Something that we don't hear much about in the bookkeeping profession is the risks we are taking on when handling sensitive client information and / or affecting their financial well-being. Is it a requirement for us to carry professional insurance as bookkeepers? Or are the risks so low that we don't really need to worry about it, especially when working freelance?
The short answer is that, no, generally it is not a requirement for us to carry professional insurance of any kind. That doesn't mean, however, you shouldn't.
TFB Spotlight on Jock Wols of RiskDesk
Over the past year, since the popular blog post that discussed professional liability insurance for bookkeepers, I've been in email conversations and then telephone calls with Jock Wols of RiskDesk. He has been especially focused on the plight of freelancers, and his expertise is in insurance matters for the accounting profession. So I knew it would be valuable to us to interview him for a deeper understanding on this important topic.
Here is the 47-minute conversation we had that I think you'll find very helpful in making the decision as to whether you feel you need professional insurance for your bookkeeping practice.
Disclaimer: This interview is not designed to replace the advice you should get regarding your own unique situation, since I am neither a lawyer nor an insurance professional. This is for information purposes only.Â
Would you rather listen to the interview on the go? Â Download Audio HereÂ (right-click and â€œSave Asâ€¦â€)
Vulnerabilities we have as bookkeepers
The work we do has a financial impact on our clientsâ€™ financial well-being when mistakes happen.
The nature of our services by handling finances sometimes means clients have unrealistic expectations. The litigious world we live in makes us a target in some cases.
Cyber-criminals are also going after smaller companies now, so we are more of a target for them than we used to be.
Whatâ€™s the difference between Professional Liability insurance, Errors & Omissions, and Malpractice insurance?
These terms are used interchangeably and thereâ€™s no real difference. It protects you against claims for lack of services or perceived errors youâ€™ve made in serving your clients.
The need for insurance doesnâ€™t have anything to do with the quality of your services. You can still be sued even if you have made no mistakes and provide high quality services.
TIP:Â Best practice â€“ if there are some problems where a client is unhappy and making threats, even if it hasnâ€™t materialized into a claim against you, you should contact your professional liability insurance carrier because they can help you protect yourself if things go badly.
Protection if one of your clients gets sued
You could also be at risk, even in a frivolous law suit since lawyers try to cast a very wide net on who to blame. Insurance protects you from needing to pay the defense costs out of your own pocket.
TIP: Communicate as much as possible. Many insurance case problems happen when someone tries to fix the issues on their own without assistance.
Best Practice: Keep your standards high as to the clients you will work with
If a client is engaged in fraudulent activity, as a bookkeeper, you do not want to be implicated in their crime. Do not turn your head the other way. Hold your clients accountable for â€œfishyâ€ transactions and disengage if you discover they are doing anything dishonest.
Always use a written agreement with all your clients. Otherwise you make it much more difficult for the insurance company to protect you, even though it isnâ€™t bulletproof.
What is a claims made policy?
Any claims made during the policy period are covered. If you donâ€™t renew your policy, even if a claim comes up later that happened during the time you were insured, if the policy is not current, you will not get any coverage from the insurance company.
Is Professional Liability Insurance Expensive?
Everyoneâ€™s situation is different, and it will depend on how much coverage you want (limit of liability) and how high you choose for your deductible. You can try out the new tool below under Resources to get an idea of what it might cost you.
Carrying insurance is the cost of running a professional business.
What should bookkeepers know about cyber-insurance?
This is a rapidly emerging risk class for insurance. What a cyber-policy looked like a few years ago is quite different from what they are today. There is a lot of gray area on cyber-insurance policies. Some Errors & Omissions policies do cover some claims for cyber-related situations, but you should investigate specifically what is excluded to know where the gaps are.
TIP:Â Your insurer could add cyber-insurance endorsement to your existing Errors & Omissions. Itâ€™s not the same coverage as a standalone policy, but provides some protection and usually at a lower price.
As a virtual bookkeeper, you may be required to carry this type of insurance by some clients, especially in healthcare.
As mentioned in the interview, Jock has been developing a platform specifically for the insurance needs of freelancers, including bookkeepers, in partnership with Nationwide Mutual Insurance Company. If you'd like to get a pre-launch peek at how it works (designed to give you a quick quote with no obligation), check out the link below
They are in the process ofÂ rolling this out â€“ currently available in 24 States. If you want to get a feel for how it works to get a quote for bookkeepers, just try your zip code and see if it's available in your State yet.
Have you had any incidents where you either had or wished you had professional liability or cyber-security insurance?