If you're running an accounting practice or working as a CPA in New York, you've probably wondered: what insurance do I actually need? The answer isn't as straightforward as you might hope. While New York doesn't mandate professional liability insurance for individual CPAs, there are several types of coverage you'll likely need depending on your business structure, whether you have employees, and what your clients or landlord require.
Here's what you need to know about insurance requirements for accounting professionals in New York, from workers' compensation mandates to professional liability recommendations.
Professional Liability Insurance: Not Required, But Essential
Here's something that surprises many CPAs: New York State doesn't require you to carry professional liability insurance (also called errors and omissions insurance) to maintain your CPA license. In fact, of the seven states that require tax preparers to be licensed or registered, none include professional liability insurance as part of their licensing requirements.
But before you breathe a sigh of relief and skip this coverage, understand this: professional liability insurance protects you when a client claims you made an error, gave bad advice, or missed something important. One mistake on a tax return or financial statement could cost you tens of thousands in legal fees alone—even if you did nothing wrong.
The situation changes if you incorporate your practice or form an LLP. Some states mandate minimum coverage for incorporated accounting firms, typically starting at $100,000 per CPA for each claim (capped at $1 million) and $250,000 per CPA annually (capped at $3 million). While New York's specific requirements for incorporated firms aren't as clearly defined, many contracts with corporations headquartered in NYC or state government agencies mandate minimum coverage levels of $1 million or more.
Professional liability policies typically offer coverage limits from $250,000 to $2 million per occurrence, with annual costs ranging from $1,000 to $3,000. That's roughly $45 per month—about the cost of a few lattes—for substantial peace of mind.
Workers' Compensation: Mandatory from Day One
This one's non-negotiable. If you have even one employee in New York—and yes, that includes part-time workers and family members—you must carry workers' compensation insurance from day one of employment. There's no grace period, no exceptions based on how few hours they work.
New York's workers' compensation law is one of the strictest in the country. The state requires all for-profit businesses that employ anyone other than the owner to carry both workers' compensation and disability insurance. This covers medical expenses and lost wages if an employee gets injured on the job.
The good news? If you're a sole proprietor with no employees, you're exempt. Same goes for one or two-person corporations where stock is held solely by the owners with no additional employees, and LLCs or partnerships without employees.
Important note for 2025: New York expanded mental health coverage for workers' compensation. All workers are now eligible to submit claims for mental health conditions triggered by workplace circumstances. Additionally, as of January 1, 2025, employers must provide 20 hours of paid prenatal leave annually to pregnant workers—which doesn't directly affect your insurance but does impact your payroll calculations for premium purposes.
The penalties for not having workers' comp when you need it are severe. You could face significant fines, and if an employee gets injured, you're personally liable for their medical expenses and lost wages—which can easily run into six figures.
General Liability Insurance: What Your Lease Probably Requires
While New York State doesn't require general liability insurance for all businesses, here's the reality: you probably need it anyway. Most commercial leases require it, and many clients won't work with you without proof of coverage.
General liability insurance covers third-party claims for bodily injury, property damage, and even advertising injuries like slander or copyright infringement. Think about it: a client trips over a box in your office and breaks their ankle, or someone claims your marketing materials used their copyrighted image without permission. General liability covers these scenarios.
The standard minimum for most commercial leases and contracts is $1 million per occurrence. For accounting firms in New York, general liability insurance averages around $42 per month, though annual costs can range from $300 to $5,000 depending on your firm's size, services, and risk profile.
If you're working from home and meeting clients virtually, you might think you don't need this coverage. But if you ever meet clients in person, attend networking events, or have anyone visit your home office, general liability insurance is worth having.
Additional Coverage to Consider
Beyond the basics, there are a few other types of insurance that accounting professionals in New York should consider:
Cyber liability insurance is increasingly important for accounting firms. You handle sensitive financial data, tax returns, and personal information—exactly what cybercriminals target. A data breach could not only damage your reputation but also expose you to lawsuits and regulatory penalties. Cyber liability coverage typically costs $1,000 to $2,500 annually for accounting practices.
Commercial auto insurance is mandatory if your firm owns vehicles. Even if employees use personal vehicles for business purposes—like driving to client meetings—you might need hired and non-owned auto coverage to protect your firm from liability.
Employment practices liability insurance (EPLI) covers claims of discrimination, wrongful termination, or harassment. If you have employees, this coverage can protect you from costly lawsuits even when you've done nothing wrong.
Business owners' policies (BOP) bundle general liability and commercial property insurance, often at a lower cost than purchasing each separately. This can be a cost-effective option for smaller accounting practices.
Understanding New York CPA Licensing Requirements
While we're talking about requirements, it's worth noting that New York enacted significant CPA licensing reforms in 2025. You now have two pathways to licensure: the traditional 150-hour pathway (requiring a bachelor's degree and 150 semester credits with one year of experience) or a new 120-hour pathway (requiring 120 credits with two years of experience).
Neither pathway requires proof of insurance for licensure. However, once you're licensed and practicing, the insurance considerations we've discussed become relevant based on your business structure and employment decisions.
How to Get Started with Your Insurance Coverage
Start by assessing your situation honestly. Do you have employees? Then workers' compensation is mandatory. Do you rent office space? Check your lease for general liability requirements. Do you want protection against malpractice claims? Professional liability insurance is your answer.
Talk to an insurance agent who specializes in professional services or accounting firms. They can help you understand which coverages are truly necessary for your specific situation and which ones are optional but advisable. Don't just buy the minimum—think about what level of coverage would let you sleep at night.
One important tip: when shopping for professional liability insurance, look for policies with defense costs outside the limit of liability. Legal expenses can quickly eat into your coverage limits, and you want those defense costs separate so your full policy limit remains available for any settlement or judgment.
Finally, review your coverage annually. As your practice grows, your insurance needs will change. You might take on bigger clients, hire more employees, or expand your services—all of which could require adjusting your coverage limits.
