Although Professional Indemnity Insurance (PII) is not always required for accountants by law, it is one of the most important types of business liability insurance for firms to invest in.

Accountants handle complex financial transactions and confidential data for clients, so any issue at work can have significant financial consequences for both the client and accountant if they are not protected by PII. A PII policy will cover the cost of any client claim – whether this be due to negligence or otherwise – as well as any compensatory damages that the firm is required to pay.

All chartered firms will need to purchase PII to meet the membership regulations of their respective accountancy trade bodies, though the amount of cover needed will vary based on both the size of the firm, and the metrics used by each body.
Chartered accountants – insurance requirements   
Each of the six accountancy bodies in the UK has different professional indemnity insurance requirements; we recommend researching these thoroughly before you purchase a policy.
To maintain membership, chartered accountants will need to abide by the rules of their trade body and provide annual proof of PII coverage to the trade body.
Trade body members typically need to satisfy three types of criteria when buying PII:

  • They must buy from a participating insurer (there are only certain insurers qualified to provide PI insurance to chartered accountants)
  • The policy must abide by the minimum policy wording as dictated by the trade body
  • The accountant needs to obtain certain minimum limits of insurance. Each accountancy body will have their own calculations to determine these limits, but they usually depend on two factors: the type of work done by the accountant, and the amount of income generated

Non-chartered accountants – insurance requirements

While non-chartered accountants are not generally required to have PII in place, this is strongly recommended.

Advising clients on their finances comes with high levels of responsibility and risk, and the impact of giving incorrect accounting advice or making a mistake would almost certainly result in the client's business suffering. It can also lead to financial ruin for the accountancy firm itself, as without insurance, they would be directly liable for any legal defence costs or compensatory damages.

A PII policy works to cover the cost of any compensation should your business be found responsible for inadequate advice. It will also cover any legal costs incurred defending the claim.

Having PII in place may also help to secure new business. Many clients will expect their accountant to be covered by a suitable policy and may even insist on seeing proof of this before signing on.  
Other types of insurance for accounts

Depending on the size of their firms, accountants may also require other types of business insurance in addition to PII.

  • Management liability insurance will protect individual officers and directors  in the event of a claim by a third party (including regulatory authorities) brought against them alleging a wrongful act
  • Cyber insurance will safeguard firms from financial damage in the event of a cyber-attack or hacking incident
  • Commercial crime insurance provides protection from financial losses related to business-related crime, including theft by employees, forgery, robbery, and electronic crime
    Public liability will cover the cost of claims related to personal injury or property damage claims made by third parties
  • Business contents and equipment insurance covers furniture or electronic equipment against theft or loss due to events like fire and flood
  • Legal expenses cover will respond if a client has a contract dispute, needs assistance with a debt from a non-paying client, or faces an HMRC tax investigation
  • Employers' liability is required by any accountancy business with employees, and will enable the firm to pay compensation if an employee is injured or becomes ill due to their work

If you would like further advice on coverage requirements for your accountancy firm, please do get in contact with our dedicated team using the details below – we would be more than happy to help.