Do accountants legally need professional indemnity insurance?

There's no single law that makes it compulsory, but it is a condition of practising for members of the main accountancy bodies. ICAEW, ACCA, and AAT all require practising members to hold professional indemnity insurance. Clients, lenders, and tender processes often ask for evidence of it too. In practice, if you hold a practising certificate or licence, you should have professional indemnity insurance.

How much professional indemnity insurance do accountants need?

It depends on which body regulates you and what you earn. ICAEW firms with gross fee income of £800,000 or more need a minimum limit of £2 million for any one claim, and firms below that threshold need the greater of 2.5 times gross fee income or £250,000. AAT licensed members need the greater of 2.5 times gross fee income or £50,000 as a sole trader, the greater of 2.5 times gross fee income or £100,000 for a partnership or limited company, with a required maximum of £1 million once fee income passes £400,000. ACCA members with total income under £600,000 need the greater of 2.5 times the firm's total income or £100,000. Members with total income of £600,000 or more need at least £1.5 million of cover. These are minimum levels, not recommendations, so it's worth reviewing your largest engagements before you settle on a limit, as you may want to insure for more.

How much does professional indemnity insurance cost for accountants?

Premiums are based on your fee income, the services you offer, the limit you choose, your excess, and your claims history. Audit, corporate finance, tax planning, and insolvency work usually cost more to insure than compliance and bookkeeping, because the potential claim amounts can be larger. We'll get terms from several insurers so you can compare premiums and limits.

What does professional indemnity insurance not cover?

It won't cover deliberate or dishonest acts by a principal, fines and penalties imposed on your practice, trading losses or your own bad debts, or work you didn't declare to your insurer. It also isn't a substitute for cyber cover, employers' liability, or public liability. Claims made after the policy ends are not covered either, unless you have run-off cover.

What invalidates professional indemnity insurance?

Common causes include not telling your insurer about a circumstance that could lead to a claim, not disclosing something relevant at renewal, or doing work outside the services you declared. Ensure you notify your insurer of a potential claim early, keep your proposal information accurate, and tell us when the practice takes on a new service line, a large one-off engagement, or an overseas client.

Can a client take legal action against my practice?

A client who believes your work caused them a measurable financial loss can bring a professional negligence claim, usually within six years. Claims often follow a tax penalty, a missed deadline, a disputed valuation, or a set of accounts relied on by a lender or buyer. Tell your insurer as soon as you're aware of a complaint or a circumstance, even if no claim has been made yet.

Professional Indemnity Insurance for Accountants

Name: Professional Indemnity Insurance for Accountants
Brand: Alan Boswell Group
Rating: 4.8 (13362 reviews)

Professional Indemnity insurance is a vital safeguard that protects accountants against the financial fallout of professional errors or oversights.

Flexible limits from £50,000

Cover for sole practitioners through to multi-partner firms

If you hold a practising certificate, professional indemnity insurance is normally a requirement of your professional membership. ICAEW, ACCA, AAT and the other accountancy bodies all make it a condition of practising, and each sets its own minimum limit.

Even a well-run practice can face a claim. A missed filing deadline, an error in a return, advice given that doesn't have the expected result, or a fee dispute that turns into a negligence allegation can all end in legal costs and compensation. Professional indemnity insurance covers those costs, and your regulator normally expects the policy to be in place in case a claim is made.

The Alan Boswell Group difference

With more than 40 years of arranging commercial insurance, we know the risks that can lead to an accountancy claim and what your professional body expects your policy to cover.

We'll check your limit against the rules that apply to your practice, make sure the wording covers everything you do, from bookkeeping and payroll to tax planning and corporate finance work, and protect your retroactive date and run-off position if you move insurer.

Professional indemnity insurance in detail

Accountants' professional indemnity insurance covers legal costs and compensation when a client, or a third party relying on your work, claims they lost money because of something your practice did or failed to do. It can cover practices of every size, from sole practitioners and licensed bookkeepers to multi-partner firms, and includes:

Civil liability

Cover for claims that your advice, accounts, returns, or calculations were negligent or mistaken, including the compensation awarded and the cost of putting the error right.

Defence costs

Even unsuccessful claims cost money to defend. The policy covers legal representation, expert evidence, and the legal costs spent defending an allegation against your practice.

Loss of documents

Covers the cost of replacing or restoring client records and data left in your care, whether they're paper files or held on your systems.

Breach of confidentiality

Practices often hold sensitive financial and personal information. This covers claims arising when that information is disclosed without permission.

Dishonesty of employees

Fidelity guarantee cover protects you if a member of staff takes client money or defrauds a client. ACCA requires this cover for firms with more than one employee.

Libel, slander and defamation

Cover if something said or written in the course of your work is alleged to have damaged somebody's reputation.

Formal investigations

Cover for the costs of responding to an investigation by your professional body or an ombudsman, where the matter could lead to a claim under the policy.

Subcontractors and outsourced work

If you outsource bookkeeping, payroll, or offshore processing, the work is still yours as far as the client is concerned. We'll make sure your policy reflects how your practice actually works.

Run-off and retroactive cover

Professional indemnity policies work on a claims-made basis, so the policy which is in force when the claim is made is the one that responds. Retroactive and run-off cover protects against claims made before the policy began and after you retire, sell, or close the practice.

Is the cheapest professional indemnity policy the right one?

Not always. The cheapest quote may have a lower limit, a bigger excess, a restricted retroactive date or a narrower definition of your professional services, any of which can leave you to receive less than expected if you make a claim. We compare wording and pricing and tell you where the differences are.

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