What Tax Preparers Need To Know About Insurance
Tax codes in Canada continue to grow, making it extremely difficult for individuals and businesses to stay up-to-date. Fortunately, there are thousands of tax preparers on standby to help with tax preparation. Tax preparers have a variety of job duties to attend to on a daily basis. These duties include everything from reviewing financial records to preparing tax returns. And, anyone familiar with the tax preparation process knows that it involves a lot of risks.
Tax preparers with business clients are always at the highest risk of error. For example, a tax preparer was preparing a client’s tax returns and accidentally utilized a $100 instead of $1,000. This error caused the client to receive a higher return, which he later had to repay. While these errors may seem minor, they can be devastating for both tax preparer and taxpayers.
Hundreds of Canadian tax preparers have been sued because of errors that led to financial loss for their clients. Whether these errors were due to negligence or not, they still cause tremendous damage for everyone involved. And, this is not to mention that some of these tax preparers were unable to recover from their losses. The main reason these tax preparers were not able to recover is because they were uninsured.
What Insurance Policies Do Tax Preparers Need?
Tax preparers are very knowledgeable about tax codes, but most know very little about insurance. Regardless, if you work out of your home or in an office, your job comes with risks. These risks include:
- Third-party injuries caused by slips and falls
- Fire
- Natural disasters
- Claims and lawsuits
- Breach of confidentiality
- Damage caused by computing errors
The only way to reduce these risks is to get covered to the fullest. However, this process is not as simple as going online and taking out a basic insurance policy. In fact, it will require a lot of research to find the policies that will offer you full protection from financial loss related to the above risks. Fortunately, the agents at LiabilityCover can tell you everything you will ever need to know about insurance and then help you customize a policy that will offer full protection for you, your business and employees.
Basic Coverage For Tax Preparers
Depending on your level of risk exposures, basic insurance coverage may be enough protection. There are several types of insurance coverage that are considered basic. These include:
- Commercial General Liability Package – This package consists of a variety of insurances that cover liability risks and business property, such as office equipment and furniture. It is more suitable for small- and medium-sized businesses that need affordable, but comprehensive coverage. Also included in this policy is business interruption coverage, which compensates for financial loss related to downtime caused by stolen or broken equipment. One of the most important components of this policy is liability insurance, which covers third-party property damage and bodily injury.
Additional Insurance Coverage To Consider
For tax preparers who believe basic insurance policy is not enough protection, additional coverage may be in order. There are several types of coverage that can be added to a basic policy. These policies include:
- Electronic Data Processing (EDP) – EDP insurance, also known as computers and media insurance, covers damage related to lost data caused by vandalism, fire, theft, malware and virus. This policy will also compensate for hardware, software and computers that are damaged due to a fire, theft, weather or vandalism.
- Cyber Liability Insurance – This policy covers damages caused by data breaches. It also covers private investigator services and public relations.
Does Homeowners Insurance Cover Business Office Equipment
If you work out of your home full-time, you may believe your homeowners insurance policy covers your office equipment. Depending on how much office equipment you have, your homeowners policy may compensate you 100 percent in the event that it is damaged or stolen. However, most homeowners policies have a $2,500 coverage limit for office equipment. This coverage will probably not even cover your computer system, let alone your printers, fax machines, phones and scanners.
Homeowners insurance will also not cover business liability or damage caused by interruption and loss of business data. Tax preparers working out of their home should consider additional types of insurance coverage including:
- Home Office Insurance – Home office insurance, also known as in-home business insurance, provides $10,000 of liability and business property coverage. Generally, these policies have a liability coverage limit that does not exceed $1 million. Some of these policies may even cover damage caused by loss data and records, as well as business property stored in offsite facilities.
- Business Equipment Insurance – These policies are ideal for home-based tax preparer businesses that need business property coverage of more than $10,000. This policy covers damages caused by business interruptions and third-party bodily injuries.
Errors And Omissions Insurance For Ontario Tax Preparers
A type of coverage that all Ontario tax preparers will need is Errors and Omissions (E&O) insurance, also known as professional liability insurance. As mentioned above, tax preparers are at risk of computing errors. And, in most cases the damage is already done when these errors are finally detected. In fact, most computing errors are found during audits.
Computing errors are generally not covered under a general liability insurance. But, they are covered under an E&O insurance policy. This policy covers damages caused by computing errors. This damage includes monetary penalties and interest. It also covers litigation fees, settlements, court costs and judgments.
Call Us Today!
Insurance can be confusing for average taxpayers. Fortunately, LiabilityCover is always on standby to assist. Locally owned and operated, LiabilityCover employees agents who are very knowledgeable and experienced. When in doubt, contact our local Ontario office. We will assist you in customizing an insurance policy with different types of coverage that will provide the protection you need to stay in business, in the event you are sued or your property is damaged in a fire or storm. No one knows insurance like LiabilityCover, so what are you waiting for contact us today to learn more.
