Buying any insurance, can be a confusing and time consuming process. And when it comes to getting your Professional Indemnity Insurance, it can be even more so. Here are 7 tips for Accountants to consider when it comes time to get their PI sorted.
1. Are you required to hold a certain level of cover?
Whether you have CPA or CA accreditation, most regulatory bodies require you to hold a certain level of insurance.
To be a member of Chartered Accountants ANZ you are required to provide information on your professional indemnity insurance.
Investigate and make sure to look into what is required of your business by the relevant associations to ensure you are adequately covered.
2. What are your risks?
The next thing to consider, after looking at what is required of you, is the risks your business faces. Even with the minimum required insurance, you may also have a number of unique risks that could seriously affect your business. Most accounting business will cover above the $1 million, especially when the price rise between $1 million and $2 million coverage is minimal.
The things you will need to examine are;
- existing and intended areas of practice,
- experience and expertise,
- your own internal control procedures,
- the technology you use,
- the size of your clients,
- the maximum potential exposure.
TYPES OF RISKS TO CONSIDER
3. Not all policies are the same
No two professional indemnity policies are exactly the same. It’s important to read the fine print, to see what is included and excluded. Then you can be sure that you are actually covered for what you think you are. If you don’t understand the technical terms, speak to an insurance professional who can help you understand the meaning.
Some policies will also cover:
- Lost Documents,
- Fidelity (cover for a loss due to employee’s dishonesty),
- Public Relations Costs,
- Statutory Liability (cover for unintentional breaches of acts or legislation),
- Court Attendance Costs and Official Investigation Costs.
Others will have certain extras as optional extensions which you may need to add to your policy. Also, not all policies will cover former principals or joint ventures where some will extend the cover to this.
It’s important to look at the details side by side to help you make your decision. This is where comparison sites can come in handy as they will let you compare not only prices but also policy details side by side.
4. Claims Made Policy
Professional indemnity policies will cover you on a ‘claims made’ basis. What this means is that the date which a claim is made upon you must fall within the policy period, not the actual date that the advice was given or the loss occurred. It’s important then to make sure you have up to date cover and report all third party claims promptly to the insurer within the policy period.
5. Retroactive Date
Claims-made policies will have an exclusion that eliminates coverage for claims made on events that took place before a specific date (known as a retroactive date), even if the claim is first made during the policy period.
This ‘Retroactive Date’ means that it’s important to have an active policy as soon as possible when commencing business and make sure that the retroactive date is far back enough to give you adequate protection.
6. Will it cover contractors or subcontractors?
This is an important issue to think about if you use any contractors or subcontractors. If you use contractors or subcontractors, it is important that you have cover for any liability which attaches to you arising from the actions of the contractor or subcontractor.
7. Is Professional Indemnity Enough?
Once you’ve had a look at your risk areas you may see a number of areas that professional indemnity on its own will not cover. You may be managing a team and see a significant human resource risks which will require a management liability policy to cover.
Or you may have a large amount of data online which presents a potential risk to your business and may need to consider a cyber liability policy. It’s important to look at the whole scope of your business and what you need cover for.
This is general advice only.