If you're running an accounting practice or working as a CPA, you already know that numbers have to be perfect. One misplaced decimal point, one missed tax deadline, one bad piece of advice—and you could be facing a lawsuit. That's where insurance comes in, and honestly, it's not as straightforward as you'd hope. The good news? Once you understand what coverage you actually need, protecting your practice becomes manageable.
Here's what surprises most accountants about insurance: it's not one policy that protects you. You need a combination of coverages that work together—professional liability for mistakes in your work, general liability for accidents at your office, cyber insurance for data breaches, and potentially more depending on your practice. Let's break down exactly what you need and why.
Professional Liability Insurance: Your First Line of Defense
Professional liability insurance—also called errors and omissions (E&O) insurance—is the most important coverage you'll buy as an accountant. This is what protects you when a client claims you made a mistake that cost them money. Maybe you missed a tax deduction, gave incorrect financial advice, or failed to catch an error in their books. Even if you did nothing wrong, defending yourself in court costs thousands of dollars. E&O insurance covers both your legal defense and any settlements or judgments.
The statistics are sobering: 46% of accountants have experienced situations where mistakes in their work resulted in financial losses or penalties for clients, and 72% of those who made mistakes were held financially responsible. That's not because accountants are careless—it's because the work is complex and clients have high expectations. When money is involved, people sue.
Cost-wise, professional liability insurance typically runs between $500 and $2,000 annually for small practices, though this varies widely based on your revenue, services offered, and claims history. As a rule of thumb, expect to pay about 0.5% to 1% of your annual revenue. So if your practice brings in $200,000 per year, you're looking at around $1,000-$2,000 for coverage. Most policies offer $1 million to $2 million in coverage limits, though larger firms working with Fortune 500 clients may need $3 million to $5 million.
General Liability: Protection Beyond Your Professional Work
General liability insurance covers the physical risks of running a business—the stuff that has nothing to do with your accounting expertise. A client trips over a computer cable in your office and breaks their ankle. A cup of coffee spills on a client's laptop during a meeting. Your employee accidentally damages a client's property while working at their location. These are all general liability claims.
The good news? General liability insurance is affordable, averaging just $30-40 per month for accounting firms. About half of accounting firms pay less than $30 monthly, and 86% pay $60 or less. For this relatively small investment, you get coverage for bodily injury, property damage, and even advertising injury claims. If you rent office space, your landlord likely requires you to carry general liability coverage anyway.
Cyber Insurance: The Growing Necessity You Can't Ignore
Here's what changed dramatically in the past few years: cyber insurance went from "nice to have" to absolutely essential for accounting practices. You're handling some of the most sensitive data imaginable—Social Security numbers, bank account details, tax returns, financial statements. If that data gets breached, you're not just looking at angry clients; you're facing regulatory fines, lawsuits, notification costs, and potentially business-ending reputation damage.
What's more, insurers have gotten really picky about who they'll cover. In 2026, you can't just buy cyber insurance—you have to prove you deserve it. Almost 80% of insurers now require multi-factor authentication across all systems. Many also require endpoint detection and response (EDR) software, regular patch management, and formal third-party risk management programs. These aren't suggestions; they're prerequisites for coverage.
Accounting practices pay an average of $80 per month (about $964 annually) for cyber insurance. That might sound steep, but consider this: the average data breach costs small businesses over $100,000 when you factor in forensics, notification, legal fees, and lost business. Cyber insurance covers breach response costs, legal defense, regulatory fines, and even extortion payments if you're hit with ransomware. Given that litigation now follows most cyber incidents—sometimes within days—this coverage isn't optional anymore.
Business Owner's Policy: The Money-Saving Bundle
If you're running a small accounting practice, a Business Owner's Policy (BOP) can save you money and simplify your insurance. A BOP bundles general liability, commercial property insurance, and business income coverage into one package. For accounting firms, the average cost is about $56 per month or $671 annually—which is often less than buying these coverages separately.
The property coverage protects your office equipment, furniture, and supplies if they're damaged by fire, theft, or covered disasters. The business income portion kicks in if a covered event (like a fire) forces you to close temporarily—it replaces your lost income and covers ongoing expenses like rent and payroll while you get back on your feet. BOPs work best for small practices operating out of offices or storefronts; if you're working from home or have a very large operation, you might need different coverage.
State Requirements: What's Legally Required?
Most states don't require individual CPAs to carry insurance, but that changes if you incorporate or form an LLP. Several states have specific minimum coverage requirements for accounting firms:
California requires accounting corporations and CPA firms to carry at least $100,000 per CPA for each claim (capped at $1 million total) and $250,000 per CPA annually (capped at $3 million). Massachusetts mandates $250,000 to $1 million in coverage depending on firm size if you incorporate or form an LLP. Ohio requires CPA firms to show proof of insurance or an alternative capital program when licensing, though specific dollar amounts aren't published.
Even if your state doesn't mandate coverage, many of your clients will. Corporate clients, especially larger ones, typically require proof of insurance before they'll hire you. Fortune 500 companies and publicly traded firms often require $3 million to $5 million in professional liability coverage as a condition of engagement.
Getting Started: How to Buy the Right Coverage
Start by assessing your specific risks. Are you a solo practitioner doing basic tax returns, or do you provide audit services for publicly traded companies? Do you store client data in the cloud? Do clients visit your office? Your answers determine what coverage you need and how much.
For most small practices, the baseline is professional liability insurance plus either general liability or a BOP. Add cyber insurance if you handle client data electronically (which is essentially everyone in 2026). As your practice grows, you might need additional coverages like employment practices liability, hired/non-owned auto insurance, or umbrella policies for extra protection.
Get quotes from multiple insurers that specialize in professional services. The Hartford, Progressive Commercial, Travelers, and Hiscox all have strong reputations for insuring accounting practices. Working with an independent insurance agent who understands professional liability can help you find the right combination of coverage and price. And before you buy cyber insurance, make sure you have multi-factor authentication and endpoint protection in place—you'll need them to qualify for coverage.
