The Best E&O Insurance for Accountants

5-Star Excellence Awards

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  Product
  Max Coverage
  Company
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  QBE Professional Liability
  $10M
  

• Argo
• CFC Underwriting
• Chubb
• Hiscox
• Markel American Insurance Company
• Travelers

What is accountants’ errors and omissions (E&O) insurance?

An accountant is responsible for performing finance-related tasks, including the collection, recording, analysis, and interpretation of either an individual client’s or a business organization’s financial operations. While performing their roles, accountants are exposed to various liabilities, including misstatements, which could deal huge financial losses to their clients.

The risk of lawsuits stemming from these situations is what prompts many accounting professionals to take out accountants' errors and omissions (E&O) or professional liability insurance. This type of coverage provides protection from monetary losses in the event accountants face legal charges resulting from oversight and negligence. E&O insurance covers expenses incurred in the litigation, settlement, and payment of damages.

Why do CPA’s need E&O insurance?

Certified public accountants (CPA) and accounting firms deal with a huge amount of numbers and figures on daily basis, and their actions and decisions can have crucial ramifications on the finances of their clients. Accounting professionals are exposed to several liabilities stemming from the performance of their roles. Inaccurate financial statements audited by an accountant could result in massive monetary losses for businesses. For this reason, having professional liability insurance is necessary.

What are common inclusions in an accountant’s E&O policy?

Accountants’ professional liability insurance plays a major role in risk management. This type of policy protects accounting professionals from financial loss in the event they face lawsuits stemming from oversight and negligence as part of their jobs. E&O policies cover the cost of litigation, settlement, and punitive damages.

However, under the Generally Accepted Accounting Principles (GAAP), accounting professionals are not often held liable for misstatements if these are done in good faith.

Should a bookkeeper have E&O insurance?

Just like accountants, bookkeepers deal with large amount of financial data as they are tasked with recording and classifying a business’ transactions, including sales, purchases, bills payments, and payroll. The nature of their work exposes them to the same level of risks as accounting professionals. Bookkeepers also need professional liability insurance to protect them against claims of professional negligence.

How does E&O insurance protect accountants?

Win or lose, lawsuits are expensive. E&O insurance protects accountants and other accounting professionals from financial losses by covering the costly legal expenses stemming from court attendance, and the settlement and payment of damages.

What does errors and omissions cover for accountants?

Carrying E&O or professional liability insurance provides accounting professionals protection against claims of oversight and negligence while performing their duties. These mistakes include data entry errors, giving incorrect tax advice, non-compliance with GAAP and Generally Accepted Auditing Standards (GAAS), and failure to maintain appropriate documentation, detect fraud, and meet deadlines. E&O insurance covers legal costs incurred during litigation and settlement.

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