The following article was written by The Editorial Staff at CyberPolicy and contributed for use on the TaxSlayer Pro blog.
Many tax preparers are surprised by the liability exposure that the industry faces. Lawsuit and litigation are very real threats to tax preparers; a single claim has the potential to fold a business. Fortunately, there are many options available to tax preparers that help plan for, prevent, and insure against costly litigation.
Whether you are new to the game or you’re a seasoned pro, this checklist of essential insurance coverages will ensure that your tax preparer business is protected.
Professional Liability Insurance
Professional Liability insurance, also known as Errors and Omissions (E&O) insurance, is the basic form of coverage needed to operate a tax preparer business. Professional Liability protects you and your business if you’re ever sued for mistakes made on a return or claims of negligence. Typically, Professional Liability insurance covers legal fees and judgments to the plaintiff. For a tax preparer, this means you’re protected if a client sues you for mistakes on their return.
General Liability Insurance
General Liability insurance is a common form of coverage for tax preparer businesses. It protects your business from a range of common claims that can arise as a result of normal business operations – including claims of property damage, personal injury, libel, slander, and defamation.
Business Owners Policy
If you operate out of a brick and mortar location, a Business Owners Policy (BOP) is the logical choice. A BOP pairs General Liability and Business Property insurance into one policy. Business Property will cover damage to a rented or owned property and the equipment inside it. A BOP is the one-two combo of coverage for tax preparer businesses operating in an office or location that is visited by clients.
Cyber insurance is a type of business insurance that covers your tax preparer business in the event of a hack, data breach, or system compromise resulting in data loss (client information) or financial damages. You are responsible for protecting your client’s sensitive information, and if that information is exposed, you are liable. Cyber insurance will cover legal fees and judgments as well as any costs related to recovering data and restoring business operations.
Cybersecurity is a major issue in the tax preparer business. Many people in the field underestimate the threat and overestimate their level of protection. The unavoidable fact remains, that tax preparers are at risk, and the overwhelming majority of them are under-protected.
Workers Comp is a must if you have full or part-time employees or you hire seasonal staff during peak times. Workers Comp is a requirement for employers in 48 states (it is optional in TX and OK), but virtually every employer in every state has this crucial form of coverage. This insurance covers your employees if they suffer an injury or become ill while on the job. Accidents do happen, and your employees will receive financial coverage for missed wages and medical expenses for mishaps that happen at work. It also protects you from lawsuits from employees for workplace conditions that are alleged to cause harm.
Visit CyberPolicy.com for more information
TaxSlayer Pro has partnered with CyberPolicy to offer you affordable business and cyber insurance tailored specifically to the tax preparer industry. Visit CyberPolicy.com or speak with a licensed insurance advisor by calling (844) 307-8681 for more details.