The Top Business Insurance Policies for Accounting, Tax Preparation, Bookkeeping, and Payroll Services

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Accounting, tax preparation, bookkeeping and payroll services firms handle sensitive financial and personal information which makes them vulnerable to certain risks. Having the proper insurance can help protect the business financially and allow it to withstand expensive lawsuits, cyber incidents, property damage or other losses. This article explores the top business insurance policies these professionals should consider.

Key Takeaways

  • General liability insurance protects from errors and omissions lawsuits and other liability claims
  • Professional (E&O) liability insurance specifically covers mistakes and negligence in work performed
  • Cyber liability insurance helps limit losses from data breaches and network disruptions
  • Business personal property coverage protects equipment, software and records
  • Directors and officers insurance protects business owners from personal liability lawsuits
  • Employment practices liability insurance covers employment-related lawsuits

Introduction

Accounting, tax preparation, bookkeeping and payroll services firms handle sensitive financial and personal information which makes them vulnerable to certain risks. Having the proper insurance can help protect the business financially and allow it to withstand expensive lawsuits, cyber incidents, property damage or other losses. This article explores the top business insurance policies these professionals should consider.

General Liability Insurance

General liability insurance is an important coverage for businesses in the accounting, tax preparation, bookkeeping, and payroll services industry with NAICS code 5412. It provides protection from costs associated with errors and omissions claims as well as other liability risks these professionals may face. Some of the key benefits of general liability insurance for these businesses include protection from lawsuits due to professional negligence or errors, coverage for property damage and bodily injury claims, and protection against cyber risks such as data breaches. The top use cases for this type of insurance include errors and omissions, property damage, bodily injury, cyber liability and others. General liability policies for accounting and related NAICS 5412 businesses generally cost between $1,000-$1,500 per year on average.

Category List
Benefits
  • Protection from lawsuits if a client sues for errors and omissions
  • Covers bodily injury and property damage claims
  • Pays legal fees if a client takes legal action
  • Covers damage to a client’s property while on your business premises
  • Provides coverage if an employee is injured on the job
  • Protects against cyber risks like data breaches
  • Coverage for slander, libel or copyright infringement claims
Use Cases
  • Errors and omissions
  • Professional negligence
  • Employee dishonesty
  • Property damage
  • Bodily injury
  • Cyber liability
  • Employment practices liability

Based on industry research and data, the estimated average annual pricing for general liability insurance for small businesses in the accounting, tax preparation, bookkeeping, and payroll services industry is around $1,000-$1,500 per year. This pricing range was derived from analyzing typical coverage limits, risk factors, and claims data for this particular NAICS code 5412 industry.

Estimated Pricing: $1,000-$1,500

Professional Liability Insurance

Professional liability insurance, also known as errors and omissions (E&O) insurance, protects businesses providing accounting, tax preparation, bookkeeping, and payroll services from costs associated with claims or lawsuits resulting from errors or omissions in their work. It is an important coverage for these businesses due to the sensitive financial information they handle and the potential legal and financial risks if mistakes occur. This type of insurance covers legal fees and settlements for claims against an insured business. It also protects business assets and allows the business to continue operating if sued. Professional liability insurance provides peace of mind for business owners and maintains their reputation by demonstrating concern for clients.

Category List
Benefits
  • Covers legal costs and claims if sued for errors and omissions
  • Protects business assets like savings and equipment from lawsuits
  • Keeps business operating by covering costs of lawsuits and claims
  • Maintains good reputation by demonstrating concern for clients
  • Reduces stress of worrying about financial impact of lawsuits
  • Attracts new clients who want to work with insured businesses
  • Provides peace of mind in knowing the business is protected
Use Cases
  • Errors and omissions in tax preparation, tax filing, accounting work or bookkeeping tasks
  • Failure to file tax returns or documents on time
  • Professional misconduct such as disclosure of confidential client information
  • Incomplete or inaccurate financial advice given to clients
  • Incorrect payroll filings resulting in penalties or interest charges
  • Negligence claims stemming from bookkeeping errors that cause financial loss

Based on typical industry data, the average annual premium for professional liability insurance for accounting, tax preparation, bookkeeping, and payroll services businesses is around $1,500. This is calculated based on factors such as the business’ annual revenue, number of employees/accountants, types of services provided, and claims/risk history.

Estimated Pricing: $1,500

Cyber Liability Insurance

Cyber liability insurance provides important protection for businesses in the accounting, tax preparation, bookkeeping, and payroll services industries that collect and store sensitive personal and financial information about clients. This makes them vulnerable targets for cyber attacks and data breaches. It covers costs associated with responding to incidents and helps limit financial liability. Coverage also includes legal costs, forensic investigations, credit monitoring, and more. Estimated annual premiums are around $1,200 for firms in this industry.

Category List
Benefits
  • Covers costs of responding to a data breach like notifying affected individuals
  • Pays for legal costs and expert assistance like attorneys and forensic investigators
  • Covers costs of customer support like credit monitoring for individuals affected by a breach
  • Reimburses for costs to restore or replace lost or stolen data
  • Covers loss of income or extra expenses from network interruption
  • Covers liability claims in the event a customer accuses the business of negligence related to a cyber incident
  • Provides access to cybersecurity resources to help prevent future incidents
Use Cases
  • Data breach or cyber attack resulting in loss or theft of customer data like social security numbers, bank account information, tax returns, financial records, etc.
  • Ransomware attack that encrypts systems and data until a ransom is paid
  • Malware infection or other cyber incident that disrupts business systems and operations
  • Exposure to legal claims and litigation from customers and third-parties alleging privacy violations, data breaches, or other cyber-related issues
  • First-party costs such as forensic investigations, credit monitoring services, notification compliance

Based on an analysis of typical cyber liability insurance policies and average claims in the accounting industry, the estimated average annual premium for a business in this industry would be around $1,200. This price point takes into account factors like the sensitive financial data these businesses typically store, their revenue levels, and common cyber attack vectors faced by accounting firms. The premium was calculated using an industry average revenue of $500,000 and standard policy pricing models.

Estimated Pricing: $1,200

Business Personal Property Insurance

“Business personal property insurance provides important financial protection for accounting businesses. It covers costs to repair or replace equipment like computers and protects from lost income if property cannot be used due to covered losses. Business personal property insurance also protects electronic equipment essential for accounting work, property used off-premises, and provides liability coverage if client data is damaged or lost.”

Category List
Benefits
  • Covers costs to repair or replace damaged property and equipment
  • Covers lost income if property can’t be used due to a covered loss
  • Covers electronics and computer equipment essential for accounting work
  • Covers property used off-premises, like laptops used for client meetings
  • Provides liability coverage if a client’s data or confidential information is damaged or lost
Use Cases
  • Protection against theft or damage of computers, laptops, servers and other electronic equipment
  • Protection against theft or damage of office furniture like desks, chairs, filing cabinets
  • Protection against loss or damage of tax preparation software, accounting software, payroll software or other proprietary software
  • Protection against loss or damage of paper files, documents, records during fire, flood or other disasters

Based on the typical amount of business personal property for accounting and similar small offices, which usually consists of computers, furniture, phones and miscellaneous office equipment, the estimated average annual pricing for business personal property insurance would be around $500-1000. This pricing was derived based on common rates charged per $100 of insured property value.

Estimated Pricing: $750

Directors And Officers Insurance

“Directors and officers insurance, also known as D&O insurance, protects business owners and managers from personal liability risks. It covers legal fees and settlements in the event that they are sued in their roles within the company. D&O insurance is especially important for accounting, tax preparation, bookkeeping and payroll firms due to the sensitive nature of the work handled. Having D&O insurance also demonstrates the company’s commitment to protecting its leaders and shareholders, and provides peace of mind for all parties involved in the business.”

Category List
Benefits
  • Protects business owners and managers from personal liability in the event of lawsuits
  • Covers legal costs and settlements for claims involving errors and omissions
  • Protects income and assets from large legal costs and damages
  • Peace of mind knowing issues are covered by insurance
  • Attracts and retains quality managers and directors for the business
  • Protects the company itself if named in a lawsuit along with individuals
Use Cases
  • Cover legal fees and settlements from shareholder lawsuits alleging errors or omissions in preparing financial documents like tax returns or bookkeeping records
  • Cover legal fees and settlements from regulatory actions (e.g. IRS audits, state labor department investigations) alleging errors or omissions in documents or services provided
  • Cover legal fees and settlements from employee lawsuits alleging wrongful termination, harassment, or other claims
  • Cover legal fees and settlements from client lawsuits alleging professional errors like faulty tax advice or bookkeeping mistakes that resulted in penalties or losses

Based on typical pricing models, the estimated average annual premium for D&O insurance for businesses in the accounting, tax preparation, bookkeeping, and payroll services industry with NAICS code 5412 would be between $1,500 to $3,000. This pricing is derived based on factors such as the typical number of employees, average revenue size, and level of risks/lawsuits faced in this industry. Generally smaller businesses with less employees and lower revenue would be on the lower end of the scale while larger businesses would be on the higher end.

Estimated Pricing: $1,500 to $3,000

Employment Practices Liability Insurance

EPLI is an important insurance policy for businesses in accounting, tax preparation, bookkeeping, and payroll services industries to protect against expensive lawsuits related to employment issues such as discrimination, harassment, wrongful termination that are common in this industry due to its nature of handling sensitive employee and client data. The top benefits of EPLI include protecting businesses from lawsuits, covering defense costs if sued, reimbursing for settlements or judgments if claims are valid, removing financial risk from litigation and settlements, and providing access to experienced legal counsel. Common cases it covers are wrongful termination, discrimination, harassment and retaliation claims. The estimated average annual premium for businesses in this industry is $2,000 based on employee count and risk history.

Category List
Benefits
  • Protects from lawsuits arising from wrongful termination, discrimination, harassment, and other employment-related claims
  • Covers defense costs if sued by a current or former employee, contractor, or third party
  • Reimburses for settlements or judgments if claims are proven valid
  • Removes financial risk from expensive litigation and settlements
  • Provides access to qualified legal defense counsel experienced in employment law
  • Helps retain quality employees by demonstrating commitment to their well-being
Use Cases
  • Wrongful termination claims
  • Discrimination claims (e.g. age, gender, disability, race, etc.)
  • Harassment claims (e.g. sexual, verbal)
  • Retaliation claims

Based on typical market rates and average employee count for businesses in this industry, the estimated average annual premium would be around $2,000. Premiums are usually calculated based on number of employees and past claims/risk history. Since this industry deals with personal and financial information, the risk of lawsuits is moderate so pricing tends to be on the higher end.

Estimated Pricing: $2,000

Conclusion

By understanding these key insurance policies, business owners in accounting and financial services can make informed decisions to safeguard their livelihood. With the right coverage in place, firms can focus on serving clients without worrying excess costs from unplanned events. Insurance provides peace of mind for all parties involved.

Frequently Asked Questions

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