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Why Tax Preparers Need Professional Liability Insurance
Taxes and money are a volatile combination in current litigious times.
If a mistake is made
on client tax returns and a business loses money, tax professionals will be at a high risk of getting
sued. Tax preparation is a highly regulated industry that runs on strict deadlines. Failure to adhere
to key regulatory codes or missing a filing date can create an exposure resulting in litigation or
disciplinary/regulatory proceedings. Fortunately, one can avoid such risks by safeguarding
themselves as individuals and their business with professional liability insurance.
Professional liability insurance mitigates the risks of preparing tax
returns and maintaining company records and books. Also known
as errors and omissions or malpractice insurance, professional liability
insurance covers the expenses of defending oneself against
accusations of professional negligence. Coverage provides for the cost
to hire an attorney and pay any legal defense fees as well as
settlements or financial judgments ruled against the insured. Even the
most seasoned tax professionals can make mistakes. A client can
bring forth a lawsuit for any reason, especially if they perceive that
wrongdoing or negligence has taken place.
Purchasing a professional liability policy is a means of risk transfer.
When an insured
professional pays their premium, they have decided to outsource their professional risks by
entering an agreement with their insurance company which provides:
Notably, the aforementioned costs resulting from client accusations and legal expense can add up fairly quickly. Obtaining professional liability coverage is a simple way to gain peace of mind. Certain services fall outside of a tax preparer’s professional liability insurance policy and remain uncovered. Common exclusions include:
Additionally covered areas of practice include but are not limited to:
It is important to purchase a professional liability coverage specifically tailored to your professional needs and with your interests in mind. Coverage provides peace of mind in a few ways:
Reduces financial uncertainty.
It replaces a large, unknown risk (the chance of getting sued) with a smaller, known expense (insurance premium). Most tax preparers understand this importance when it comes to business finances.
Provides easy and quick access to a proven defense attorney. If a lawsuit is brought against an insured, acting swiftly is necessary. Professional liability insurance takes care of attorney assignment and other legal logistics.
Reduces stress. Facing a lawsuit can be an incredibly stressful and time-consuming experience. First, it raises the possibility of liability for a large settlement or judgment. Without an insurance policy, an individual creates a massive exposure to their livelihood by accepting their everyday professional risks. Litigation against an insured can also raise questions about professional competence, which may become public. Professional liability insurance pays for an attorney in an effort to have the claim(s) dismissed or even settled outside of court. A lifeline of support for both the financial and emotional strain of being sued can go a long way.
Fills in insurance gaps general liability or other business insurance fails to address. Many tax preparers believe their general liability insurance or business owner’s policy (BOP) covers professional mistakes or negligence. In most cases, they only cover third-party injuries and property damage, not mistakes made during the rendering of professional services.
Given the importance of protecting a business against client lawsuits, it’s crucial to pick an insurer with industry expertise. Here are some things 360 Coverage Pros can guarantee outside of a great price:
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Tax Preparer professional liability insurance safeguards against financial damages arising from an alleged mistake that you make while rendering professional tax preparing services. In layman’s terms, it helps protect you when you make a mistake or forget to do something important that ends up hurting a client.
If you make a mistake or are accused of negligence when rendering professional tax preparation services, it can trigger a client lawsuit that can cost thousands of dollars to defend. If you are found liable, and a judgment is levied against you in a court of law, you may also be responsible for settlement costs. Having an professional liability insurance policy in place provides you with expert legal counsel in the event of a claim and helps protect your current and future earnings. It also safeguards your business and personal assets against the high costs associated with client litigation and court settlements.
Professional liability insurance policies are all different from carrier to carrier, so it’s important to carefully read your policy to understand coverages, exclusions, limits, deductibles and other key policy considerations. Tax Preparer Professional Liability Insurance policies from 360 Coverage Pros are specifically designed to protect Tax Preparers, Bookkeepers, Accountants, CPAs, Enrolled Agents, Annual Filing Season Program Participants and PTIN Holders in multiple areas of practice including, but not limited to:
In addition to our professional liability coverage, we offer the following at no additional charge: