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CPA Malpractice Insurance

CPA malpractice insurance is professional liability coverage for certified public accountants. These professionals need to have coverage to protect them from clients suing them for negligence. For example, if a CPA gave a client bad financial advice or misappropriated their money, the client would have definite grounds for a lawsuit. In cases where the damages are intangible, the amounts may be costly. This is why insurance is so important.

When a client files a claim against a CPA who has malpractice insurance, the insurance company will allow a specific dollar amount for each incident. Each CPA must choose their amount limit. In most cases, they choose $1 million per incident. CPAs who deal with high-profile clients should purchase a higher maximum allowable amount per incident.

CPA Malpractice Insurance Prices

Prices of insurance vary, ranging from a few thousand dollars or more than $50,000. The factors affecting the price of a premium are the state in which the CPA lives and practices, claim history, the type of business and the insurance underwriter's rules. Every state has a different rate from another. State-based rates are determined by collecting statistical data regarding lawsuits and the amount of awards plaintiffs collect.

There are several companies that sell CPA malpractice insurance. Most companies offer a variety of plans, each designed for different types of customers. For example, a CPA who practices independently needs an independent plan. CPAs who work in a small office or partnership qualify for a discounted group plan. Large companies or firms that take in an excess of $10 million annually qualify for company plans.

CPA Malpractice Insurance - Group vs. Individual Plans

It is important to remember that group and company plans may not offer the same protection as an individual plan does. Depending on the insurance provider, the provisions may be slightly less or significantly less than an individual plan. Company and group plans are designed to protect the company or group as a whole more than the individual. CPAs who find their company's coverage to be inadequate should purchase a personal policy.

Most CPA malpractice insurance companies offer payment for personal damage, property damage and litigation expenses. The best companies also offer license protection, travel expense allowances and claim-free discounts. License protection ensures the CPA may still practice if a lawsuit is lengthy. Travel expense allowances are beneficial for cases that happen out of the immediate area. Claim-free discounts result in a premium amount discount for each cycle or year that passes without any claims made.

Last modified: May 6, 2011