uk
- 300,000+ quotes completed per month
- Fill out only one form