Given the recent deadline for second-quarter 2012 estimated tax payments on June 15, your accounting-firm clients have been busier than usual. With another rush of deadlines, they have probably not been thinking about the need to have adequate insurance in place to cover a major setback. But given current economic conditions and increasingly unpredictable weather, small businesses have too much at stake to risk being underinsured.
Whether you have existing accounting-firm clients or want to expand into this market, it’s important to remember that in a time-sensitive business like accounting, disruptions can be costly and damaging to client relationships. From a fire or natural disaster to a disgruntled client or a physical injury that leads to a lawsuit, your clients need to be prepared.
By talking to clients and prospects about these exposures and issues, agents and brokers strengthen their role as trusted advisors and ensure their clients have the right risk management and insurance products in place.
Here are seven essential coverage areas to highlight for them:
1. Commercial Multiperil: Any comprehensive insurance program has at its foundation a Commercial Multiperil (CMP) policy. The policy and any endorsements should carry adequate limits for all essential coverage, such as Property, Business Income replacement and Liability. Be sure to advise your clients to seek out and choose a financially strong and stable insurer.
2. Property: Any business can be affected by fire, natural disasters or other destructive events. One way to make sure your clients know what’s at stake is to do an office inventory with them. Discuss the cost, for example, to replace desks, chairs, computers and other items that are used on a daily basis. Valuations need be up-to-date and the full replacement cost assessed. It’s not uncommon to undervalue essential equipment as well as the cost to rebuild.
3. Liability: No professional executes flawlessly every day and with every client. Professional errors or accusations of errors can have devastating effects on the reputation, focus and finances of an accounting operation. Professional Liability coverage is often the difference between the firms that clear the hurdle of a Professional Liability claim or lawsuit and those that do not.
4. Network and Information Security Offense Coverage: Many professionals, particularly those in small businesses, mistakenly believe that cyber-attacks are directed at large businesses and they won’t be affected. In fact, small businesses are increasingly under attack by cybercriminals, and they face serious and costly legal issues relating to privacy and data breaches. In accounting businesses in particular, the client information on hand is extremely valuable to a hacker.
If a lawsuit does result for any reason, it’s critical to have Liability insurance that will transfer to the insurer the burden of investigating and defending the suit and/or negotiating a settlement.
5. Replacement Income Coverage: While most people would expect accounting firms to keep impeccable records for their own businesses, it’s not always the case. Agents and brokers can help accountants understand that Replacement Income coverage is based on documented information. How much would it cost, for example, to keep the business running if income was disrupted? For accounting businesses with their ebbs and flows, a disruption at a busy time could be disastrous if there’s no insurance in place.
6. Business Continuity Plan: Many firms don’t understand the need for a business-continuity plan if a substantial loss or disruption occurs. But having a plan in place coupled with good insurance could mean the difference between surviving and shutting down. Accountants need to have a way to quickly access and restore client and other records.
7. Workers’ Compensation: Most states require accounting firms with one or more employees to purchase Workers’ Comp insurance. This insurance provides workers with wage and medical-expense protection when injured on the job. Employees, including those with nonphysical roles like a bookkeeper or accountant, do sustain work-related injuries.