Accountants handle extremely sensitive financial information. If they make a mistake, they might cause considerable harm to both their clients and others. They might thus have a responsibility to compensate those affected for their losses. If you find yourself in this situation, consider if your business insurance can help you. Often, if you have errors & omissions (E&O) insurance, this is the case. What’s this coverage? Why is it so important to accountants?
Understanding E&O Insurance
Accountants who have business insurance usually carry general liability insurance. It’s there in case you cause a problem like injury or property damage to your clients. It will often help you pay for the person's medical bills or damaged belongings. However, where it often leaves a hole is in mistakes that occur through your professional advice, or clerical errors. That’s where E&O coverage might come into play.
E&O insurance is also known as professional liability insurance. It’s there to cover your professional mistakes that harm a third party, like a client. As an accountant, you likely understand how critical this coverage is in your line of work.
Most policies cover things like inaccurate advice, negligence or violations of good faith. Through your considerable handling of finances, there’s always a chance that you could make a mistake that leads to financial losses for your clients. In these cases, you might be able to turn to your E&O insurance to compensate the harmed party.
Let’s say, for example, that you help a local business file their yearly taxes. Due to a mistake in your calculations, the party winds up underpaying in their taxes. As a result, your client might face considerable ramifications. They might have to pay back taxes, lose income and face other penalties. If they can prove the mistake was your fault, then you might have to cover the expenses with your E&O insurance.
Where Your Policy Can Pay
When you file an E&O claim, the payout might help both the affected party and yourself recover from the incident. The policy might help you pay for any judgements or settlements you must make to the affected party. It might likewise help you cover your own legal fees or any professional penalties. Therefore, both you or your clients can come out on top of the issue.
Keep in mind, you’ll need to tailor your coverage to your specific professional needs. This will include setting limits, deductibles and premiums that match your assets. It will also include trying to cut out exclusions that might exist in your coverage. Don’t hesitate to rigorously investigate all E&O options available to you.
Also Read: What is Professional Liability Insurance and Who Can it Help?