All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren't legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A ACCOUNTANT
Example 1: A client is visiting the office to go over their tax reports and asks for a hot tea while having the meeting. Your employee accidentally spills the hot liquid on the client when delivering it, resulting in severe burns. General liability insurance will likely cover the resulting medical bills.
Example 2: One of your accountants misses an important deduction for a client, resulting in them overpaying thousands of dollars on their taxes. General liability insurance will likely help you settle any resulting claims or reputation loss.
Example 3: A client sues your business because they believe your marketing to be misleading. General liability insurance will likely help you cover the cost of defending yourself or settling out of court.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It's always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
On average, accountants in America spend between $400 - $700 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner's policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all accountants should obtain:
Professional Liability Insurance
Professional liability covers professional mistakes or negligence that may occur while on the job, Accountants give a lot of advice to their clients, and this coverage goes further than general liability insurance to help businesses when a particularly egregious error may have occurred.
An accounting business typically relies on the space and the equipment they have to function. Just one storm, incident of theft, or fire can threaten its livelihood. Property insurance is likely to cover the grounds, physical building, and the business equipment in the event of damage or destruction.
In addition to the policies outlined above, there are a few other types of coverage your accountant may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Home-Based Business Insurance
For accountants working from their home, this insurance will cover any damage or destruction that occurs to the areas used for business. So if the accountant is deducting the cost of their mortgage for tax purposes, they’ll likely need home-based insurance to cover common events such as fire, theft, or flooding.
Commercial Umbrella Insurance
Commercial umbrella insurance is designed to cover expenses in the case of a particularly costly legal claim. For example, if a client feels as though you cost them millions of dollars because your financial forecasting proved too conservative. The case drags on for a year, incurring many thousands of dollars in legal costs. Commercial umbrella insurance will cover a business when the limits of its general liability or professional liability insurance policies are reached.
Although it's easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business' financial losses after an incident occurs, but it's much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
- Streamline your business' internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
What is included in a business owner’s policy?
A typical business owner's policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company's needs.
What is the difference between business insurance and general liability insurance?
"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it's best to be proactive when it comes to protecting your assets. After all, you can't buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.