If you’re a bookkeeper or accountant, people rely on your expertise in balancing the books. But we’re all human, and mistakes can happen. When you’re dealing with financial information, these slip-ups can be expensive to put right.
How can you protect your business and livelihood from blunders? Read our guide to discover everything you need to know about mitigating these risks with professional indemnity insurance for bookkeepers.
1) How bookkeepers can protect themselves from being sued
As a bookkeeper, your clients expect you to provide your services professionally. A certain level of specialist knowledge is assumed. And if things go wrong, you may be held to account for financial losses.
Bear in mind that financial losses can be more far-reaching than you may imagine. Your poor advice can lead to:
- Also known as dispute resolution, this is the process of going to court. Your client will set out their complaint against you outlining how your actions have resulted in them losing money.
- Damaged reputations. Your client could argue that you have caused damage to their reputation, for example by leaking personal information or making them appear untrustworthy. If your client feels that this damage to reputation has cost them financially, they can argue that you are responsible for this money too.
- Loss of revenue. If your actions have resulted in your client having to cease trading for a period of time, for example, if criminals steal customers’ personal data information, your client can sue you for this loss of revenue.
If a client sues you, you’ll need to employ a solicitor to defend your case. And if your defence is unsuccessful, you’ll need to pay the compensation. Both can end up costing you big. Even if your defence is eventually successful, you’ll typically still need to pay your solicitors fees up front, so will need access to money.
Unfortunately, no one can wave a magic wand to prevent you from ever making a mistake again. But you can protect yourself from the financial strain by taking out professional indemnity insurance for bookkeepers.
2) Find out who needs professional indemnity insurance
The first question to ask is ‘do you actually need professional indemnity insurance?’ To answer that you need to consider if you are at risk of being sued for the advice or service you provide. As a bookkeeper, you give advice that could have a financial impact on your clients. You also handle sensitive financial and personal data. If criminals access that because you have not protected it sufficiently, you would also be responsible for your client’s financial loss. For example, if you leave your laptop behind on a train.
Not everyone who is working as a bookkeeper will need to take out professional indemnity insurance. You may need it if:
- You work for yourself
- You’re responsible for managing an office of bookkeepers.
If you work as a bookkeeper in an office, you won’t need to take it out for yourself as it’s your firm that is responsible for taking it out.
3) How much professional indemnity insurance do I need for peace of mind?
The maximum payout that your professional indemnity insurance will cover can vary from £100,000 to £10million. The lower the payout level, the lower your premium. But how do you know how much you’ll need?
The amount of cover you’ll need to take out for peace of mind will depend on the type and size of your clients. You may also have some clients, such as government organisations, who will specify a minimum amount or they won’t give you the work.
- Take a look through your client list.
- Do any currently specify a minimum amount of professional indemnity insurance to be held?
- Do you currently have any tenders out for jobs with clients that specify a minimum level of cover?
- Next, look at each client.
- How much is their turnover?
- Look at jobs you have not been awarded. Did you lose out on any because your indemnity insurance was not high enough?
- If so, make sure you increase your level of indemnity cover so you won’t lose out in the future.
- If you’re held liable for a project being delayed or replaced, how much could that cost you?
- The bigger the client, the more significant the potential losses could be
- You might not just be held responsible for the part of a project you’re involved in. If your advice causes delay or requires complete replacement, you could be liable for the entire loss.
4) Know what insurance you are buying to get cover you can rely on
Insurance can be confusing, with lots of different options available. Sometimes it can be tricky to know what you need to take out and what is just an unnecessary waste of cash.
Professional indemnity insurance for bookkeepers usually covers against:
- Data loss
- Breach of confidentiality
- Intellectual property infringement
- Professional negligence
- Loss of documents
- Breach of confidentiality
- Find your current professional indemnity insurance cover note.
- Check what cover is listed.
- If it’s not clear, call up your broker or the insurance company to ask for clarification.
- Tick off the list to make sure all the areas you need are covered.
5) How can professional indemnity insurance help you meet your commitment to your professional bodies?
Holding appropriate professional indemnity insurance is a condition of membership of many of the most important professional trade bodies for bookkeepers and accountants.
6) What is the difference between ‘claims made’ and ‘claims occurring’?
When it comes to professional indemnity insurance, you may have read about ‘claims made’ and ‘claims occurring’ cover.’ But what is the difference?
If you take out insurance on a ‘claims made’ basis, it doesn’t matter when the act that gave rise to the claim occurred as long as the claim is made during the policy period. For example, if you take out a claims made policy today, you will be covered if a claim is brought against you tomorrow even if the action that gave rise to the claim occurred a week, month, or year before.
If you have a claims occurring policy, it covers you for advice given during the policy period, regardless of when the claim against you is made. For example. You hold a claims occurring policy from August 2016-August 2017 then switch to a different insurance provider. A claim is then made against you in January 2018 relating to an action you made in January 2017. The insurance you would use is your claims occurring policy that covered you at the time of the incident.
Most professional indemnity insurance policies for bookkeepers are ‘claims made’ policies.
‘Claims made’ policies should have a clear retroactive date specified to protect them against claims in respect of work undertaken before the policy year. That date should be the date you started trading.
7) Will professional indemnity insurance protect me against data theft?
Do you or your employees work on the go or carry work laptops with them? Leaving a laptop in a bag on the train is easy to do but could end up costing you a lot. If a criminal gets hold of work data you put your business and your clients at risk
- Ensure staff undertake training on the danger of cyber attacks and avoiding phishing scams. Your IT policy should state that employees are not allowed to install software on their work computers themselves.
- When you replace tech, ensure that the old hard drives are destroyed or wiped completely.
- Use anti-virus and anti-malware software. If you are prompted to update software make sure you do.
- Consider restricting staff from bringing their own devices into the office. Any viruses on personal tech could be spread via your WiFi.
8) The easy way to find the right professional indemnity insurance for bookkeepers
You know what you need, but now you need to find it. Professional indemnity insurance for bookkeepers is a specialist service, and you’ll need a specialist insurance company that understands your business and the risks.
You can do this yourself or use a specialist insurance broker.
If you’d rather be spending time doing what you’re trained for, it’s a good idea to use a specialist insurance broker. An independent broker can work as your partner to guide you through your options. They’ll help you to source robust insurance cover that you can rely on. And they’ll use their knowledge and contacts to get a selection of quotes and find you the best price out there. You’ll also have peace of mind that they are experts in the field. That means there’s less chance of getting the wrong level of cover that could leave you exposed to risk.
You’ll also have the reassurance that as insurance brokers, they take out their own professional indemnity insurance too. So if their advice does turn out to be wrong and you end up financially out of pocket, their insurance will pay out to you. And if you do need to make a claim, they’ll handle it for you, leaving you to focus on the day job.
Top tips to get the best price on your indemnity insurance
For unbiased, expert advice on indemnity insurance for bookkeepers, speak to an independent insurance broker who specialises in this field.
- They can give you advice on what cover is available.
- Tell them about your business, and they can help you understand exactly what you do (and don’t) need to take out.
- Whether you’re a sole trader or run a small business, ask them to put together a tailored package that meets the specific needs of your business. That way, you won’t be paying out unnecessarily for cover you don’t need.
- Make sure you speak to an independent broker. That way you can be sure they are scouring the whole market for the best deal, not just the best price offered by the insurance company they work for.
9) What other insurance cover does a bookkeeper or accountant need?
Professional indemnity insurance isn’t the only insurance cover you’ll need as a bookkeeper. Whether you’re a sole trader or run a bustling office of bookkeepers, other insurance products that you may need include:
- Commercial premises insurance.
- Equipment insurance, such as computers.
- Public liability insurance (if clients or members of the public visit your business address).
- Employer’s liability insurance (if you employ any members of staff.
You can maximise profits when you buy all your insurance together as a bundle deal. But that doesn’t mean every bookkeeper will need the same levels of cover. Always chat through your specific business situation with your insurance broker to make sure you’re only paying for the insurance that you need.
Tell your broker:
- The type and size of your clients
- If any clients specify minimum levels of professional indemnity cover
- The size and scope of your work
As a bookkeeper, your clients rely on your expert knowledge. If a client thinks your advice or work has lead to financial loss or damage to their reputation, they will launch a claim for compensation against you.
As a bookkeeper, usually, your advice won’t lead to death or severe injury. But costs can be high especially if financial data is lost.
Professional indemnity insurance covers your legal fees to defend your case as well as any compensation awarded. Check what cover you have today and make sure you have the right level of professional indemnity insurance. It should be individually tailored to your bookkeeping business for your reassurance, and so you get the best price. Then sit back and relax knowing that even if something goes wrong, your livelihood is protected.