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Basically, any individual or business that offers knowledge or services as part of their business should get professional indemnity (PI) insurance, as they could be subject to a legal claim if the advice they give causes their customer or employer a financial loss.
It may be ultimately the business owner’s responsibility to review and sign off your bookkeeping activities, but being involved in preparing the books also bears legal liability, should a problem arise.
If you find yourself in a position where you have caused a financial loss to your customer/employer then they may take legal action against you, which could be extremely expensive. Professional indemnity insurance will help to protect you from the costs incurred to defend yourself, such as legal cost, damage or compensation to the party that is suing you.
As a bookkeeper is a skilled profession, where you are dealing with financial records of clients/employers, there is the possibility that errors, omissions or mistakes could occur in your work. With this in mind it's good practice to protect yourself with professional indemnity insurance as any claim could prove extremely costly.
Bear in mind that bookkeeper insurance is a requirement of some professional bodies, including the Institute of Certified Bookkeepers (ICB ), so if you’re a member, check their rules to find out what cover you need.
The purpose of PI insurance is to protect you as a professional against any mistakes that you may make. Bookkeepers like many other professions can make a mistake from time to time, at the end of the day we are all human.
The professional indemnity insurance will ensure that you as the bookkeeper can afford to settle any claim resulting from an error in your work.
Basically, if you think of yourself as a tradesman rather than a book keeper for one minute.
If you were employing a builder, would ask your builder to show you their public liability insurance? Of course, you would. Well it can be the same with financial services such as bookkeeping. When you’re tendering for a contract, often the prospective client will want you to demonstrate you have professional indemnity insurance up to a particular limit before letting you quote or offering you the contract.
The important thing to remember is that your professional indemnity insurance covers your business. Your cover should therefore be enough to fix the worst possible scenario, pay compensation to your client and cover legal costs of defending you.
To help determine the correct level of cover for your bookkeeping business you will need to think of the type of clients you work with, the size and value of the client’s company and the specific nature of the work you as the bookkeeper are involved with.
Some good general question you could ask yourself:
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