Professional Indemnity insurance often referred to as PI is a form of insurance that covers you if you make a mistake during your work that causes financial or reputational loss for the client. For accountants this will cover the costs of defending your business against claims of negligence such as giving incorrect or wrongful advice. The client can face financial losses from these mistakes which they may take legal action against you in order to recover these costs. Some examples of the importance of PI to accountants are:

• Legal Protection: PI provides financial protection if a client accuses the accountant of negligence, errors, or omissions in their work. It covers legal costs and any compensation awarded to the client if the accountant is found liable.
• Client Requirement: Some clients may insist that an accountant holds PI before they agree to work with them. It serves as a reassurance for clients regarding the quality and accountability of the accountant’s services.
• Regulatory Requirement: Professional bodies or associations that accountants belong to might mandate PII as part of their membership or licensing requirements. It ensures a certain level of professional conduct and accountability within the industry. Not all Accounting firms will have these mandatory requirements however it is still very much advised that they obtain this cover.
• Risk Management: Even the most diligent accountants can make mistakes. PI acts as a safety net, allowing accountants to focus on their work without the constant worry of potential financial ruin due to an unexpected claim.
• Maintaining Reputation: If a claim arises against an accountant, having PI helps mitigate the financial impact. It can protect the accountant’s reputation and prevent severe financial setbacks that could affect their practice.

How much cover is required?

This can vary from firm to firm but commonly, coverage amounts might range from £100,000 to several million pounds. For the minimum levels of cover it is recommended that this is checked with the regulatory body that you are a part of, who will outline the scope of cover required taking into account factors such as; size, turnover, activities and location of companies. Another factor can be client requirements, some larger firms will have minimum expected sums insured.

Other Considerations

Another consideration for accountants to consider is retroactive cover. Professional indemnity cover is usually offered on a claims-made basis. This means that your insurer will only cover you for claims that are brought against you during the term of your policy. A retroactive date defines how far back in time a loss can occur for your policy to cover your claim. If a claim happens prior to your retroactive date, your policy won’t provide benefits. In order for this to apply insurance must have been held continuously since this date.

PI insurance is an essential insurance cover for accountant and provides peace of mind that you business is protected in the event of a claim. Contact us today for more information of Accountants Professional Indemnity insurance.