Accountants insurance

Why accountants need insurance in the UK

Accountants insurance is a set of policies designed to protect firms and sole practitioners from financial loss linked to their professional work. At its core is professional indemnity insurance - the cover that helps pay legal costs, settlements, and damages if a client alleges negligence, error, or omission. In the UK, if you hold a practising certificate, professional indemnity insurance is not optional. It is a regulatory requirement designed to safeguard both clients and practitioners by ensuring there is meaningful financial recourse when work is disputed.

Recent rule changes underline its importance. From 1 September 2024, the ICAEW increased minimum indemnity limits, reflecting higher claim values and the rising cost of legal action. From January 2025, enhanced insurance requirements will also extend protection beyond negligence claims, with emphasis on equipment and legal expenses cover to address wider operational risks. Other professional bodies - including ACCA, AAT, and ICAS - maintain their own minimum terms and oversight to keep standards consistent across Great Britain.

This guide explains what the core covers do, how claims typically work, and where the limits and exclusions sit. It also outlines who benefits most, how to judge an appropriate limit, and what affects the price you pay. No hype - just clear, practical information so you can make informed decisions and stay compliant without overinsuring.

Insurance can only protect you if the right cover and limits are in place before a claim arises.

What is covered and how a claim works

Professional indemnity insurance addresses claims alleging professional negligence, mistakes in advice, or failures in service. It typically pays for solicitors, counsel, expert reports, and any damages or settlements agreed with the claimant, up to the policy limit. Many policies include mitigation costs and cover for complaints to professional bodies. Some extend to defamation, breach of confidentiality, and loss of documents. Separate policies or add-ons often cover public liability, employers’ liability, business equipment, cyber incidents, and legal expenses.

A typical claim might involve a tax computation error that results in penalties for a client, or a missed filing deadline that causes financial loss. The insurer would assess the allegation, appoint lawyers, and manage negotiations. You would pay any policy excess and cooperate with the investigation. If the claim is upheld or settled, the insurer pays within the policy limit and subject to terms.

Limits are usually written as either each and every claim - which resets per claim - or aggregate - which caps the total paid during the policy year. Policies usually exclude known circumstances, deliberate acts, fraud, fines or penalties where uninsurable, and contractual liabilities you have accepted beyond your professional duty. Retroactive cover is important because claims often arise from historic work. Check whether your policy has a retroactive date and how far back it goes.

Who benefits most

This insurance is essential for any UK accountant or firm that advises clients for a fee, especially those holding a practising certificate. It is particularly important for practices handling complex tax planning, audits, assurance, corporate finance, and advisory work where losses can be significant. Sole practitioners benefit from having defence costs funded so a single dispute does not threaten cash flow or personal assets. Larger firms need higher limits and robust terms to address multiple matters in a year.

If you work in-house, do not provide services to the public, or operate under another organisation’s policy, separate cover may be unnecessary. However, you should confirm that the employer’s policy explicitly covers your role and activities, including run-off needs if your employment ends.

Picking your level of protection

1. Basic - compliance-focused

   • Who it suits: Sole traders and micro firms needing to meet professional body minimums.
   • Typical features: Professional indemnity to mandated levels, legal defence costs, basic retroactive cover, standard excess. May offer aggregate limits.
   • Considerations: Check retroactive date, limit basis, and any territorial or jurisdictional limits.

2. Standard - broader protection

   • Who it suits: Small to mid-sized practices with varied service lines.
   • Typical features: Higher indemnity limits, each and every claim wording on PI where available, full civil liability, loss of documents, dishonesty of employees, and wider retroactive cover. Option to add business equipment and legal expenses.
   • Considerations: Ensure limits align with fee income multiples set by your professional body.

3. Premium - complex risk cover

   • Who it suits: Firms with significant fees, regulated services, or high-value transactions.
   • Typical features: Multi-million PI limits, defence costs in addition to the limit where available, specialist endorsements for corporate finance, insolvency, and audit, plus cyber and crime cover purchased alongside.
   • Considerations: Model worst-case scenarios. Consider higher excess options to manage premium volatility.

4. Optional add-ons

   • Legal expenses insurance - helps with non-PI disputes such as employment or contract issues.
   • Computer and business equipment - protects laptops, servers, and office tech used in practice.
   • Cyber insurance - addresses data breaches, ransomware, regulatory investigations, and client notification costs.
   • Public and employers’ liability - protects against third-party injury or employee claims at work.

What it costs in practice

A range of factors influence premium levels. Prices vary by firm size, services, claims experience, and chosen limits. The figures below are illustrative and not guarantees.

Typical annual ranges

• Sole traders with low-risk work: roughly £150 - £600
• Small firms with mixed work: roughly £600 - £2,000
• Mid-sized practices needing multi-million limits: £2,000+ depending on risk profile

Can you apply - and what insurers check

Any UK-based accountant or firm offering services to the public can apply, including sole traders, partnerships, LLPs, and companies. Insurers usually ask for your professional body membership, practising certificate status, gross fee income, split of work types, largest clients, engagement terms, internal controls, and the details of any past claims or circumstances. They may request proposal forms, claims summaries, and a copy of your engagement letter and quality control procedures.

Applications can be declined or terms restricted if there is undisclosed or frequent claims activity, high-risk services without appropriate controls, significant past disciplinary action, or if requested limits appear disproportionate to your income and exposure. Clear documentation and accurate, complete disclosures help secure appropriate terms and avoid problems at claim time.

From quote to claim - simple steps

1. Gather fee income, service mix, and claims records for the last five years.
2. Get quotes using consistent limits, excess, and retroactive date options.
3. Compare each and every claim versus aggregate limits and policy exclusions.
4. Confirm compliance with your professional body’s minimum terms and ratios.
5. Purchase the policy, keep documents safe, and calendar renewal reminders.
6. If a complaint arises, notify your insurer or broker immediately and follow guidance.

Benefits and watch-outs

Checks before you buy

Start with your professional body’s rules. Practising certificate holders must carry professional indemnity insurance, with specific minimums. For example, ICAEW increased minimum limits in September 2024, and many smaller firms must hold at least 2.5 times income subject to updated minimum thresholds. ACCA requires minimum limits based on income and full retroactive cover, while AAT licensed members must meet set multiples and minimums by structure. From January 2025, firms should also consider computer equipment and legal expenses to align with enhanced requirements. Confirm whether your PI limit is each and every claim or aggregate, understand any excess per claim, and check exclusions around contractual liability and dishonesty. Review retroactive coverage, territorial limits, and run-off needs if you retire, merge, or cease trading. Finally, budget for renewal changes - premiums can shift with claims trends and market capacity.

Alternatives and related cover

1. Cyber insurance - better for data breaches, ransomware, and privacy incidents that sit outside PI.
2. Legal expenses insurance - helps with employment disputes, tax investigations, and contract claims not covered under PI.
3. Public liability - addresses third-party injury or property damage at your premises or client sites.
4. Office and equipment insurance - protects laptops, servers, and office contents used in your practice.
5. Management liability - covers directors and officers against management-related claims and investigations.

Common questions

Q: Is professional indemnity insurance mandatory for UK accountants? A: Yes, practising certificate holders must maintain appropriate cover. Professional bodies set minimum terms and limits, and clients increasingly require proof of insurance in engagement letters.

Q: What changed in September 2024 for ICAEW firms? A: Minimum indemnity limits increased to improve client protection. Smaller firms must hold at least 2.5 times fee income, subject to updated minimum amounts and higher limits for many practices.

Q: What are the January 2025 enhancements about? A: Firms are expected to maintain broader protection, including computer equipment and legal expenses cover, to address operational risks that fall outside pure professional negligence claims.

Q: How do ACCA requirements differ? A: ACCA sets minimum limits based on firm income and expects full retroactive cover. Members should review terms before structural changes such as mergers to avoid gaps in protection.

Q: What about AAT-licensed members? A: AAT requires mandatory PI with limits tied to income and structure. Sole traders typically need 2.5 times gross fee income with a specified minimum, rising for partnerships and companies.

Q: Should I choose each and every claim or aggregate limits? A: Each and every claim can offer stronger protection where multiple matters may arise. Aggregate limits cap total payments in a policy year. Select based on workload and risk profile.

Q: Do insurers offer schemes tailored to accountants? A: Yes, some providers design policies to meet professional body terms and some broker-led schemes pool risk for more stable premiums. Always check wording, limits, and excesses carefully.

What to do next

List your services, fee income, and any previous claims. Decide on a realistic limit that meets your professional body’s rules and your risk exposure. Compare multiple quotes on an identical basis, review exclusions and retroactive cover, and only buy once you understand the wording. Take your time - the right match matters more than the quickest purchase.

Important information

This guide is general information, not personal financial advice. Policy terms, limits, and exclusions vary by insurer. Always read the policy wording, endorsements, and schedule carefully and confirm compliance with your professional body’s requirements before purchasing.