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
CPA Malpractice Insurance
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.
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