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ACCA accountants’ insurance explained

02/07/2014

ACCA professional indemnity insurance is set at a certain minimum level for members.

Like many professional bodies, the Association of Chartered Certified Accountants (ACCA) says its members in public practice have to have ACCA professional indemnity insurance (PI).

ACCA defines 'public practice' as any work for the use of a third party.

For example, bookkeeping is 'private' practice; tax returns and creating financial reports for the use of somebody other than your client is 'public practice'. Most other accountancy bodies take a similar stance – it's all to make sure members work to the same high standards.

If you're an ACCA member and you're not sure what's needed, its stipulations are below. Although it may seem like there's a lot to remember, getting it right isn't difficult. That's what we're here for.

How much ACCA professional indemnity insurance do I need?

The ACCA don't need you to buy your insurance from a particular provider. You’re free to buy your professional indemnity insurance from any reputable UK insurer.

But it does specify a minimum level of professional indemnity cover. What you need is based on your annual fee income:

  • If your firm's income is below £200,000, your level of PI cover for 'any one claim' must be either 2.5 times your total income, 25 times the greatest fee raised in the previous year, or £50,000, whichever is the greatest.
  • If your firm's income is between £200,000 and £700,000, your level of PI cover for any one claim must be either the aggregate of £300,000 and the total income of the firm, or 25 times the largest fee, whichever is the greatest.
  • If your firm's income is over £700,000, your level of PI cover for every one claim must be either £1 million, or 25 times the largest fee raised in the previous year, whichever is the greatest.

In all cases, the 'largest fee raised' does not refer to the largest single invoice, but to the highest cumulative amount of fees raised to a particular client during the year.

What other insurance do I need?

The ACCA decrees members who've stopped trading buy PI run-off cover. In simple terms, this covers your past work – and only your past work.

It can take months or even years for claims to rear their heads, and cancelling your policy altogether means they (and therefore you) aren't covered.

Having run-off cover means they are. It does still cost money, but it's less than a full-blown PI policy because it's not covering current or new work.

ACCA recommend members' run-off cover lasts for a minimum of six years.

Employers' liability insurance (EL) is a legal requirement for all businesses with employees. The Health and Safety Executive can hand out some hefty fines if you're supposed to have it but don't (£2,500 for each day, and £1,000 for not displaying the certificate).

EL covers you if an employee is injured or ill at work and you're to blame. It pays compensation as well as the legal costs to defend you.

Anything else?

When applying for or renewing practising certificates and other licenses, you'll need your professional indemnity insurance details handy. ACCA might check that all the information they hold is current and correct.

You will also need the details of any relevant claims.

If you have any questions relating to ACCA's insurance guidelines, we recommend you search their website for more information, or call them on 0141 582 2000.

If you have any questions about ACCA professional indemnity insurance, feel free to call us on 0345 222 5391. Or you can get a quick quote by clicking here.

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