Professional indemnity insurance for accountants
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Professional indemnity insurance for accountants. Pick a package (if your turnover's under £50,000) or build your own.
When the numbers don't add up
Your clients expect the utmost care and attention. Not unreasonable considering it's their money in your hands.
But even the safest hands drop the ball now and then, and a mistake could cost you time, money and your reputation. PI insurance for accountants saves you all three.
If you’re a chartered or certified accountant, or a member of a professional accountancy association, professional indemnity insurance is compulsory.
But not just any old professional indemnity will do – it has to have an ICAEW approved policy wording. (You'll always get this if you get your cover from us.)
Oh, and if you have employees the law says you need employers’ liability insurance too.
To some extent, this decision is made easy by what ACCA, CIMA, ICAEW and various professional associations stipulate:
Income up to £200k: two and a half times your firm’s gross fee income for the last financial year or 25 times the largest fee, whichever is greater.
Income £200k-£700k: the aggregate of £300k and your firm’s total income or 25 times the largest fee, whichever is greater.
Income £700k or more: £1m or 25 times the largest fee, whichever is greater.
Income less than £600k: two and a half times your firm’s gross fee income.
Income more than £600k: £1.5m.
Sole traders have to have at least £50,000; all other firms at least £100,000. Perhaps oddly, there’s a maximum too: £1,500,000. Firms with large turnovers or specific client requirements can get more, however.
An ICAEW approved wording is industry standard and already has everything you need. The insurer has to note any changes they’ve made to this wording by including a ‘difference in conditions’ clause.
Otherwise, you need to make sure your cover is backdated at least six years. If you haven’t been trading for at least six years, backdate it to when you first started your practice. This is called ‘retroactive cover’.
Glad you asked.
The simple answer is: we know what we're doing. Professional insurance is all we do so we know what you need, even if you don't.
We also know that buying insurance can be, well, a bit of a pain. So we make sure getting yours is quick and hassle-free.
We do all that while treating you like a human being, too. You won't find a call centre here. Or a phone menu. And we've banned nonsense insurance jargon.
Plus, every insurance-related question you can think of is answered in our School of Risk, and you'll get our quarterly risk advice email – 'The Waggle' – to help you avoid problems in the first place.
If you're after a second opinion, have a look at our customers' feedback. They're the ones you should really listen to.
When the numbers don't add up
Professional bodies like the ICAEW don't just let any old number crunchers in. They have high standards. And, knowing you're a chartered accountant, your clients expect the highest degree of accuracy.
Let's hope you don’t make a mistake, because chances are it will cost your client money. Unhappy clients = a day in court, and the only way to balance those figures is with compensation, and lots of it. Luckily, professional indemnity insurance can help.
If you're a member of ICAEW with a practising certificate and engage in public practice, professional indemnity insurance is compulsory.
If you're unsure if your business activities are considered public practice, read the ICAEW's statement on public practice.
Still in doubt? The ICAEW recommends you contact the Ethics Advisory Service on +44 (0)1908 248 025 for advice.
The minimum level of indemnity for ICAEW members with an income over £600,000 is £1.5 million. If your income is less, you can buy less cover. However, ICAEW warn that doing so might mean you might not have enough should the worst happen. As a general rule, 2.5 times your annual income is a good place to start.
If your firm is a licensed firm, or is authorised by the FCA to conduct insurance mediation activities, your minimum level of indemnity should be the equivalent of at least €1,120,200 for any one claim, and €1,680,300 in total.
Finally, if your firm is an accredited probate firm, you must have a minimum level of indemnity of £500,000 for any one claim.
Our policy wording is ICAEW-approved for use by its members. This means it already includes everything you need. If you're shopping around, make sure what you’re quoted is what you need.
To comply with ICAEW regulations you must backdate your insurance by at least six years. This is called 'retroactive' cover and is usually free to add to your policy. If you've been trading for fewer years, backdate it from the date that your business started.
The more astute of you will know that ICAEW members must buy their professional indemnity from an ICAEW-approved insurer. Rest assured that the insurers who provide our accountant's insurance are all approved by the ICAEW.
The smart choice for smart accountants
Legally, anyone calls themselves an accountant.
Chartered accountants, however, provide that little extra. Membership to a professional body like the Institute of Chartered Accountants of Scotland gives your customers the reassurance they need.
Of course, even the best reputation can't prevent mistakes and mix-ups. For that, you need professional indemnity insurance.
If a client claims your work isn't up to scratch, your insurance pays for an expert to defend you, as well as compensating your client if necessary.
Professional indemnity insurance isn't just good business sense – it's compulsory for ICAS members.
ICAS doesn't specify a minimum level of professional indemnity cover – they leave it up to you. If you're not sure how much cover you need, we can help. 2.5 times your annual fee income is usually a good place to start.
ICAS insist that their members are insured through a participating insurer. See the full list here.
We work with many of ICAS's approved insurers, so you'll always get the cover you need. And have to have.
If your firm has stopped trading, ICAS says you need run-off cover.
Run-off cover is insurance for businesses who've stopped trading but want to cover past work. This is because most, if not all PI insurance claims come from work already done. It can take months or even years for problems to become apparent.
That risk is taken care of by run-off cover. You're usually advised to have it for at least six years.
The good news is that run-off cover typically costs less than 'standard' professional indemnity insurance. And this cost usually decreases over time, too, in line with the risk of a claim.
Clients expect a certain standard from their CIMA registered accountants. That’s fair enough: they're parting with their hard-earned cash, after all. In more ways than one.
However, even accredited professionals make mistakes, and your CIMA membership won't make them go away. For that, you'll need professional indemnity insurance.
Yes, it's a prerequisite that all accountants have professional indemnity insurance before they can become a member of CIMA.
CIMA asks for your policy details – updated each year – so they can check you have what you should have, when you should have it.
No. Some professional bodies insist on a specific minimum level of cover but CIMA leaves it up to you.
They recommend you take advice from an insurance provider on how much indemnity cover you need, though.
Unlike other professional bodies, CIMA are quite lenient. They don’t insist on their members having retroactive (backdated) cover, although they do recommend you consider it.
Really, the only things CIMA insist on are that you have professional indemnity insurance, and that you keep your policy details up to date through your online CIMA account. Nice and easy.
It's easy to see why many accountants join professional bodies like CIMA (Chartered Institute of Management Accountants). It's like a club for smart, talented professionals; it proves you're on top of your game. It also reassures your clients that your work complies with the highest of ethical and professional standards.
See you later, calculator
Congratulations. Your hard work has paid off, and in return, you get to use those four little letters after your name. Becoming a member of the ACCA gives you instant kudos, and access to expert advice and resources. Sounds like a great deal to us.
When you're associated with a professional body, your clients are going to expect a professional service. However, even the most dedicated professional can make a mistake – you're only human, after all.
Luckily, professional indemnity insurance for ACCA accountants can help. If an unhappy customer alleges you've made a mistake, professional indemnity insurance pays for a specialist legal expert, and any compensation or damages you owe.
Professional indemnity insurance is mandatory for any ACCA accountants who engage in public practice.
Firms with employees are also have to have employers' liability insurance.
Yes, they do. Levels of cover are calculated in relation to a firm's annual fee income.
If your firm's annual income is less than £200,000, your level of cover for each and every claim must be either 2.5 times your total income, 25 times your largest fee raised in the previous year, or £50,000, whichever is greater.
If your income is between £200,000 and £700,000, your level of cover for each and every claim must be either the aggregate of £300,000 and the total income of the firm, or 25 times the largest fee raised in the previous year, whichever is greater.
If your total yearly income is over £700,000, your level of indemnity must be either £1m, or 25 times your largest fee raised in the previous year, whichever is greater.
No. The ACCA doesn't specify minimum levels of cover for either of these.
But they're not so difficult to calculate. The law says you have to have at least £5m employers' liability insurance if you have employees (even just the one); and most insurers only offer £10m.
And most insurers have a choice of either £1m, £2m or £5m public liability insurance. If you're unsure how much you need, we can help.
Like many professional bodies, the Association of Chartered Certified Accountants (ACCA) requires members in public practice to have professional indemnity insurance.
ACCA defines 'public practice' as any work for the use of a third party. For example, bookkeeping is a 'private' practice; tax returns and creating financial reports for the use of somebody other than your client is 'public practice'.