For your best business protection and savings, we recommend bundling GL with some other important coverages on one Business Owners Policy!
Clients expect bookkeepers and bookkeeping firms to deliver satisfactory work that's free of errors. However, mistakes can still happen no matter how much care is observed. Damage resulting from preliminary work can result in clients filing a lawsuit.
If not inadequate work, then work-related accidents might make a client ask for a settlement. In part of bookkeeping firms, employees can also get involved in accidents causing damage to third parties.
Insurance for bookkeepers and bookkeeping firms provides the first line of defense against financial distress caused by litigations. In this discussion, we'll discuss how this helps.
Also read: CPA & Accounting Insurance: Quotes From $5
Claims made by clients are the ultimate risk that auditors face. Lawsuits against auditing firms can cost millions. In the 1990s, Ernst and Young faced two lawsuits for a mistake made by its auditors. The plaintiff demanded $4 billion in the first litigation and $300 million in the second litigation. Another example is Laventhol and Horwath, which didn’t get back on track after paying a hefty sum for litigation.
Auditors insurance provides coverage for lawsuits filed by clients against auditors. In connection, a study published in 2000 in the Journal of Accounting and Economics gives us an idea of spheres in auditing where litigation may arise, and they are:
Return of investments
Client total assets
Financial distress in terms of stock return, financial leverage, and delist
So how common are lawsuits against auditors? The research published in the Journal of Accounting Research provides a clue. Using various databases having records of audit-related lawsuits, the study found a total of 492 cases wherein a client, creditor, trustee, shareholder, or the SEC filed the litigation. One surprising fact is that it’s not the clients who have the highest percentage of lawsuits filed, but it’s the shareholders instead.
Commercial general liability and professional liability insurance make up auditing insurance. The basic coverage for a basic auditor liability insurance is $1 million. However, if you’re willing to invest a lot for premiums, insurance for bookkeeping business and auditing business might provide more than $5 million coverage.
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The responsibilities of bookkeepers and bookkeeping firms include creating, reviewing, and maintaining financial records of all company expenditures. Also, they must be meticulous with receipts and provide detailed information on their tax returns.
“ Bookkeeping work can involve some costly risks to both the employer and taxpayer who is supplying funds for this particular type of activity. That's why many companies allocate insurance policies for their most valued employees - including credit health care plans and liability release options so that they're protected if anything goes wrong with the record-keeping process or resultant paperwork discrepancies ”, says Chriss Hill, CEO of the designing agency, Bluedesh.
Discrepancies in the bookkeeping process can result in lawsuits arising from accusations of committing a criminal act. The cases below prove this point:
|Bookkeeper Name||Accusation||What Happened Next?|
|Tania Florencio||Using of company funds for personal purposes||Spent $10,000 on bail and was found guilty|
|Joy Wilde||$1 million embezzlements over a course of three years||Spent $200,000 in bail and was arraigned at San Luis Obispo County Jail|
|Wanda Larson||Stole $81,138.64 from employer to pay for purchases, hotel rooms, airline tickets, and PayPal transactions||Admitted to her crime. The penalty, which the court imposed, is unknown.|
|Denise L. Alberts||Accused of stealing money from her company amounting to $86,200||Found guilty of her crime. However, the court did not disclose what the penalty is|
|Mary Bentley||Accused of stealing $30,000 by writing unauthorized checks addressed to herself||Unknown|
|Cheryl Ann Waldron||Accused of embezzling $430,000||Unknown|
|Deborah Evin||Over $50,000 embezzlement from two dental clinics||Unknown|
|Kathleen "Kathy " Ann Wilkie||$208,000 embezzlement from the school she was working for||Unknown|
|Twyla Kay Bucholz||Stole $60,000 in a course of 6 years from the eye care center she was working for||Issued with a detention order by the court district judge|
|Valorie Diane Bradley||Embezzlement $3 million while working as a bookkeeper||Charged with four counts of theft amounting to $250,000 and got released after paying a $100,000 bond.|
|Rebecca Rae Thompson||Accused of giving herself a raise and spending more than $100,000 of company funds for personal purposes||Unknown|
|Robert Wills||Embezzled by forging checks amounting to $26,280||Attempted to sort things out by settlement (amount paid to the plaintiff is unknown)|
|Stephanie Leblanc||Embezzled $51, 380 of bingo proceeds by altering bookkeeping records||Charged with four counts of filing or maintaining false public records|
|Roscoe Fields||Mishandled $302, 601 while processing the payroll of a client||Unknown|
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A general liability policy covers physical injuries caused by employees or the office. Clients have the liberty to file a claim if a bookkeeping firm or a bookkeeper has liability for the damage done.
There are 670 cases of trips, slips, and falls in bookkeeping offices. This is from the database of the Bureau of Labor Statistics . In addition, there are 790 additional cases wherein individuals slipped or tripped but didn’t fall.
Slipping, tripping, and falling might sound like day-to-day accidents in the office, which doesn’t lead to disastrous results. Though minor, some injuries might have significant effects on the victim, especially if body parts such as the eyes, arms, head, leg, and foot are affected.
You need general liability coverage because settlements for physical damages a bookkeeping firm or bookkeeper cause isn’t cheap. The table below shows the rates of compensation based on injury.
|Type of Injury||Settlement Rates|
The costliest injuries to settle are leg injuries, eye injuries, head injuries, arm injuries, and foot injuries. A valid explanation is that such body parts are integral for performing daily tasks and injuries dealt with them, even though minor, can impair a person’s ability to work, move around, and use objects. In addition, these body parts also take long periods of recuperation to fully heal.
Bookkeeping firms and bookkeepers never fail to use their own vehicles to meet clients, attend conferences, and other important meetings. Failure to get auto liability coverage is bad not only because it goes against state laws but also because it leads to vulnerability from road accidents.
Using data we compiled from different studies, we found out that there’s an average of 186,174,387 motor vehicle accidents that happened in the United States from 1900 - 2018. We also looked at the report of the U.S. General Services Administration: Office of Motor Vehicle Management for further reference and discovered that 6,420,000 auto accidents happen in the United States every year. In addition, human errors comprise 98% of car crashes. These human errors are:
Failure to wear a seatbelt
Miscommunication with other drivers
Auto-liability insurance coverage isn’t only needed due to the likelihood of bookkeepers or bookkeeping firms getting involved in a car crash. It’s also needed just in case there are fatalities. The National Highway and Safety Administration reports that 21,160 died from motor vehicle crashes that happened in 2021, and this is the highest recorded number of fatalities since 2006. The agency also reports that there are 1,280,000 fatalities per 100 million vehicle miles traveled.
What if you’re running a bookkeeping firm and your employees get into road accidents? How much will the costs be? NETS’ (Network of Employers Travel Safety) states that employers spend $72.2 billion in road crashes involving employees. Below are further highlights of its report:
On-the-job highway road accidents cost employers $26,081 on average per crash.
Employers spend a total of $3.8 billion for car crashes involving property damage only.
Employers spend a total of $46.1 billion per accident caused by employees wherein the other party experienced fatalities.
For car crashes resulting from failure to wear seatbelts, employers spend $7.4 billion all in all.
Employees who were at fault for accidents resulting from drunk driving were also shouldered by employers, and the total expenditure amounts to $8 billion.
Employees are not exempt from causing accidents due to distracted driving, and employers pay a total of $18.8 billion for this.
Speeding is another cause of accidents that employers have to pay for employees, and it amounts to $9.8 billion all in all.
The table below provides further information if you’re wondering how much car accidents cost employers in different locations of the United States:
|State||Car Accident Cost|
|District of Columbia||$8,000,000.00|
Professional Indemnity Insurance for Bookkeepers
Professional indemnity insurance provides funds the settlements and legal expenses if ever a bookkeeper or bookkeeper firm commits mistakes specified in the proceeding section. Bookkeepers handle a lot of tasks and that’s why sometimes, mistakes are bound to happen no matter if a large degree of care is exercised.
In practice, professional indemnity insurance provides funds attorney fees and expenses for court proceedings. It also takes care of the amount the plaintiff demands to compensate for the damage done.
If you’re a bookkeeper working independently, it’s best to get bookkeeper insurance for small businesses that’s available online. If you’re running a bookkeeping firm, work with carriers experienced with handling the insurance programs of companies. Before proceeding, ensure that your professional liability insurance policy doesn’t only provide coverage for attorney fees and plaintiff settlements but also witness attendance fees, administrative fees, and court filing fees.
Here is the list of errors and omissions covered by professional indemnity insurance for bookkeepers:
Improper or poor record-keeping
Mistake in categorizing expenses
Failure to reconcile bank accounts
Not processing sales tax
Poor petty cash management
Forgetting to track reimbursable expenses
Disclosing confidential information to third parties
Unintentional falsification of records (for example, if mandated by a higher-up)
The average cost of errors and omissions for bookkeepers is $38 a month or $456 a year.
The cost of a $1 million general liability insurance for bookkeepers is $25 per month or $300 per year. Factors that affect premiums are location, business history, business size, claims history, and more. Here’s a table showing how much the best companies charge for their $1 million general liability insurance:
|Company||Cost per month||Cost per year||Best for|
|CoverWallet||$42||$504||Bookkeeper insurance quotes comparison online|
|Zensurance||$27||$324||Bookkeeper insurance with specialized legal defense coverage|
Here are some review showing the pros, cons, and average pricing for a $1 million general liability coverage of the best bookkeeper insurance companies.
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Doesn’t offer tailored coverage for bookkeepers
CoverWallet covers bookkeepers with its accountants insurance. Coverage options are general liability only, general liability with professional liability, and general liability with commercial property and professional liability insurance.
Best for: Bookkeeper insurance quotes comparison online
Average cost: $42
Our rating: 10/10
Has a specialized legal expense coverage
Save up to 35%
Doesn’t offer commercial auto insurance for bookkeepers
Zensurance offers professional liability insurance, general liability insurance, and cyber liability insurance for bookkeepers. You can also decide to get legal expenses coverage to increase the legal defense coverage limits of your general liability and professional liability insurance from this company.
Best for: Bookkeeper insurance with specialized legal defense coverage
Average cost: $27
Our rating: 10/10
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