What Is the Minimum Professional Indemnity Cover Required for Accountants?

As an accountant, professional indemnity (PI) insurance is your safety net when things go wrong. The reality is that even the most careful accountant can face a claim…PI insurance protects your professional reputation and your clients’ interests when that happens. When a claim comes in – and statistically, it probably will at some point in your career – you want to be properly covered.

How much professional indemnity insurance do you need? It all depends on factors like the size of your practice, your client mix, and the specific services you provide. A sole trader doing basic bookkeeping for corner shops has very different risk exposure than someone advising on corporate acquisitions. Understanding what’s mandatory versus what’s wise is the first step in making sure you’re adequately protected.

Why Professional Indemnity Insurance Matters for Accountants

Every accountant deals with risk. From human error to miscommunication to claims of negligence, things can – and occasionally do – go wrong. A single claim, even if it’s unfounded, can have serious repercussions.

Shield your firm from claims with the right cover

As an accountant, you handle sensitive financial information and provide advice that influences your clients’ business decisions. An error in judgment, a calculation mistake, or a missed deadline can result in serious financial losses for clients – and potentially devastating claims against your small practice. Without PI insurance, legal fees, court costs, and compensation can easily run into tens or even hundreds of thousands of pounds.

The financial impact can quickly exceed what most small practices can absorb. Beyond the financial hit, reputational damage can be even harder to repair. Claims, even unfounded ones, can damage client relationships and referral networks that take years to build. Insurance coverage provides the resources needed to defend your practice effectively. And clients need confidence that, in the unlikely event of a mistake, you can put it right.

Meeting regulatory and client expectations

If you’re a member of a professional body such as ICAEW, ACCA, or AAT, professional indemnity insurance is a requirement.  Operating without adequate cover can limit your ability to secure work with larger clients (particularly corporate or public sector clients) who require evidence of PI insurance as part of their procurement processes. Some lenders will also mandate it for business financing.

Minimum Levels of Professional Indemnity Insurance Cover

So, what’s the baseline? Professional bodies prescribe minimum levels of cover – based on turnover, fee income, and other risk factors.

What do professional bodies require?

Different professional bodies set varying minimum requirements, reflecting their assessment of typical member risk exposure:

ICAEW: For firms with less than £800k in fee income, the minimum limit must be equal to 2.5 times its gross fee income, with a minimum of £250,000.

ACCA: If your firm’s total income is less than £600,000 a year, you need coverage worth at least 2.5 times your annual income, but never less than £100,000 – whichever figure is higher.

AAT:

• Sole traders: the greater of either 2.5 times your firm’s gross fee income or £50,000.
• Partnerships: the greater of 2.5 times your firm’s gross fee income or £100,000.
• Limited companies: the greater of 2.5 times your firm’s gross fee income or £100,000.

This includes fees from all accounting services – audit work, tax advice, bookkeeping, and consultancy. Basically, anything that falls under your professional activities. Investment income or rental income from office space doesn’t count.

How it works in practice

Let’s look at ACCA’s requirements as an example…

• Annual income of £30,000? You need minimum £100,000 cover (the baseline applies)
• Annual income of £80,000? You need minimum £200,000 cover (2.5 x £80,000)
• Annual income of £150,000? You need minimum £375,000 cover (2.5 x £150,000).

Professional bodies like ACCA recognise that larger practices face proportionally greater risk exposure. A practice turning over £200,000 annually likely handles bigger clients and more complex work than one generating £40,000. Of course, this only applies to practices with income below £600,000. If you cross that threshold, you’ll need to check ACCA’s higher-tier requirements, which typically involve fixed minimum amounts rather than income-based calculations.

The 2.5 multiplier might seem arbitrary, but it reflects typical claim values relative to practice size. Smaller practices face different risk profiles than larger firms. The requirements attempt to match coverage to realistic exposure levels. Remember, though, these are minimums, not necessarily recommendations. Depending on your client mix and service complexity, you might need more than the baseline suggests.

What if you’re independent or not with a professional body?

Operating outside of a professional body doesn’t eliminate the need for PI insurance. As an independent practitioner, you face the same liability risks. Without adequate professional indemnity cover, you’re personally liable for all legal costs and settlements, and a single claim could jeopardise your practice. Even if you’re confident in your work, claims can arise from misunderstandings, third-party reliance, or client disputes. Skimping on cover is a false economy.

The Right Level of Cover Beyond the Minimum?

Minimum requirements are just a starting point, but real-world risks vary widely, and your actual coverage needs depend on the following factors.

Practice-specific factors that influence your coverage needs

Fee income and client size: Bigger clients or higher-value engagements mean higher potential claims. And turnover alone doesn’t determine optimal coverage. A practice specialising in high-risk advisory work, for example, might need coverage exceeding what turnover-based formulas suggest. Which brings us to…

Type of work: Client profile significantly impacts risk levels. Practices serving large corporations, high-net-worth individuals, or regulated industries face different risk exposures than those focusing on small businesses or personal tax work. Complex corporate restructuring advice carries different liability risks than basic bookkeeping services.

Contractual obligations: Some contracts stipulate minimum cover levels.

Finding a Professional Indemnity Insurer

As a sole practitioner providing basic bookkeeping services to small local businesses, you might adequately manage risk with £250,000 coverage. However, if you were offering corporate tax advice to medium-sized companies, you would likely need £500,000 or more.

How much professional indemnity insurance do I need?

If you’re asking yourself this question, ICPA can help. Accounting-specific insurers, like A-rated insurer AXA, understand the profession’s nuances and regulatory requirements. ICPA Pro, Premium, and Essentials members benefit from tailored cover provided by AXA, along with options to scale up affordably depending on your practice’s turnover and risk profile.

Don’t leave your practice exposed to preventable risks. Whether you’re a sole practitioner or a growing firm, contact ICPA today to discuss how our professional indemnity insurance solutions can provide the protection and peace of mind your practice deserves.