5 key questions for liability insurance

October 5, 2022 9:00 AM

With the professional liability insurance market hardening thanks to the repercussions of the pandemic, Candace Coach, small-firm sales manager at Aon, the broker and administrator of the American Institute of CPAs' Professional Liability Program provided the following tips for accountants who are looking to protected. (See our 2022 Buyers' Guide to Professional Liability Insurance.)

What are you protecting?

When a CPA comes to us for coverage, before we talk about things like risks or policy limits, we ask them to think about what they're looking to protect with professional liability insurance. For a CPA, that's a big question, because the answer includes not just their business but also their professional reputation and even their clients' personal assets.

Have you considered the 'Three Ps'?

We tell CPAs to consider the Three Ps when they're shopping for professional liability coverage: paper, program and people. Paper means examining details like coverage scope, limits and deductibles, and the track record of the organization paying the claims. Program includes endorsements, risk management tools, and the provider's financial history. People is about industry experience and expertise, as well as the advisor's approach to working with clients. These three elements play such an important role in the overall insurance experience.

What are your limits?

A review of the paper should include the coverage scope, limits and deductibles, and who's paying the claims as well as that organization's track record.

The limits and deductibles piece is critical because CPAs need to make sure the policy is sufficient for their needs. This is really a question of what you could afford to pay out of pocket in the event of a claim. Are the limits high enough to cover a worst-case scenario? Is the deductible too high or could it be cost-prohibitive? Depending on where a CPA does business, they may also have to comply with state insurance minimums, so we suggest checking with state board of accountancy on any regulations.

Where is the Devil?

As CPAs consider a program, they should pay attention to details like the provider's financial history — its rating, how long it's been serving the industry, its stability and more. They should get an understanding of the program's full line of coverage options, like employment practices liability and cyber insurance, with an eye on what they need today and might need tomorrow as their risk profile evolves. CPAs should also look at the risk management resources the provider offers. For example, we give our clients access to online educational resources and special learning events to help them better understand and manage their risks.

How well do they know accountants?

From a people perspective, you want to talk to someone who talks to CPAs like you every day, someone who's truly working on your behalf. This can be a complex industry with unique risks; having a partner who specializes in working with CPAs can make a difference. Industry experts understand the emerging risks and can raise the questions you're forgetting to ask as you shop for coverage. They can tailor coverage to your specific needs and help you evolve that coverage as your risk profile evolves. They're there to protect that which you have worked so hard to build.