Understanding E&O Insurance Costs for Accountants (2024)

What Is E&O Insurance?

Errors and Omissions (E&O) insurance, also known as professional liability insurance, is essential for protecting businesses against the financial repercussions of client lawsuits arising from unsatisfactory work. For accountants and other financial professionals, this coverage is crucial because even a small mistake can lead to significant legal expenses.

Coverage Provided by E&O Insurance

1. Professional Mistakes: In the world of finance and accounting, errors happen. Whether it’s a bookkeeping mistake or a missed item on a client’s tax return, these slip-ups can result in financial losses for your clients. E&O insurance helps cover the costs of lawsuits stemming from such professional mistakes.
2. Failure to Deliver Promised Services: Clients rely on your services to maintain their financial health. If you fail to deliver contracted services (e.g., missing a tax deadline), clients may take legal action. E&O insurance can pay for your legal defense and related expenses in such cases.
3. Accusations of Negligence: Allegations of professional negligence are unfortunately common. If your investment advice leads to client losses, they can accuse you of negligence and file a lawsuit. E&O insurance covers attorney’s fees and other legal expenses resulting from these accusations.

Cost Factors for E&O Insurance

The cost of E&O insurance for accountants varies based on several factors:

1. Profession and Risk: Accountants face lower risks compared to some other professions. As a result, their E&O insurance rates are typically more affordable.
2. Number of Employees: On average, E&O insurance can cost around $500 to $1,000 per employee annually. However, the exact amount depends on your specific risks and the size of your practice.

Real-World Examples

• Median Cost: Finance and accounting businesses pay a median of less than $35 per month for professional liability insurance4.
• Specific Figures: Some small business owners pay less than $50 per month, while others pay between $50 and $100 per month. A minority pays more than $100 per month.

As an accountant, investing in E&O insurance is a wise decision. It provides peace of mind and financial protection against unexpected legal challenges. Remember that the actual cost may vary based on your unique circ*mstances, but having this coverage is essential for safeguarding your practice.

Remember, always consult with an insurance professional to determine the best coverage for your specific needs. 📊🔍

I hope you find this article helpful! If you have any further questions or need additional information, feel free to ask. 😊