As an accountant, tax preparer, or other finance professional, you understand how much your clients depend on your business to maintain their financial health. This isn’t something you or your employees take lightly—a good reputation is often essential to a successful business that manages the money of others. But no one is perfect. No matter how careful you are, or how many times your employees double check the numbers, an error might slip through the cracks and spark a lawsuit. That’s why it’s so important to safeguard your financial business with Errors and Omissions Insurance, which protects companies like yours from those oh-so-human mistakes.
Keep your accounting, tax preparation, or finance business from falling down the rabbit hole of legal defense costs! Read on to learn more about Errors & Omissions Insurance.
How Does Errors & Omissions Insurance Protect Accountants, Tax Preparers, & Finance Professionals?
As an accountant, tax preparer, or finance professional, you know that your livelihood depends on your meticulousness with data and your sharp eye for errors. But you’re also human, and we all make mistakes. Since small errors can mean thousands of lost dollars for your client, Errors & Omissions Insurance is a supremely important part of a properly insured financial business. If your client believes your business is at fault for their financial loss, a lawsuit is probably in the cards. Take a look at some of the mistakes that your Errors & Omissions Insurance may cover…
- Failure to provide a promised service. It’s tax season and in all the hustle and bustle, you forget to file a client’s tax form on time.
- Professional negligence. You fail to include a piece of information in a client’s tax return.
- Shoddy, incomplete, or incorrect work. As an accountant, you forget to record or calculate a transaction, causing your client’s books to be off.
- Any other mistakes or oversights.
Or course, your client’s claims could be without merit, and, in that case, your Errors & Omissions Insurance will still cover your costly legal defense—with or without any judgments or settlements—up to your stated policy limits.
With Errors and Omissions coverage, deductibles usually start at $1,000 and your business is generally compensated in $1 million dollar allotments. In order for your company to receive these benefits, it’s important to remember that your insurance policy must be in place both when the purported mistake happens and when the claim is filed. Because of this, insureon recommends that financial professionals keep their policies active continuously. Otherwise, you may not have coverage when you need it. You can find more information about this concept below, or on insureon’s Professional Liability page.
Errors & Omissions Insurance: Key Details for Accountants, Tax Preparers, & Financial Professionals
When a client holds your business or startup responsible for financial loss, your Errors & Omission Insurance will cover your legal costs, which tend to add up quickly. Here are a few things to keep in mind when deciding what kind of policy is best for your financial business:
What Does “Claims-Made” Coverage Mean?
As mentioned above, many Errors & Omissions policies only provide what’s called “claims-made” coverage. This means that, in order for your business to be protected, your policy must be in place when the error occurs and when you file the claim. Many startup and small-business owners opt to keep their Errors & Omissions Insurance for the length of their companies’ lives—you never know when a mistake will slip through the cracks.
If you must cancel your coverage, it’s probably wise to purchase what’s called “tail coverage,” which will still allow you to file claims for a certain length of time. But remember: you may only file claims related to previously covered incidents. Any new claims will not be covered.
How Are Baseless Lawsuits Handled?
You know how careful you are when it comes to your daily operations—you have to be—and so Errors and Omissions Insurance might seem unnecessary. Unfortunately, you don’t have to make mistakes to get sued. Time and time again, insureon has seen unfounded and meritless claims made against startups and small businesses. If this happens to your business when it is uninsured, you will be forced to lose time and money on legal defense. So think of Errors and Omissions insurance as a kind of risk-management strategy. Let insureon take care of the distractions so that you can focus on your business.
What Are Coverage Limits and Deductibles?
A coverage limit is the maximum amount an insurance policy pay toward the cost of your claims. Many E&O policies include both per-incident limits (which identify a maximum payment amount for individual claims) and policy lifetime limits (which identify a total or yearly maximum for all claims). A deductible is the specified amount of money you must pay before receiving insurance benefits. Generally, Errors and Omissions insurance is available in increments of $1 million. Deductibles usually start at $1,000, though they can go as high as $25,000, depending on your company’s needs.
Accountants, Tax Preparers, & Financial Professionals: Customize Your Business Insurance Plan
As with any insurance policy, some types of coverage might be excluded. When you’re ready to customize your Business Insurance Plan, contact one of our specialized accounting, tax preparation, and finance insurance agents to discuss how to protect your company from its biggest risks.