Q: Do I need extra insurance in the busy season?
A: Because accountants and financial professionals have busy seasons with annual and quarterly fiscal deadlines, your work can be heavily concentrated in certain months. However, you won't need any extra insurance during these peak seasons.
That's good news for accountants: it's one less thing you'll have to worry about during rush season. Your Professional Liability Insurance (also known as Errors and Omissions Insurance) offers you the same level of coverage year-round, meaning even during your busiest times, you'll be protected from the cost of lawsuits.
To make sure you get the most from your E&O Insurance, you should…
- Avoid lapses in coverage. As soon as you cancel your E&O policy or let it lapse, you'll lose coverage for all the work you've done in the past. For example, say a tax preparer lets his Professional Liability policy lapse after tax season is over. He restarts his coverage a month later. Shortly after, a client claims he made a mistake on their return. Unfortunately, because he let his coverage lapse, his insurance won't cover the lawsuit (even if he restarted coverage before he was sued). E&O typically offers claims-made coverage — only covering lawsuits over tax returns, financial advice, and other work you've done while that policy was active, so avoid gaps in coverage.
- Keep your insurance premiums low. If you cancel an E&O policy and later restart it, chances are your premiums will also go up. Starting and stopping coverage is a red flag for insurers and many of them will increase your premiums if you do this.
The best policy for managing your professional liabilities and keeping your insurance costs low is to sign up for an E&O policy as soon as you start your business. Keep this policy active and don't start and stop coverage. As your business grows, you can always increase the limits for your policy for more coverage as necessary.
If you have more questions about small business insurance, makes sure to read "I just started my own tax prep business — what insurance do I need?"