Running an accounting practice in Pennsylvania means juggling client deadlines, tax season chaos, and making sure your business is properly protected. Here's what catches most CPAs off guard: Pennsylvania doesn't require professional liability insurance by law, but you'll struggle to operate without it. Between client contracts, lease agreements, and the reality of potential lawsuits, understanding your insurance requirements isn't optional—it's foundational to protecting everything you've built.
What Pennsylvania Law Actually Requires
Let's start with the non-negotiables. Pennsylvania law mandates workers' compensation insurance for any business with one or more employees. This includes full-time staff, part-time bookkeepers, seasonal tax preparers—everyone. The moment you hire your first employee, even if it's a family member working 10 hours a week, you're legally required to have coverage in place. There are no minimum employee thresholds, no grace periods, and no exceptions for small firms.
The penalties for skipping workers' comp are severe. We're talking misdemeanor charges that carry a $2,500 fine and up to a year in prison. If your non-compliance is flagrant or results in serious injury, it escalates to a felony with a $15,000 fine and up to seven years in prison. Pennsylvania takes this seriously because workers' comp protects injured employees from medical bills and lost wages while shielding you from devastating lawsuits.
If you own vehicles for business use—driving to client meetings, bank runs, or picking up supplies—you also need commercial auto insurance. Personal auto policies won't cover business use, and Pennsylvania requires this coverage for all business-owned vehicles. Sole proprietors using their personal vehicle occasionally might be covered under their personal policy, but if the vehicle is titled to your business, commercial coverage is mandatory.
Professional Liability Insurance: Not Required, But Essential
Here's where things get interesting. Pennsylvania doesn't require CPAs or accounting firms to carry professional liability insurance—also called errors and omissions (E&O) insurance—at the state level. The Pennsylvania State Board of Accountancy doesn't mandate coverage amounts for licensure. Unlike states such as California, Massachusetts, and Ohio that have specific minimums for accounting corporations and LLPs, Pennsylvania leaves this decision up to individual practitioners.
But before you celebrate, understand this: operating without professional liability coverage is financial suicide. Even minor mistakes in your work—a missed tax deduction, an accounting error in financial statements, or advice that leads to a client's financial loss—can trigger six-figure lawsuits. Professional liability insurance covers your legal defense costs, settlements, and judgments when clients claim you made errors or were negligent in your professional services. Without it, you're personally liable for everything.
The typical coverage for accounting firms is $1 million per occurrence with a $1 million aggregate limit. This means each claim is covered up to $1 million, with a total annual limit of $1 million across all claims. Many firms opt for higher limits—$2 million or more—especially if they serve larger clients or provide audit services. The average cost for this coverage runs about $537 annually for small firms, though this varies based on your revenue, services offered, and claims history.
General Liability Insurance and Client Requirements
General liability insurance covers the everyday risks of running a business—slip and fall accidents in your office, property damage you cause at a client's location, or advertising injury claims. Pennsylvania doesn't require this coverage by law, but you'll find it's practically mandatory for other reasons.
Most commercial landlords require general liability insurance before you sign a lease. They want proof that you have coverage, typically $1 million to $2 million in liability protection. Many clients—especially larger businesses and government entities—also require proof of general liability coverage before they'll hire you. They want assurance that if something goes wrong, there's insurance to handle it rather than tying up their legal department chasing you for damages.
The good news is general liability insurance is relatively affordable for accounting firms. Because you're not operating heavy machinery or running a retail storefront with high foot traffic, your risk profile is low. Pennsylvania accounting firms typically pay around $42 per month for general liability coverage. Many firms bundle this with property insurance in a Business Owner's Policy (BOP), which is often more cost-effective than buying policies separately.
Additional Coverage to Consider
Beyond the basics, Pennsylvania accounting firms should evaluate cyber liability insurance. If you handle client tax returns, financial data, or store sensitive information electronically—which describes virtually every modern accounting practice—a data breach could devastate your business. Cyber insurance covers forensic investigations, notification costs, credit monitoring for affected clients, legal fees, and regulatory fines. With data breaches becoming more common and costly, this protection is increasingly essential.
If you're structured as an LLC or corporation, you might also consider employment practices liability insurance (EPLI). This covers claims from employees alleging discrimination, harassment, wrongful termination, or other employment-related issues. Even if the claims are baseless, defending against them is expensive. EPLI handles the legal costs and any settlements or judgments.
Getting the Right Coverage for Your Firm
Start by assessing your specific risk profile. Are you a solo practitioner doing tax prep and bookkeeping, or a multi-person firm providing audit and consulting services? The latter needs higher coverage limits. Review your client contracts and lease agreements to identify minimum insurance requirements. Many contracts specify exact coverage amounts and require you to name the client as an additional insured.
Work with an insurance agent who specializes in professional services or specifically accounting firms. They understand the nuances of your industry and can structure coverage that addresses your actual exposures rather than selling you generic small business policies. Compare quotes from multiple carriers—rates can vary significantly even for identical coverage.
Review your coverage annually, especially if your firm grows, you add new services, or you take on larger clients. What was adequate protection three years ago might leave you dangerously exposed today. Keep detailed records of all your insurance policies, including certificates of insurance, and know how to file a claim quickly if something goes wrong. The right insurance isn't just about compliance—it's about ensuring one mistake doesn't end your career.
