In general, professional indemnity insurance is a commercial insurance policy aimed at protecting businesses including those that provide professional or advisory services. This includes accounting firms and accounting professionals.
Clients of such firms can sue if they deem that the services rendered are unsatisfactory – this could be the case regardless if the client has a case for such or not (Read more about why such an insurance is important in this separate article!)
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Who needs Professional Indemnity Insurance?
While not an exhaustive list, the following businesses should definitely consider professional indemnity insurance:
- Engineers and other construction-related professionals
- Property managers, real estate agents and agencies
- Employment agencies
- IT/Technology consultants
- Website developers and digital marketers
- Multimedia companies;
- Doctors, surgeons, TCMs, and other medical providers
- Accountants/ auditors
- Designers (web designers, graphic designers, and interior designers)
- Beauticians and plastic surgeons
- Marketing experts
- Teachers and tutors
- Physical sports instructors (MMA, Yoga, dancing, etc.)
In Singapore, some industries have legal requirements for professional indemnity insurance and this includes that for accounting. Unsurprising given that accountants professional indemnity insurance is typically the most important insurance policy a CPA (certified public accountant) and any other type of accountant can purchase to protect their firm.
How much professional indemnity insurance do I need?
Professional indemnity insurance is sold in variable limits and amounts. For accounting professionals, and using accounting LLP as an example, it is a requirement that they be covered by professional indemnity insurance of not less than one of the following amounts, whichever is the highest:
- $1 million;
- a sum equal to the total of $500,000 for every corporate practitioner in the accounting LLP; or
- where applicable, a sum equal to two and a half times the gross income of the accounting LLP in the last completed financial year of the accounting LLP, subject to a maximum sum of $50 million.
These are minimum requirements and you may decide that your business needs a higher coverage depending on needs. While not exhaustive, here are a few factors you can conside to help you decide on sufficient coverage:
- Size of your contracts: Think about the size of business or contracts you work on. In such a case, what is the maximum amount you could be sued and how much would it cost for lawyer’s fees.
- Size of your company: The more employees you have the greater your exposure to professional liability
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