{"id":17369,"date":"2019-06-11T17:19:51","date_gmt":"2019-06-11T16:19:51","guid":{"rendered":"https:\/\/www.policybee.co.uk\/blog\/?p=17369"},"modified":"2023-10-03T16:44:18","modified_gmt":"2023-10-03T15:44:18","slug":"bookkeepers-professional-indemnity-insurance","status":"publish","type":"post","link":"https:\/\/www.policybee.co.uk\/blog\/bookkeepers-professional-indemnity-insurance","title":{"rendered":"Professional indemnity insurance for bookkeepers"},"content":{"rendered":"\n

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\"Professional<\/figure>\n<\/div>\n\n\n

Bookkeeping is a numbers game. It\nrelies on precision and accuracy, with little margin for error. Because if the\nnumbers are wrong, a client\u2019s business can very quickly go wrong too.<\/p>\n\n\n\n

So, why is it important to have professional indemnity insurance for bookkeepers? It\u2019s cover for when a mistake\u2019s been made, after all. And bookkeepers shouldn\u2019t make mistakes, should they?<\/p>\n\n\n\n

Well, not intentionally, no. But the\nthing is, we\u2019re all human. And along with being human comes an unfortunate\ntendency to err. <\/p>\n\n\n\n

That puts even bookkeepers at risk\nof messing up. Because on a bad day, it\u2019s really not that hard to enter figures\nwrongly, forget to make a payment, or pull together a report using the wrong\ninfo. <\/p>\n\n\n\n

And that\u2019s where the problems can\nstart. Because if a client makes a business decision based on numbers that are\nout of line, it can seriously backfire. The same applies if an accountant uses\nthose numbers to prepare an incorrect tax return and HMRC gets involved.<\/p>\n\n\n\n

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Paying the price<\/h2>\n\n\n\n

The second part of the \u2018to err is\nhuman\u2019 quotation would have you believe that \u2018to forgive is divine\u2019.<\/p>\n\n\n\n

That may be so, but if a client loses\nmoney because of a mistake you made, the chances of them forgiving you are\npretty slim. Instead, they\u2019re much more likely to come after you with a claim\nfor compensation.<\/p>\n\n\n\n

Unfortunately, that can have some\npretty serious implications for your business. Because besides the matter of\nthe amount of compensation you may have to pay, there\u2019s all the complex,\ntime-consuming paperwork to deal with. And a possible day in court.<\/p>\n\n\n\n

That means hiring a lawyer to help you find a way through the legal landscape\u2026which also means paying by the hour. Ever come across a cheap solicitor? No, me neither. So that\u2019s another big expense to swallow.  <\/p>\n\n\n\n

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Why professional indemnity insurance for bookkeepers makes good business sense<\/h2>\n\n\n\n

Where professional indemnity i<\/a>nsurance for bookkeepers makes sense is that it takes all the hassle and uncertainty out of dealing with a claim and pays the costs, too. It buys you a legal expert to represent your interests and covers court expenses. Importantly, it also picks up the tab for any compensation you\u2019re obliged to pay.<\/p>\n\n\n\n

In fact, bookkeepers\u2019 professional indemnity insurance makes so much sense that some professional associations insist on it. Anyone practising under a license from the Institute of Chartered Bookkeepers<\/a> (ICB), the International Association of Bookkeepers<\/a> (IAB) or the Association of Accounting Technicians<\/a> (AAT) simply has to have it.<\/p>\n\n\n\n

You\u2019ll also find that certain clients will insist on seeing proof of cover before they\u2019ll employ you to work on a contract. They see it as a mark of professionalism and a sign that you take your work seriously. Plus, they\u2019re (understandably) covering their backs should things go wrong.<\/p>\n\n\n\n

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How much professional indemnity insurance do you need?<\/strong><\/h2>\n\n\n\n

It makes good business sense to be properly protected \u2013 which is why we advise people to buy as much cover as they can afford. And although hindsight is a wonderful thing, it\u2019s not much help if you find yourself out of pocket because your level of cover wasn\u2019t adequate. <\/p>\n\n\n\n

As well as considering the obvious\ncosts involved with any claim, start by thinking about the size of your\nclients. A big company with lawyers on tap is far more likely to pursue a claim\nof negligence against you than a corner shop. No matter the gravity or\notherwise of the mistake.<\/p>\n\n\n\n

You may also have clients who insist on a certain level of cover before they\u2019ll employ you. And think about any contracts you missed out on. Is there a chance you were ruled out of the running because your professional indemnity cover wasn\u2019t considered enough?<\/p>\n\n\n\n

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Professional indemnity insurance<\/strong> for AAT bookkeepers<\/h2>\n\n\n\n

The AAT goes a step further and stipulates a minimum level of cover for its licensed bookkeepers. You can read the specifics here<\/a>.<\/p>\n\n\n\n

And there are other requirements. The AAT says its members\u2019 professional indemnity cover must work on what\u2019s called an \u2018any one claim<\/a>\u2019 basis. This is something to look out for when choosing your insurance policy as it means each claim is treated separately. <\/p>\n\n\n\n

So, say your level of cover is\n\u00a350,000, your insurer will pay compensation up to that amount for each <\/strong>claim\nagainst you within the insurance period. In each<\/strong> case it will also pay up\nto \u00a350,000 in legal costs on top.<\/p>\n\n\n\n

Another of the AAT\u2019s requirements is that its members\u2019 professional indemnity cover should be \u2018retroactive<\/a>\u2019. This is important since it means you\u2019re covered for past work.<\/p>\n\n\n\n

\u2018Retro\u2019 effectively stretches your policy\u2019s start date backwards, usually to when you started your business. It means you\u2019re covered for complaints about work you did previously\u2026which is a good thing, considering errors can take months or even years to emerge.<\/p>\n\n\n\n

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What can you do to help avoid claims?<\/strong><\/h2>\n\n\n\n

Professional indemnity insurance for bookkeepers is your backstop once a claim\u2019s been made against you \u2013 whether it\u2019s justified or not. <\/p>\n\n\n\n

But there are other things you can do to reduce the likelihood of a claim dropping onto your doormat in the first place \u2013 just as there are ways to increase your chances of fending off a claim once it\u2019s been made.<\/p>\n\n\n\n