Understanding AAT Insurance
When you become a member of the AAT, you may not realise that professional indemnity insurance is compulsory before you can actually begin working for yourself. AAT insurance is designed to protect you in case something goes wrong when you are dealing with your clients. Generally professional indemnity insurance will protect you against breach of confidentiality, loss of data/documents, negligence and defamation. With varying levels of cover available, it is vital that you choose the right level to suit your needs.
What could go wrong?
The reason AAT insurance is mandatory is because you are offering a professional service. Unlike many other professions, the advice and services that you provide can severely affect the clients business. If you were to give advice that went on to ruin the third party’s business, then obviously they would not be happy and you would end up potentially losing your business after having to pay out thousands of pounds worth of compensation.
Obviously being qualified with the AAT, it is not likely that you will make such drastic errors in judgement. However mistakes can still happen and that is why there is insurance out there to protect both you and the third party.
One problem which you may encounter is if you are in charge of a company’s tax returns. They would send you various documents that you would use to work out their return. If you were to lose those documents then it could seriously affect the tax return and land the company in a lot of trouble. So they could make a claim against you for loss of documents. Another thing that could potentially go wrong is if you provide accounting advice that the company follows and as a result they lose money. You would again be hit with a claim against you and if found guilty you would have to pay compensation to the company for their loss.
Overall AAT insurance protects the third party but it also protects your finances too. If a claim were to be made against you, the legal fees can be fairly high. It wouldn’t matter whether the fault was yours or whether you were found innocent of the claims made against you; it would still be costly proving it either way. So ATT insurance is compulsory for a number of reasons and even if it wasn’t, it would still be something that all accountants should have.
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