Getting the numbers right might not be enough if advice to clients is deemed to be negligent. That’s why accountants need professional indemnity cover to protect their business and reputation.
Professional indemnity insurance is designed to protect you and your profession against claims relating to actual or alleged negligent advice. When clients believe they have suffered a financial loss due to negligence by an accountant, having the right professional indemnity insurance cover is vital. Without it, the potential costs could be substantial.
What Does Professional Indemnity Cover?
Professional Indemnity insurance can cover an array of potential risks. As well as providing cover against claims of professional negligence, it can include protection against intellectual property infringement, claims of dishonesty or defamation of character, and also if there has been the loss or inappropriate use of documents or client data.
Negligence can be a broad topic. Providing the wrong advice can happen without intention, and anyone can make mistakes when they are working on large accounting or tax projects. We’re only human!
As an accountant or bookkeeper, you provide your clients a valuable service. But if a client thinks that your work has been negligent and has led to a financial loss or damage to their reputation, then they could claim for compensation.
Here at John Heath, we can help you to arrange Professional Indemnity Insurance for Accountants and Bookkeepers, to give you cover for your business against many of these claims.
Why do Accountants Need PI Insurance?
Clients may also ask for proof of your professional indemnity policy before they agree to allow you to work with them, especially when you are bidding to work with local authorities or large organisations. Getting properly covered could help to take your business to the next level and progress your career.
The role of accountants has changed dramatically over the last decade. Changes to regulations have meant fresh opportunities have arisen to provide new services to clients. From probate and consultancy services to business recovery, the additional revenue streams have also brought potential issues if things go wrong.
The areas of specialism will define exactly why Professional Indemnity insurance is so important. Dealing with company taxation and audit, for example, claims have been brought against accountants who have supplied tax advice, including tax efficiency schemes which are considered evasive or fraudulent by HMRC. The subsequent penalties levied by HMRC can be massive. The client will hold you responsible for advising them incorrectly.
For bookkeeping and payroll specialists, breach of confidentiality is an area which sees claims brought against firms. Accidentally sending accounts, information about employee bank details, or specific pay amounts to the incorrect recipient (or even having them stolen) could have a negative impact if the client seeks compensation for your failure to keep their records safe and confidential.
How Long Do You Need PI Cover For?
Finally, it’s a common misconception that finishing work as an accountant means that claims can no longer be made against you. That is not the case. If you cease to practise you should consider making arrangements for continued Professional Indemnity Insurance to cover the next six years. This is because claims can be made at a later date for work undertaken whilst you were actively practicing accountancy and your previous policy would not cover you for claims made after the policy is cancelled.