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Errors and Omissions Insurance

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#1
Posts:
109
Joined:
13-Jun-2019 3:44pm
Location:
CA
Hello,

Just received a renewal quote for my E & O insurance as a one-person sole proprietor tax preparer.

Quote is $700 (up from $600 last year after no claims) for $1M coverage limit, $1000 deductible.

This seems high.

Few questions...

* Is $1M the right amount of coverage? I'm thinking it is way high.
* Is $700 a reasonable price?
* Can anyone recommend an insurance company or broker with better deals?

I guess the point is I have NO idea what coverage makes sense, how much I should expect to pay for it, and from whom I should buy it.

Thanks,
Debbie
 

#2
Posts:
292
Joined:
1-Sep-2020 2:47pm
Location:
845-NY
I went with Aon (through or sponsored by AICPA)
Cost for similar coverage $1Mil/$500k per instance, plus $250k cyber/data policy (forget the deductible but probably 1000)
Cost about $749 for a year.

Sole prop, taxes only, no assurance, 5% discount for engagement letters.

Policy cost is directly related to gross receipts, and likely the state you are operating in.
My gross wasn't that high last year.
 

#3
Posts:
3574
Joined:
4-Mar-2018 9:03pm
Location:
Near the Kwanzan cherry tree
Agree w/ Recked. It's a function of your gross revenue, revenue makeup (tax vs audit/assurance), coverage, and coverage period.

I also use AON.
 

#4
Posts:
1987
Joined:
21-Apr-2014 11:24am
Location:
North Carolina
NAEA membership plus insurance may cost less than what you are paying for insurance now.
 

#5
Posts:
1552
Joined:
21-May-2018 7:50am
Location:
SC
I'm with AON, as well. $1 mil plus $250k cyber, $1k deductible, and I just renewed at $1460 I think. Sounds high compared to what others have indicated but again, it is based on professional staff and gross revenue and how that revenue is derived. I also have full prior acts coverage when my firm was a different legal entity; AON allowed me to simply change the covered entity's name and since I was an owner of the old firm, I maintain coverage if anything pops up concerning my former partner.

When lawyers get involved, there is really no such thing as too much coverage. But, at same time, for the type of work I do and my overall client base, $1 mil would certainly cover but I also have a $1 mil umbrella that kicks in, if needed.

My discounts are engagement letters, long-time customer of AON, and their liability seminar.

And yes, I feel insured to death.
 

#6
Posts:
292
Joined:
1-Sep-2020 2:47pm
Location:
845-NY
I am certain my gross for 2020 was much lower than yours Cornerstone. It was my first full year with my "practice". (I also have no staff, or any other practitioners.)
You make a good point about the umbrella. I also carry a $1Mil personal umbrella, but have no idea if it would apply to a claim on my business/practice. Something to look into after tax season.

When I priced out my policy the incremental cost to go from $250k to $500k to $1Mil in coverage was insignificant, to me.
I think it went up less than $100-150 between the 3 options, and I think the jump from 500k to 1mil was like 20-30 bucks. The higher deductible lowered the cost, but then the cyber rider added back on top.

I will have to look into NAEA as a possibility next year, but I've heard great things about AON, and they do offer resources such as letter templates, and a helpline if you get into an issue. Presumably other insurance offers those things as well, as it's in their best interest to preempt any claim.
 

#7
Posts:
902
Joined:
24-Jan-2019 2:16pm
Location:
Honolulu
I have 250/500 for $1500. I thought I that was over-covered but now I see others with 500/1000K.

It includes 2 firms (I have an online-only and a local) and a rider for if an employee who has access to clients to client bank accounts does anything illegal with that access.


Actually, that might be separate and additional - I don't remember.
 

#8
Posts:
1552
Joined:
21-May-2018 7:50am
Location:
SC
The first firm I worked under--my dad's--at its peak had revenue 4x what I have at the moment. With four professionals, I do not think he ever paid more than $3k for a year with AON, though he also did not have the cyber security. I'd be paying about $1100 without the cyber policy.

ReckedCPA, my umbrella is through AON. They indicated as long as I have liability of at least $300k on any policy--business or personal (and also the fact that we are still personally liable at times as CPAs)--it would apply. It also automatically covers any policy my wife and I share. Each carrier may be different. But, I also live in a state where if a lawsuit occurs, I DO NOT have to disclose my umbrella policy's existence. It is not discoverable, either, so basically I can choose to volunteer the umbrella only if I am held liable for something that exceeds my standard coverage.
 

#9
Posts:
292
Joined:
1-Sep-2020 2:47pm
Location:
845-NY
Thanks for the follow up.

I think my liability is about $500 and the cyber is about $250 on top.
Cyber is important to me as I know how costly a breach can be with monitoring and notification, etc.
One IRS CPE class had a firm with a breach and they were $250k deep in costs, and weren't anywhere near done with the ordeal.

My umbrella is personal 300k coverage and then a $1Mil umbrella on top. Similar to your coverage, but from my personal home/auto policy. I will check after tax season what exactly it covers.
 

#10
Posts:
135
Joined:
5-Feb-2015 9:28am
Location:
TimBuckTwo
We use Hartford. May want to get quotes from them. Reasonable and a reputable company. https://www.thehartford.com/business-insurance
 


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