Here is why
Do you work as an accountant within the Canadian province of Ontario? If so, you likely have very little trouble acquiring work. However, you need to be aware of the risks associated with your line of work. Working as an accountant can be very tedious and somewhat frightening. Staring at numbers for hours on end can greatly increase the potential for errors. If you wind up making a mistake, you could very well face a devastating lawsuit. Depending on the outcome of the lawsuit, your business may be forced into bankruptcy. Within this guide, you will discover various reasons Ontario accountants need errors and omissions insurance.
Understanding Errors And Omissions
So, what exactly is E&O insurance? This is a specific type of insurance, which is designed for professionals. As the name implies, this insurance will provide your company with protection in the event of errors made by you or your employees. This coverage can also protect you, if the client determines that your company failed to live up to their standards. While it is possible to go through life without ever facing a lawsuit, accountants are at a higher risk than others.
Canadian accountants tend to face more lawsuits than others. This is why many insurance providers, such as Llyods of London, offer specific polices catering to accountants.
What It’ll Pay
Many professionals may not understand the importance of E&O insurance. By learning exactly what E&O insurance will pay out will help you figure out the truth. This insurance primarily helps the company, when a lawsuit is filed against them. When this happens, the insurance will pay for the company’s legal costs. By having errors and omissions insurance, you can obtain the best defense attorney possible by using the money provided by the insurance provider. Without this insurance, you would be required to pay for an attorney’s services out of pocket and those costs could be substantial.
More importantly, E&O insurance can also help you pay for a potential settlement. Whether an agreement is made outside of the courtroom or the court forces you to pay a large amount to the complainant, the E&O insurance will help a great deal. Finally, some policies will also pay you a daily allowance. This will ensure that you’re able to continue making money even when you’re forced to defend your actions in the courtroom.
General Liability Is Not Enough
Many companies will obtain general liability insurance, while simultaneously ignoring E&O insurance. This is often the case, because they’ll feel that general liability coverage will be sufficient for protecting their company. This is a major misconception. While General liability is definitely good, it is simply not enough. This coverage will only protect your business against property damage and bodily injury. E&O insurance will take things one step further and provide you with protection from lawsuits caused by clients claiming your mistake hurt them financially.
With this in mind, it is generally best to obtain a combination of both! Remember that some insurance providers, such as Aviva, may be able to offer both insurance products. By purchasing the combination from a single company, you may receive a minor discount.
Missing Filing Deadlines
Malpractice claims are mostly made up of calendaring errors. These errors have landed many accountants in a court of law, defending allegations of negligence. Accountants are responsible for filing federal income taxes for businesses and individuals. Handling a large bundle of tax returns can be extremely difficult, with lots of room for error. If the returns are not filed with the Canada Revenue Agency (CRA) by April 30 of every year, the professional could face late fees or penalties.
It really isn’t unusual for an accountant to take on a heavier workload than they can genuinely handle. When this happens, it increases the risks of missing the federal filing deadline. If the client discovers that their taxes were not filed by the deadline, they will come after the accountant. If the accountant does not find a quick and suitable solution to the issue, the customer may go ahead and file a civil lawsuit in the Ontario court of law.
The negligence allegations will land the accountant in court, if they cannot reach a settlement deal beforehand. With the errors and omissions policy by your side, you will have something to offer the customer. The policy will pay you a settlement to resolve the lawsuit out of court. This is the biggest advantage of carrying an E&O policy, making it a necessity for certified public accountants.
Protects Against Financial Losses To Your Customer
As an accountant, you are constantly dealing money that belongs to your clients. You are tracking the money that they bring in and the money they pay out. When dealing with such an abundance of numbers, it can be easy to make a mistake. Maybe you accidently put a comma or a period in the wrong place, or maybe you total a loss that should have been totaled as a gain. Whatever the situation is, all of the instances could cause your client to incur finical losses. When this happens, they are going to hold you responsible and look for retribution from you.
Of course, accidents and mistakes happen no matter how hard you try to prevent them. If you are a smaller firm, it is possible that paying for these finical losses could cripple your company. However, if you have error and omission insurance you will be protected and the insurance provider will cover any finical losses that your customers suffer.
Failure To Provide A Promised Service On Time
When dealing with people’s finances for a living you probably understand that your primary income depends meticulous calculations and an eye for detail. However, during tax season things probably get a little hectic and it would not be an exaggeration to think that you might forget to file a customer’s tax returns on time, or you might forget to file them at all.
An accident like this can have major repercussions for you and your client. Of course, you are going to be held responsible for this mishap. This is the exact type of situation where error and omissions insurance can come in handy. In the event that you failed to provide a service on an agreed time E and O insurance will cover your client for any finical losses that they by experience.