Accountants & CPAs Coverage Guide
CPAs face E&O claims from missed deductions, audit defense errors, and misapplied tax law. Cyber exposure is severe — tax-prep firms hold full Social Security numbers, prior returns, and bank credentials for every client.
Critical Coverage
Professional Liability (E&O)
Covers claims of negligence or mistakes in professional services
What it covers
Defense and damages for claims of professional negligence — missed deductions, bookkeeping errors that cause IRS penalties, audit defense failures, financial statement errors that mislead investors.
Common misconception
CPAs think 'we follow GAAP, so we're safe.' Most claims aren't about GAAP — they're about missed elections, late filings, communication failures, and clients' unrealistic expectations of tax outcomes.
What it does NOT cover
Intentional fraud. Personal bankruptcy of the CPA. Claims arising from work outside the policy period without prior-acts coverage. Criminal acts.
The gap — what happens without it
You miss a Section 754 election on a partnership return; the missed step-up costs the partner $180K in future tax savings. Even if your error wasn't 'gross,' the partner sues. E&O defends and pays the settlement.
What drives your premium
Annual revenue, services mix (tax prep alone vs. audit work — audit is much higher), client size, prior claims, years in practice
Endorsements to ask about
Prior acts coverage (covers errors discovered now from work done before policy inception). Cyber sub-limit. Privacy/notification expenses.
Cyber Liability
Covers data breaches, ransomware, and digital threats
What it covers
Breach response (forensics, notification, credit monitoring), regulatory defense (state AG, IRS Sec. 7216 violations), business interruption from ransomware, and third-party claims from clients harmed by your breach.
Common misconception
Tax prep firms hold the most sensitive PII a small business can hold — full SSNs, prior returns, bank routing/account info, and dependent SSNs. A single ransomware event can effectively close the practice during tax season.
What it does NOT cover
Unencrypted devices/data (some). Known vulnerabilities not patched. War/nation-state attacks (narrowing).
The gap — what happens without it
Ransomware encrypts your tax software and 4 years of client files mid-March. Forensics ($30K), notification to 600 clients ($8K), credit monitoring ($45K), and 3 weeks of lost productivity during peak season ($90K) total $173K. Cyber pays — without it, your practice is gone.
What drives your premium
Records held, MFA/encryption, employees, prior incidents
Endorsements to ask about
Funds-transfer fraud (social engineering). System failure (non-cyber outages). IRS Section 7216 defense.
Important Coverage
General Liability
Covers third-party bodily injury and property damage claims
What it covers
Slip-and-fall in your office, advertising injury (defamation in marketing), property damage to client property at meetings.
Common misconception
CPAs think 'we don't have customers visit much.' Even rare client visits create premises liability.
What it does NOT cover
Professional services errors (E&O). Cyber. Employment.
The gap — what happens without it
Client trips on a loose carpet in the lobby — broken wrist, $14K medical. GL pays.
What drives your premium
Office size, employees, revenue
Endorsements to ask about
Hired/non-owned auto. Employee benefits liability.
Employment Practices Liability (EPLI)
Covers wrongful termination, discrimination, and harassment claims
What it covers
Wrongful termination, discrimination, harassment, retaliation claims from employees.
Common misconception
CPA firms think 'we're a small professional shop with all professional employees — we're safe.' Mid-size firms (15–50 employees) have disproportionately high EEOC charge rates.
What it does NOT cover
Wage/hour class actions (often sub-limited). WARN Act. Workers' comp.
The gap — what happens without it
A staff accountant fired for performance files an age-discrimination charge — defense costs $42K, settlement $65K. EPLI pays.
What drives your premium
Employees, state, prior claims, HR documentation
Endorsements to ask about
Wage/hour defense. Third-party coverage (client harassment claims).
Business Interruption
Covers lost income when operations are disrupted
What it covers
Lost income when a covered property loss closes the office; for tax-prep firms, January-April closures are catastrophic.
Common misconception
CPA firms think their work is portable. Try doing complex returns from home with no records and no IT infrastructure during a 3-month restoration.
What it does NOT cover
Pandemic shutdowns. Utility failures off-premises. Closures from undamaged property without civil-authority coverage.
The gap — what happens without it
Office fire in February closes the firm for 6 weeks. Tax-season revenue lost: $180K. BI with extended period of indemnity pays.
What drives your premium
Revenue, lease, restoration time
Endorsements to ask about
Civil authority. Extended period of indemnity. Dependent property.
Not sure what you need?
Text us your trade and state — we'll tell you exactly what coverages apply to your business and shop the market for the best rate.