As a business owner, you must ensure you're covered for every possible situation. I personally know this all too well after having my business interrupted by the flood in my home after Hurricane Ian in September 2022.
Your business needs to be insured, so you're covered if anything happens. This article will examine some of the different insurance policies available to an accounting or bookkeeping firm owner, and how to pick the right one for your business.
No business is without risk, and accounting and bookkeeping are no different. There are a variety of insurances you should consider to protect yourself and your business.
- Professional Liability insurance: This type of insurance, also known as errors and omissions insurance, can protect the bookkeeping firm if a mistake or negligence results in financial loss for a client.
- Cyber Liability insurance: This is often missed and is increasingly important in our remote world. Firms are increasingly at risk of cyberattacks and data breaches, so cyber liability insurance can help protect the firm and its clients in case of such events. Note the FTC Safeguards Rule becomes effective June 9, 2023.
- Business Interruption insurance: I know this one all too well after living through the flood at my home office from Hurricane Ian. This type of insurance can help cover the costs of lost income and expenses if the firm cannot operate due to a covered event such as a natural disaster or fire.
- General Liability insurance: This type of insurance protects our firms if an accident or injury occurs on their premises or as a result of their operations.
- Workers' Compensation Insurance: If the firm has employees, they are legally required to have workers' compensation insurance. This covers the costs of medical expenses and lost wages if an employee is injured while working.
Insurance for partnerships
But what if you have a partner in your business like Sarah Prevost and I do at The Proper Trust, LLC? If the firm is a partnership, the types of insurance needed may be similar to those for a sole proprietorship, but with additional considerations. Here are a few types of insurance that may be particularly relevant for a partnership:
- Partnership Liability insurance: This type of insurance can protect the partners in case of legal claims or lawsuits brought against the partnership.
- Personal Liability Iisurance: Each partner should also consider getting personal liability insurance, especially if they own any assets that could be at risk in a lawsuit, such as a home or investment property. Personal liability insurance can also protect if one of the partners is sued in their individual capacity.
- Key Person insurance: If one or more partners play a crucial role in the business' success, key person insurance can provide financial protection to the partnership in case of their disability, illness, or death.
- Business Continuation insurance: This type of insurance can help the remaining partners buy out the share of a partner who becomes disabled or passes away, ensuring that the business can continue to operate smoothly.
3 tips for success
Tip 1: Analyze your options and choose the best plan
Now that you better understand the insurance options available to protect your business, it’s time to decide which plans are right for you. Take the time to research and compare each option carefully, looking at coverage details and premium costs. This will help you determine which plan best suits your needs and budget. Once you have decided on the ideal policy, speak with an insurance broker or agent to finalize your selection and purchase the policy. If you do not have contacts in this area, ask your colleagues for referrals.
Tip 2: Review your policy periodically to ensure up-to-date coverage
Staying on top of your insurance policy is key to protecting your business. Take the time to review your policy periodically, and make sure that any changes in your business’ operations have been accounted for, such as new staff members or a change in equipment or facility. Consider talking to an agent or broker before and after making significant changes to ensure you are fully covered in all scenarios. This will help you avoid surprises and ensure that your firm has the protection it needs throughout its lifespan.
Tip 3: Keep accurate records of claims or payments for future reference
Keeping records of claims or payments is an easy way to track what has already been purchased and any adjustments made.
This information is also helpful when discussing insurance with a broker and reviewing the current policy to ensure it still fits your needs. In addition, these records can provide evidence when filing a claim. Be sure to store all documents related to purchases and changes in coverage, including copies of invoices and notices from the insurance company, electronically and physically for secure backup.
It's all about risk
When it comes to insurance, remember that the more risks you're willing to take on, the cheaper your premiums will be. Conversely, if you want to be protected against all types of risks, you'll have to pay a higher premium. Plenty of options exist, so you should be able to find a plan that fits your budget.