Everyone makes mistakes, but in some businesses those mistakes can be quite costly and, sometimes, result in someone running afoul of the law. When accountants make mistakes, their clients may be audited by the government and face penalties that can cost them thousands of dollars. In order to protect themselves, accountants can purchase indemnity insurance that will cover the cost of defending themselves against claims made by angry clients who have been harmed by their mistakes.
What is Indemnity Insurance?
Indemnity insurance, which is also known as personal liability insurance, is a type of policy designed to protect professional accountants when their clients make claims against them for mistakes that they may have made. This type of chartered accountant insurance is required so there are several different companies that offer it, including Accountancy Insurance. However, not every policy is the same and it is important to find a policy that provides you with the best protection.
What does Indemnity Insurance Cover?
If you have a client that believes you made a mistake on his or her account and he or she was fined by the government due to that error, he or she may take you to court. If that happens, your indemnity insurance will pay the costs associated with your defence. If the suit against you is successful, then the insurance policy will also cover the damages that the client is awarded.
Examples of the types of claims covered vary by insurance company, but some of them include claims from clients who have received bad tax advice and were penalised by the taxation office. Claims can also be paid if the accountant under- or over-valued a business, which could have resulted in penalties from the ATO. When a former client hires a lawyer to take action against you, you can contact Accountancy Insurance, or whoever holds your indemnity insurance, to help cover the costs of representation.
Some insurance companies will help you assess your practices and make suggestions to try to reduce the number of claims made against your firm. The company will provide you with risk management tools to improve practices and educate others to help reduce the risk of being sued. Staying out of court will not only reduce costs, but it can also help your firm maintain its good reputation among your clients.
Filing claims with many companies is easy because all you have to do is alert them to the fact that a former client is taking you to court. In most cases, you don’t even have to find your own solicitor to defend you as some insurers will have a list of designated lawyers in your area. They can appoint one who will represent your best interests and who is paid by your policy for their assistance.
Even though you may have years of experience, anyone can make a mistake and it is important to protect yourself financially. If you are sued by a former client and the suit is successful, having insurance will pay any damages for which you are liable.