Perhaps more than any other type of business, tax preparers can benefit from errors and omissions (E&O) insurance. With all the numbers, laws, and regulations related to the work you do, it’s easy to make mistakes that could result in client lawsuits.
Errors & Omissions insurance, or professional liability insurance, is one of the least understood business coverages. The truth is that what it protects against is relatively simple: Lawsuits related to mistakes made by you and the people who work for you when providing tax services and advice to your clients.
Even if you’re the absolute best at what you do and run a completely buttoned up operation, mistakes and unintentional errors happen. If a client or customer believes something you or an employee do while providing tax services to them resulted in a financial loss or other harm, they can sue you. And these days, they often do.
E&O insurance helps cover you and your business if a client or customer sues because they aren’t happy with the tax service or advice your business provided to them. This coverage is also known as professional liability or indemnity insurance.
In this article, we’ll reveal the top six errors and omissions insurers for tax preparers in the U.S. and explain what makes them the best. We’ll also provide you with the information you need to get the coverage that’s right for you.
- 6 top errors and omissions insurers for tax preparers
- Errors and omissions insurance for tax preparers
- What does E&O insurance for tax preparers cover?
- What other types of insurance do tax preparers get?
- What E&O insurance for tax preparers doesn’t cover
- How much does errors and omissions insurance for tax preparers cost?
- Ways to save money on your errors and omissions insurance
- How to find cheap errors and omissions for tax preparers
6 top errors and omissions insurers for tax preparers
- CoverWallet: Best for tax preparers that want to compare several quotes quickly
- biBerk: Best for low-cost errors and omissions coverage
- Hiscox: Best for small tax businesses with unique E&O coverage needs
- Liberty Mutual: Best for tax preparers that are growing and changing
- The Hartford: Best for tax businesses looking for a sound and ethical insurer
- THREE: An all-in-one business insurance policy that includes E&O coverage
CoverWallet: Best for tax preparers that want to compare several quotes quickly
CoverWallet is a cutting-edge insurance provider. The firm has developed its own state-of-the-art platform, based on its own algorithms, to ensure it is able to connect small businesses with all the E&O and other business insurance they need, at the most reasonable price. The platform makes it quick and easy to get quotes from several providers at once, making it possible to compare quotes from highly reputable insurers all on a single screen.
The firm’s experts have used their extensive experience to make sure you only have to input the information needed to generate quick and accurate quotes. The entire process should take ten minutes or less.
You can feel confident knowing that CoverWallet is a part of Aon, an established company that provides advice to businesses on things like risk, health, and retirement.
Once you get your quote, CoverWallet makes it easy to purchase E&O and other business insurance online or through an agent. When you get your policy through CoverWallet, it’s simple to manage your coverage online, including downloading a certificate of insurance, filing a claim, renewing your insurance, and more.
As you can see below, we are able to get several quotes from CoverWallet for a small tax preparation service with two partners. Hiscox offers a lower monthly premium in this case, but they might not offer the lowest premium for your case, so be sure to shop and compare your own quotes.
biBerk: Best for low-cost errors and omissions coverage for tax preparers
biBerk makes it simple to get an E&O quote online in less than five minutes. Getting complete business coverage only takes a few minutes more.
biBerk is a low-cost business insurance provider. Despite saving money on your E&O insurance and other business coverage, you can rest assured knowing you’re still getting quality protection for your business. biBERK is able to lower insurance costs by almost 20 percent because it insures small businesses direct, without the added costs of having to work through a middleman or insurance broker. However, as you can see the quote below, biBerk isn’t necessarily cheaper than Hiscox’s or Chubb’s quotes that we got from CoverWallet above. So be sure to shop around with a few companies to get and compare your own quotes.
You can rest assured knowing biBerk is a part of Berkshire Hathaway, a highly reputable company headed by well-known investor Warren Buffett. It’s a firm that has millions of satisfied customers that’s been insuring people and businesses for more than 75 years.
Hiscox: Best for small tax businesses with unique E&O coverage needs
Hiscox offers a complete array of business coverages, including errors and omissions insurance, and is a leading insurer that specializes in small companies.
Hiscox makes it easy to purchase most types of business insurance online. You can also speak with experienced business insurance experts who can help you customize your coverage to meet the specific risks you and your employees face. The insurer is known for its top tier service, providing fast quotes, supplying instant coverage, and processing claims quickly.
If you choose Hiscox for your business coverage, you can feel confident knowing you’re entrusting your organization to a firm that’s been in operation since 1901. More than 400,000 companies have turned to Hiscox for their coverage.
Below is the quote we got from Hiscox directly for exactly the same tax preparation service. It is reassuring that whether you get the quote directly on Hiscox website or through CoverWallet, a digital broker, the monthly premium are exactly the same.
Liberty Mutual: Best for tax preparers that are growing and changing
Small businesses change over time, and their insurance needs evolve, as well. Liberty Mutual is uniquely able to serve their changing insurance needs. This is especially important when it comes to errors and omissions coverage. It’s not enough to secure coverage once, you need to keep up with it and get more and different coverage as your risks increase and evolve.
In addition to E&O protection, Liberty Mutual offers one of the most comprehensive ranges of business coverages of any insurer. They are able to customize policies to meet the needs of virtually any tax business. In addition to this, their experts are always looking ahead to identify new business risks and find efficient ways to cover them.
In addition to its flexibility, Liberty Mutual is a Fortune 100 company and one of the largest insurance firms in the United States and across the globe. You can feel confident knowing that Liberty Mutual will have the funds to cover any claim you make.
The Hartford: Best for tax businesses looking for a sound and ethical insurer
The Hartford is one of the oldest companies of any kind in the United States. It’s been offering insurance solutions for more than 200 years and has helped one million plus businesses with their insurance needs, including many tax firms. The Hartford has been named a World’s Most Ethical Company by the Ethisphere Institute twelve times. The Hartford’s longevity and focus on ethical business practices makes it a company that you can feel good about getting your E&O and other business coverage from.
The Hartford’s dedicated and highly experienced small business team is available to help tax company owners explore their E&O and other commercial insurance options. If you decide to purchase insurance from The Hartford, you can rest assured knowing you’re entrusting your business to a strong, stable, knowledgeable, and ethical provider.
THREE: An all-in-one business insurance policy that includes E&O coverage
If you prefer a single source for all your business insurance coverage, THREE could be the solution for you. It protects all aspects of a business, including people, property, and operations, in a single comprehensive business insurance policy that includes E&O coverage. It’s one of the few single-stop insurers that offers cyber protection as part of its package.
THREE makes protecting a business easy.
You can also rest assured knowing that THREE is a part of the solid and established Berkshire Hathaway family of companies.
Errors and omissions insurance for tax preparers
Errors and omissions insurance, also commonly known as E&O insurance and professional liability or indemnity insurance, protects you and the people who work for you against lawsuits claiming someone made a mistake when providing tax preparation advice or services. This insurance can cover legal and court related costs, along with settlements.
What does E&O insurance for tax preparers cover?
Errors and omissions coverage helps protect your tax preparation business from claims related to:
- Negligence, or gross irresponsibility in providing tax advice or tax preparation services
- Errors in services provided, including common calculation mistakes
- Omissions, including forgetting to communicate important things or leaving out critical information on a tax form or other document
- Misrepresentation, or representing something that’s untrue as true
- Violation of good faith and fair dealing, or providing a level of service that’s outside what a client should expect from a tax preparer or advisor
- Inaccurate tax advice, or providing tax or other financial recommendations that are factually wrong.
Some examples of the types of things E&O insurance for tax preparers could cover include:
- You file a client’s taxes too late, forcing them to pay penalties. They file a claim against you.
- Your assistant misplaces tax records for a client that are needed for an audit. When your client finds out, they sue you.
- You put an incorrect social security number on a client’s tax return, causing them to be returned by the Internal Revenue Service (IRS). Your client files a claim against your tax preparation business as a result.
- Your client asks you how they can reduce the amount they pay in business taxes. The advice you provide is the opposite of what it should have been and doubles their taxes. The client sues you over it.
If someone sues your business for making a mistake related to the tax advice or services you provide, errors and omissions insurance helps cover your:
- Legal fees, which can easily reach six figures even in a frivolous lawsuit
- Court costs, such as reserving a courtroom or paying for expert witnesses
- Administrative costs to build a defense, including paying court reporters
- Settlements and judgments, which typically cost thousands to millions of dollars.
A business insurance specialist with experience in working with tax firms can explain what your E&O policy covers.
Tip: Even if you don’t make a tax preparation mistake, your client can sue you. Your errors and omissions insurance will still cover your legal and other related costs.
What other types of insurance do tax preparers need?
It all depends on your operation, but some common coverages purchased by tax businesses include:
A Business Owners Policy (BOP). It provides many of the core coverages you need to protect your tax preparation business, including:
- General liability insurance covers you and your business if someone is injured at your tax office. It will also cover claims of libel and slander. Example: A client slips and falls in your parking lot and breaks a hip. General liability insurance would pay for their medical care. Learn more at the best general liability insurance companies
- Business property insurance protects your tax office space, whether you rent or own it. The coverage will pay for repairs from damage caused by things like fire or wind storms and other weather events. It will also pay for damage to or theft of office equipment. Learn more at the best commercial property insurance companies
- Business income insurance will pay lost income if you cannot open your tax office and meet with clients because of a reason covered by your business property insurance, such as fire damage or theft. Learn more at the best business income interruption insurance companies
A BOP makes it easy to purchase the other coverages your tax preparation firm needs and add them to your policy. Learn more at the best BOP insurance companies
Tip: If you run your tax business out of your home, it’s critical that you get a BOP. Your homeowners insurance policy will not cover client injuries that happen at your home or work property losses.
Some other coverages to consider include:
- Employment practices liability insurance. This covers you if an employee sues you or your tax firm for things like discrimination or sexual harassment.
- Cyber (data breach) insurance. Tax preparers store a lot of confidential client financial data on their computers and servers. This insurance will pay costs related to a data hack or theft — or a ransomware attack. Learn more at the best data breach insurance companies
- Valuable papers and records coverage. This will pay to replace or restore client files or tax records that get damaged, are lost or stolen.
- Computers and media coverage. Tax firms depend on their computers. This insurance protects you if your computer equipment is damaged by a malicious virus.
- Commercial vehicle insurance. Many tax preparers drive their personal cars to clients’ homes and businesses. If you or someone who works for you has an accident while driving for business, their personal auto policy won’t cover the damages. That’s why it’s important to be protected by a business auto policy. Learn more at the best commercial auto insurance companies
What E&O insurance for tax preparers doesn’t cover
E&O insurance doesn’t cover claims from events that happened before your policy’s retroactive date (the first date that an issue can be covered). It also doesn’t help your business with claims filed after your policy’s extended reporting period (the timeframe, usually three or six months after a policy ends). It also doesn’t cover illegal acts and purposeful wrongdoing, such as intentionally breaking the law or lying to your tax clients.
How much does E&O insurance for tax preparers cost?
The cost of errors and omissions insurance for tax preparers varies. There are many factors that influence how much you’ll pay for this coverage, including your:
- Coverage limits
- Deductible amount
- Number of employees
- Years in business
- Claims history.
The average cost of an E&O insurance policy for an independent tax preparer is $40 a month or $480 a year. Different insurance companies will offer you different quotes. Make sure to shop around with a few companies or with a digital broker with CoverWallet to find the cheapest quote.
Ways to save money on your errors and omissions insurance
You may be able to keep your E&O and other business insurance costs down by:
- Providing your employees with ongoing tax training focused on best practices. Of course, you should take advantage of the training, as well
- Hiring the best people
- Communicating with customers regularly to make sure they’re satisfied and don’t have doubts about the tax services you or the people who work for you provide to them.
How to find cheap E&O insurance for tax preparers
There are a few ways to find the coverage you need at a fair price:
- Shop around for the best value. Get quotes from a few companies and compare coverages and costs to find the best combination of the two.
- Don’t stop shopping around. Make sure you get new quotes when it comes time to renew your policy.
- Take advantage of discounts. If they’re not offered to you when getting a quote, ask about them, whether you’re buying online or through an agent.
Taking these steps will help ensure you’re not paying too much for your E&O and other business coverage.
Professional liability insurance for accountants or CPAs: Coverage, cost, and providers
Similar to tax preparers, accountants, CPAs, and accounting firms need to have professional liability insurance, or E&O policy, to protect themselves from law suits by their clients if they make a mistake or fail a deadline.
The average cost of professional liability insurance for accountants and CPAs is $65, or in the range of $40-$100 a month.
We recommend the following three providers for accountants and CPAs: CoverWallet, Hiscox, and CNA. Learn more at the best professional liability insurance companies for accountants and CPAs.