Professional indemnity insurance for accountants: who must hold it, and what it covers
Professional indemnity insurance, called professional liability or E&O insurance in North America, pays claims that your professional work caused a client loss. Whether you must hold it depends on where you practise and which body you belong to; whether you should is rarely a real question for a firm in public practice.
Updated October 2026
What a PI policy covers, and what it does not
A PI policy responds to claims that you breached your professional duty to a client: negligent advice, an error in a return or set of accounts, a missed deadline, a failure to warn. It usually pays the damages the client recovers and the legal costs of defending the claim, up to the limit of indemnity and after the excess. Some regulators set minimums inclusive of defence costs (the TPB does), so check whether your limit is costs-inclusive or costs in addition; it changes how much is left for the claim itself.
What it typically does not cover, or covers only by extension: your own losses (lost fees, the cost of fixing your systems), fraud or dishonesty by the person claiming, fines and penalties imposed on you, contractual promises that go beyond ordinary professional duty, and work outside the business description on the schedule. If you have quietly added payroll, SMSF, advisory or software implementation work since the policy was placed, tell the insurer. Undeclared services are a common reason a claim gets argued over.
Most PI is written on a claims-made basis. The policy that responds is the one in force when the claim is made, not the one in force when you did the work. That single fact explains run-off cover, retroactive dates and why letting a policy lapse when you retire is a mistake.
Who must hold it, by market
As at October 2026. Minimums are quoted only where the body publishes them, with the source named. Always check the current text.
| Market | Who must hold it | Published minimum cover |
|---|---|---|
| Australia | Registered tax and BAS agents must hold PI meeting TPB requirements for the whole registration period. Members of CA ANZ, CPA Australia and the IPA in public practice must hold it under their body's rules. | TPB: $250,000 (turnover up to $75,000), $500,000 ($75,001 to $500,000), $1 million (over $500,000), inclusive of costs. CPA Australia states a $2 million minimum for members providing public accounting services in Australia. CA ANZ sets minimums under Regulation CR 2A by reference to the work and fees. |
| United Kingdom | ICAEW and ACCA members in public practice (and their firms) must hold qualifying PII. Other bodies, including AAT, CIOT and ATT, set their own rules for members in practice. | ICAEW (from 1 October 2026 version): £2 million, or 2.5 times gross fee income with a £250,000 minimum where fee income is under £800,000. ACCA (factsheet, 1 January 2025): the greater of 2.5 times relevant total income and £100,000 under £600,000; £1.5 million at £600,000 and above. |
| United States | No national requirement. Many state boards do not make insurance a condition of an individual CPA licence, but some attach security-for-claims rules to firm structures, and clients, lenders and contracts often require proof of cover. | Varies by state and entity type. California, for example, requires accountancy corporations to maintain security for claims, by insurance or a shareholder guarantee (16 CCR 75.8). Check your state board. |
| New Zealand | The requirement comes through professional bodies rather than a tax agent registration regime: CA ANZ members holding a Certificate of Public Practice must hold PI under CR 2A, and CPA Australia sets a requirement for members serving NZ clients. | CPA Australia states NZ$1 million for members providing services in New Zealand. CA ANZ minimums are set under CR 2A. |
| Canada | Set province by province by the CPA regulator. Public accounting firms registered with CPA Ontario or CPA Alberta, for example, must carry professional liability insurance. | CPA Ontario and CPA Alberta both publish $1 million for a one-member firm, $1.5 million for two or three, $2 million for four or more (Alberta sets higher figures for LLPs). Other provinces publish their own. |
| South Africa | We could not confirm a single statutory PI mandate for all accountants in public practice as at October 2026. Requirements and cover arrangements run through the professional bodies (SAICA, SAIPA and others) and, for auditors, IRBA. | No published universal minimum found. Check your professional body's current by-laws and practice requirements directly. |
Two things follow from the table. First, the regulatory minimum is a floor set to protect clients, not a judgment about what your firm needs. A firm whose largest engagement could produce a claim bigger than the minimum is under-insured at the minimum. ICAEW says so directly: firms below its £800,000 threshold should still consider whether cover below £2 million is enough. Second, if you hold more than one membership or registration, the strictest rule applies to you. An Australian CPA who is also a registered tax agent meets both the TPB tiers and CPA Australia's minimum, which in practice means the higher number.
Australian readers registering a practice will find the TPB side in more detail in our guide to registering as a tax agent or BAS agent, including the 4% excess cap and the 14-day notice after first registration.
Run-off cover when you retire, sell or merge
Claims arrive late. A client usually discovers the problem when the tax authority does, and that can be years after the work. Because the policy is claims-made, the cover that answers a claim in 2029 about work done in 2025 is the cover you hold in 2029. If you have stopped practising and stopped paying, there is nothing to answer it.
The published rules, as at October 2026:
- ICAEW: a firm that ceases public practice must keep compliant run-off cover for at least two years, then take all reasonable steps to keep it for a further four. ICAEW is explicit that a clean claims history does not remove the requirement.
- ACCA: six years of run-off cover from the date of cessation, at the minimum limits.
- CPA Ontario: cover in an unreduced amount for at least six years after the firm stops practising (Regulation 14-1).
- CPA Alberta: at least six years, at no less than $1 million per incident.
- TPB: recommends run-off cover for agents who stop providing services. CA ANZ's Regulation CR 2A also deals with run-off for members leaving public practice; read its current text for the period.
In a sale, settle this in the agreement. Either the selling firm buys run-off, or the buyer's policy is extended to pick up the seller's prior work with the insurer's agreement, and the price reflects whichever party carries it. In a merger, ICAEW's regulations require the new firm's cover to be planned in advance so the old firms' work is not left bare. If you are weighing a sale, our piece on what is driving accounting firm consolidation covers the wider decision.
How claims arise in a working practice
- 1
Scope nobody wrote down.
The most common shape of an accountant's claim is a gap between what the client thought you were doing and what you thought you were doing. The client assumed you would spot the grant deadline, the residency issue or the super shortfall; your engagement covered the tax return. Without a written scope, that argument is decided on memory.
- 2
Advice given in passing.
A comment in a meeting or a two-line email reply is still advice. Informal advice is where file notes are thinnest and where a client is most likely to say they relied on what you said.
- 3
AI-assisted work that was not reviewed.
A PI policy responds to your professional errors; it does not care whether a person or a model drafted the work. If an AI tool produced a wrong figure and it went out under your name, it is your error. Ask your broker whether the policy wording or proposal form says anything about AI use, and make sure your review process covers AI output the same way it covers a junior's.
- 4
Cyber and payment fraud.
A compromised mailbox that sends a client fake bank details can produce a claim against the firm for the client's loss. PI may respond to some of that; your own first-party costs (forensics, restoring systems, notifying clients) usually sit with a separate cyber policy. Know which policy answers which part before it happens.
- 5
Missed deadlines and lodgements.
Penalties and interest that land on a client because a return or statement went in late are a classic claim. They are also the most preventable: they come from workflow, not judgment.
On the AI point specifically: a firm that has not written down which tools staff may use on client work, and how that output is checked, will struggle to show a reasonable process after the fact. Our pieces on why your firm needs an AI policy and on clients who connect their own files to AI cover both sides of that.
Lowering the risk, which is what insurers are pricing
Insurance transfers the cost of a claim. It does not stop the claim, the time it takes, or what it does to the client relationship. The firms with the fewest claims tend to do four unglamorous things well.
- Engagement letters that state scope and exclusions. Say what you will do, what you will not, what you rely on the client to provide, and when. Update the letter when the work changes, not once a decade. Our guide to getting paid before you send the draft shows how the engagement letter carries terms beyond scope too.
- File notes for advice given outside a deliverable. A dated line saying what was asked, what you said and what you recommended is the cheapest defence there is.
- Review before anything leaves the firm. A second set of eyes on returns, accounts and advice, scaled to the risk of the job, and applied to AI-drafted work as well as staff work.
- A workflow that shows deadlines before they become claims. Whatever practice management system you run, whether that is Karbon, FYI, TaxDome, IRIS Elements or another, the point is a single view of what is due and who owns it.
Two housekeeping items finish the job. Tell your insurer promptly about circumstances that might lead to a claim, as most policies require, even when you think the client will not pursue it. And when you renew, re-read the business description and the fee income you declared. A policy that describes the firm you were three years ago is a policy with gaps in it.
Frequently asked questions
- Is professional liability insurance the same as E&O or professional indemnity insurance?
- Broadly, yes. Professional indemnity (PI or PII) is the usual term in Australia, the UK, New Zealand and South Africa; professional liability or errors and omissions (E&O) is the usual term in the US and Canada. All three describe cover for claims that your professional work caused a client loss. Policy wordings differ far more than the names do, so compare the wording, not the label.
- Do accountants have to carry professional indemnity insurance?
- It depends on the market and your membership. In Australia, registered tax and BAS agents must under TPB rules. In the UK, ICAEW and ACCA require it for members in public practice. In Canada, provincial CPA regulators such as CPA Ontario and CPA Alberta require it of public accounting firms. In the US there is no national mandate, though some states set rules for certain firm structures. Your professional body's requirement often sits above any statutory floor.
- What is run-off cover and how long do I need it?
- Run-off cover protects you against claims made after you stop practising about work you did while you were practising. Because PI is usually written on a claims-made basis, the policy that matters is the one in force when the claim arrives, not when the work was done. ICAEW requires at least two years then reasonable steps for four more, ACCA requires six years, CPA Ontario and CPA Alberta require six, and the TPB recommends it. Your body's rule sets the minimum.
- Does PI insurance cover mistakes made using AI tools?
- A PI policy covers your professional liability for the work you deliver, and an error in AI-assisted work you signed off is still your error. Whether a particular policy has any exclusion or condition relating to AI or technology use depends on its wording, so ask your broker directly and read the proposal form questions. The safer position is a review process that treats AI output like a junior's draft.
- What happens to my PI when I sell my practice?
- The buyer's policy will not usually cover your past work unless the deal says so and the insurer agrees. You need either run-off cover for the selling firm or an agreed arrangement where the successor firm's policy picks up prior work. ICAEW's regulations, for example, require firms to plan their cover in advance of a merger or structural change. Settle this in the sale agreement, not after completion.