Accounting professional indemnity insurance is written to minimum terms set by the professional bodies rather than to whatever the open market would otherwise offer. Those terms cover the limit, the excess, the insurer and what happens after the practice closes, and buying outside them is a regulatory problem as well as a commercial one.
How the limit is set
Generally by reference to the practice's gross fee income, with a floor beneath it for small practices and a cap above which the requirement stops scaling. The calculation is published by each body and is reviewed periodically, so a practice that has grown should recalculate rather than renew at last year's figure.
What else the minimum terms cover
The insurer must meet stated criteria. The excess is capped relative to income so that a practice cannot insure nominally with a deductible it could never meet. Cover must extend to the practice, its principals and its employees. And run off cover is required for a period after the practice ceases.
Where practices get caught out
Growth that outpaces the limit. A change of mix towards advisory work, where the claims are larger. Cancelling on retirement rather than buying run off. And a policy bought on price from an insurer outside the body's criteria, which satisfies nobody and is discovered at the worst moment.
Questions people ask about accounting professional indemnity insurance
How is the required limit calculated?
Generally from gross fee income with a floor for small practices and a cap above which it stops scaling. Each body publishes its own formula.
Can I choose any insurer?
The minimum terms usually set criteria the insurer must meet. Buying outside them is a regulatory problem even if the cover looks adequate.
What happens on retirement?
Run off cover is required for a stated period after the practice ceases, because claims about past work arrive later.