The original definition of “professional” was once limited to only doctors and lawyers, but this definition has changed over the years to include a myriad of industries, including bookkeepers. As a bookkeeping professional, you are legally obliged to provide a high degree of skill and care, and therefore are liable for being sued for failure to uphold professional standards.
Bookkeepers Professional Indemnity Insurance is your protection against this type of claim. Professional Indemnity (PI) will cover you in the event of a claim made against you by a third party who has suffered a loss attributed to your failure to uphold professional standards.
Why Do Bookkeepers need Professional Indemnity Insurance?
As per the media release from the Tax Practitioners Board on 25 Feb 2010, all bookkeepers in Australia who are registered as BAS Agents are legally obliged to carry PI insurance as of 1 July 2011.
As a bookkeeper you provide professional services to your clients, and in the event of one of your clients suffering a loss or damages as a result of an alleged neglect, error or omission on your part or the part of any employee of yours, the client is within their rights to institute a claim against you.
What Does Bookkeepers Professional Indemnity Insurance cover?
Professional Indemnity insurance will indemnify you against any losses suffered by a third party due to negligence, error, failure or a mistake on your part. Apart from covering the amount of the claim itself, PI will also cover you for the legal costs of defending such an action, which could run into thousands of dollars.
Whether you register as a BAS Agent or not, it is crucial that you protect your business risk by carrying bookkeeper’s professional indemnity insurance. Nobody is perfect and anybody can make a mistake; just ask the bank employee who recently fell asleep on his keyboard and erroneously sent through a huge transaction in error.
Even a tiny error could cause damages to a client and that could have huge repercussions on your business, as no small business is set up to absorb the amount of money that such a claim could cost you.