Running a bookkeeping business requires patience, time, and a keen eye in order to keep every account in order. But no matter how experienced or good you are at doing your job, mistakes can happen that expose your business to potential risks. These include errors on financial statements, failure to provide the promised services, providing incorrect advice, missed deadlines, failure to uncover fraud or negligence. Any liability claims lodged against your business could have a detrimental effect on your financial standing and damage your reputation.
Business liability insurance for bookkeepers is based on the understanding that managing client finances and handling sensitive information can be risky. Many accountants in Hong Kong purchase this coverage to protect their firms from a wide variety of risks. In the following sections of this guide, we explore the importance of small business liability insurance and some of the major types of coverage available.

Who Needs CPA Insurance?

In today’s litigious environment, it’s easy for an aggrieved client or outsider to file a lawsuit against your bookkeeping business. Tax laws are changing all the time and client expectations often mean that businesses are quick to recoup for losses and blame the accountant when mistakes happen. You probably have experienced this kind of situation or heard a story where a firm did good work but still got hit with a devastating liability claim. CPA insurance is an effective risk management measure that helps your company to safeguard from a variety of possible exposures. This kind of coverage is ideal for the following types of businesses in Hong Kong.

• Tax preparers
• Accounting firms
• Auditors
• Accounting private practices
• Billing services
• Payroll practices
• Corporate services

Types of Business Insurance Packages for CPA Firms

Different small businesses have varying needs when it comes to business insurance in Hong Kong. Accounting firms may consider purchasing the following types of coverage to cater to various aspects of their business.

a) Professional Indemnity Insurance

Also known as professional liability insurance, this is a type of coverage that is designed to suit the needs of businesses that provide specialist services or professional advice. It is arguably the most important type of insurance coverage that accounting firms need to have. Indemnity insurance responds to claims that are launched against your business for actual or alleged negligent acts or omissions in the provision of professional service or advice.

What does PI insurance cover? Professional indemnity insurance pays for most of the discovery costs, legal costs, and damages resulting from claims against your Hong Kong accounting or CPA business. This insurance protects both your firm and employees from risks associated with providing accounting services.

What is excluded in PI insurance? Professional indemnity insurance usually does not cover intentional damage, fraud and dishonesty, professional fees, contractual liabilities, and known claims and circumstances.

Whether you are a bookkeeper, a small CPA firm, or a large accounting business, you need professional liability insurance because any mistake or aggravated client can easily turn into a lawsuit that threatens the continuity of your business.

b) Public Liability Insurance for Accountants

Small business owners are legally required to provide a safe business environment. Public liability insurance - also referred to as general liability insurance - protects your Hong Kong accounting business from lawsuits resulting from injuries that occurred on your property. This is the type of insurance that comes in handy if a supplier, client, or member of the public sustains injuries within your property due to negligent business activities. It also covers damage to property by a third party linked to your negligent business activities, and legal costs arising from the lawsuit.
It is important to note that general liability insurance will not pay for injuries to your own employees, damage to your property, professional negligence, costs of correcting faulty workmanship, contractual liability, and liabilities occurring either before or after the policy term.

c) Business Insurance for Accountants

A business insurance package can ensure the continuity of your accounting business. This type of insurance may cover the following:

• Business interruption – seen or unforeseen disruptions can hamper business continuity and sometimes even result in the bankruptcy of otherwise established firms. This type of business insurance in Hong Kong protects your bookkeeping firm from specified insured events such as property damage or fire. It covers ongoing expenses such as rent and wages to help your firm recover from the insured event.

• Contents – this package covers stock or contents that are damaged due to malicious damage, a fire, storm, or other specified insured events.

• Building – this policy option covers property that may be damaged due to a specified insured event such as a fire or storm.

Business insurance for accountants can be a key aspect of your risk management program. It reduces the uncertainty of business losses and thus helps ensure the continuity of your bookkeeping business.

d) Employees Compensation Insurance

Worker's compensation insurance is an important type of coverage that can help offset medical expenses and lost wages following a workplace injury. This insurance is legally mandatory in Hong Kong for accounting firms that have employees. It also protects the employer from liability. Since this type of coverage is a legal requirement, there isn’t much to think about it. Failure to comply may lead to hefty financial penalties.

e) Cyber Liability Insurance

Bookkeeping is a data-heavy industry. Accountants and other professionals deal with sensitive client information such as social security numbers and banking details nearly on a daily basis. Protecting this information from unauthorized intrusion, ransomware, and other types of IT threats is more of a necessity than an option. Cyber liability insurance helps cover legal fees associated with a data breach that exposes a client’s information.

Conclusion

Accountants and other financial professionals have to juggle between paying bills, hiring quality staff, offering superior service, and keeping up with the latest tax laws. You have a lot on your plate. Still, you need to be aware of and proactively guard against risks that may drain your financial resources and damage the reputation of your service business. Procuring a business liability insurance policy ensures that you do not have to cater for costly damages and legal claims against your company from out-of-pocket. Our team at Trusted Union can help you select insurance coverage that is precisely suited for your needs so you can focus on what matters. We partner with multiple providers to link you to the right plan and the insurance company.

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