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Posted on: October 26, 2023 by Huntersure
Professional liability insurance is essential for safeguarding the careers and financial security of various professionals, including accountants. Prior acts coverage is an integral part of protection for these professionals. Insurance agents should understand the intricacies of prior acts insurance and its importance for their accountant clients. Learning about these policies will help you craft the right insurance package for their needs.
You might see prior acts insurance referred to as retroactive date coverage. In professional liability insurance, this coverage protects professionals, such as accountants, from claims arising from work they performed before their policy’s enforcement date.
For example, say an accountant’s client discovers an error in a financial statement from a few years ago. The accountant might have changed insurance carriers since then. The new policy excludes anything from before the policy term, but prior acts insurance extends that coverage.
The prior acts period refers to the timeframe the prior acts policy covers. For example, your client might need a policy to cover any potential acts in the 10 years before the current policy took effect.
For accountants, that prior acts period is essential. Remember that financial statements, IRS filings, and potential audits may occur for years after the filing date. Your clients need comprehensive protection for possible errors in those look-back periods.
Accounting clients should review the retroactive date carefully when choosing a prior acts policy, as this date affects the scope of coverage. The further back the retroactive date is, the more extensive the coverage. Make sure you understand the period for which your accounting clients need coverage so you can tailor a policy accordingly. Prior acts insurance can cover many years of exposure risks if necessary.
Continuity of coverage plays a vital role for accountants. Because accountants often change firms or decide to pursue their own practices, they need prior acts insurance to ensure comprehensive protection for the services they offered in previous roles.
Continuity of coverage is particularly crucial for accounting professionals as their careers develop. The longer and more substantial their careers, the more comprehensive their prior acts insurance should be.
For example, an accountant who has worked with a specific firm for seven years will typically have protection under the firm’s professional liability insurance programs. If that accountant chooses to work with a new firm, that policy no longer applies. However, the risk factors still exist for previous work. Prior acts insurance protects them against any claims that arise from their original firm.
Prior acts insurance provides accountants with peace of mind in the face of potential claims for professional mistakes, omissions, or negligence in their roles. Despite a commitment to accuracy and due diligence, sometimes these complications are unavoidable. Understanding the value of prior acts coverage helps you appreciate those policies as you craft coverage for your accounting clients.
Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding, and policy issuance and tailored products to meet the needs of your insureds. Give us a call at (855) 585-6255 to learn more.
Posted in: Accountants