Accounting Firm Insurance Requirements for Tax and Bookkeeping Work
- Nate Jones, CPCU, ARM, CLCS, AU
- 1 day ago
- 2 min read
Accounting firms that provide tax preparation and bookkeeping services face unique legal and professional risks. Beyond protecting your business from potential lawsuits, state regulations and licensing requirements often mandate certain types of insurance. Understanding accounting firm insurance requirements ensures compliance, safeguards your clients, and protects your professional reputation.
Why Insurance is Required for Tax and Bookkeeping Firms
CPAs and bookkeepers handle sensitive client financial information daily. Mistakes, negligence, or cyber breaches can result in claims, fines, or legal action. Insurance is not just a safety net—it’s a legal necessity in many states. Common reasons insurance is required include:
Compliance with state licensing boards for CPAs and tax preparers.
Protection against claims of professional negligence (Errors & Omissions).
Coverage for client data breaches or cyberattacks.
Safeguarding business assets from liability or property damage claims.
Common Insurance Requirements by State
While requirements vary by state, accounting firms typically need:
Professional Liability (E&O) Insurance: Many states and professional boards require CPAs and tax preparers to carry professional liability coverage to protect against client claims of errors or omissions.
General Liability Insurance: Some states may require general liability coverage, especially if your firm has in-person client meetings. This protects against bodily injury or property damage claims.
Workers’ Compensation Insurance: If your firm employs staff, most states require workers’ compensation insurance to cover medical costs and lost wages for workplace injuries.
Cyber Liability Insurance (Optional but Recommended):Handling sensitive tax and bookkeeping data exposes your firm to cyber risks. Some states are introducing data protection regulations, making this coverage increasingly important.
For specific requirements in your state, it’s best to consult the state CPA board or local regulatory agency.
How to Comply and Get Coverage
Assess Your State Requirements: Determine the mandatory coverage for your firm based on state law and licensing boards.
Evaluate Your Risks: Consider your client base, services offered, and potential exposure.
Compare Providers: Wexford Insurance specializes in accounting firm coverage for CPAs, bookkeepers, and tax preparers. They can help you find the right policies that meet legal requirements. Request a free accounting insurance quote from Wexford Insurance.
Maintain Compliance: Regularly review your insurance policies to ensure they meet current state regulations and adapt as your firm grows.
Protect Your Firm and Stay Compliant
Accounting firm insurance is both a legal requirement and a vital safeguard for your business. Wexford Insurance offers customized coverage solutions for tax and bookkeeping firms, ensuring you meet state requirements and protect your professional reputation.
