Professional Indemnity Insurance for Accountants

What does professional indemnity insurance cover?

Professional indemnity insurance is a form of insurance that covers professionals against claims of negligence arising from an alleged act, omission or breach of professional duty on their part.

A typical professional indemnity insurance policy will cover for things such as:

• Court attendance costs and legal advice
• Employment practices liability – indemnity in respect of claims brought by employees
• Fidelity – coverage for loss of monies for which they are legally liable
• Negligence claims. There are claims arising from errors or incorrect advice
• Civil liability claims. These might result from their business activities
• Infringement of intellectual property rights. Claims for breaches of copyright or trademark
• Fines and penalties. Indemnity for penalties imposed for breaches of OH&S or environmental legislation
• Loss of documents. Indemnity for loss of documents for which they are legally responsible
• Run-off cover. Ongoing cover for a practice that has ceased operations, to cover claims that may arise at a later date
• Public relations expenses. Covers the cost of retaining a public relations consultant to protect their reputation, if damaged by a claim
• Investigations and enquiries. Costs associated with any official investigations and enquiries.

Make sure you read the PDS

2022 Finder research shows that 23% of Australians can't be bothered reading the PDS. Every insurer is different, it is important to read their PDS to make sure they cover you for what you need.

How to choose professional indemnity insurance for accountants

What is covered by a professional indemnity insurance policy for accountants will vary from insurer to insurer, but when comparing policies, there are certain areas you should pay special attention to. These include, but are not limited to:

• The level of excess and whether it is including or excluding costs
• Whether the policy covers work you have performed in the past if it is your first policy
• Ability to reinstate insured amount following a claim
• The geographical extent of the coverage (i.e. whether it is Australia only or worldwide)
• Whether the work undertaken is clearly defined
• The general wording of the policy and the particular exclusions that apply.

Be sure to read a policy's PDS for a more complete picture of what is and isn't included with the insurance.

Public liability insurance for accountants: If you have premises

When taking out professional indemnity insurance, it is normally advisable to take out public liability insurance as well. This is standard practice for any business that has clients who visit their premises or who visit clients at their own homes or premises.

What's covered?

Public liability insurance covers accountants against claims of personal injury to others or property damage incurred during the course of normal business activities.

A public liability insurance policy will normally cover your business, including any subsidiary companies you might own and your employees, as long as they are acting within the scope of their duties at the time of any incident.

What's not included?

Like all insurance, it has certain exclusions and will not cover events such as unlawful activity on the part of the insured, deliberate acts to cause damage or injury or personal injuries or property damage suffered by the insured.

Talk to a broker about professional indemnity insurance for accountants

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FAQs

• Is the cost of professional indemnity insurance tax-deductible for my accounting practice?

  Yes, professional indemnity insurance premiums are generally tax-deductible in Australia because they are considered a necessary expense for running a business and generating assessable income. You can typically claim the full amount of the premium paid during the financial year on your business tax return.

• Does the Tax Practitioners Board set a maximum limit on the excess I can choose for my policy?

  Yes, the Tax Practitioners Board (TPB) requires that your policy excess does not exceed 4% of your business turnover unless 4% of that turnover is less than $1,000. If your turnover-based calculation results in a figure lower than $1,000 the TPB allows a maximum excess of $1,000 to ensure you can realistically meet the out-of-pocket costs of a claim.

• How long do I need to maintain run-off cover after I retire or close my practice?

  You should generally maintain run-off cover for at least seven years after you stop practising to protect yourself against claims arising from past work. This duration aligns with the limitation periods for legal actions in Australia and is often a mandatory requirement for members of CA ANZ and CPA Australia who hold a Public Practice Certificate.

• Can I get cover for work I completed before I took out my current policy?

  Yes, most professional indemnity policies for accountants include a retroactive date that covers claims arising from work performed before the policy commenced. It is vital to ensure that this date is set to 'unlimited' or covers at least as far back as your earliest professional activities to avoid gaps when switching insurers.

• Do I need professional indemnity insurance if I only provide bookkeeping services?

  It depends on whether you handle BAS work. PI insurance is legally mandatory for registered BAS agents under Tax Practitioners Board (TPB) regulations. If you are an unregistered bookkeeper providing basic data processing or payroll services without a BAS registration, PI insurance is not legally required by the government. However, it is highly recommended and often demanded by corporate clients or professional bookkeeping associations to cover potential data entry or financial reporting errors.

• Does accountant PI insurance cover the legal costs of responding to a formal ATO or TPB inquiry?

  Yes, many comprehensive professional indemnity policies for accountants include a 'statutory liability' or 'inquiry costs' extension that covers the legal fees associated with attending a formal regulatory inquiry. You should check your specific policy schedule to confirm if it covers investigations by the Australian Taxation Office, the Tax Practitioners Board or ASIC.

Written by

Gary Ross Hunter

Journalist

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Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

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