Why Cyber Insurance Matters for CPA Firms
Accounting and tax firms sit on a treasure trove of sensitive client data: Social Security numbers, bank accounts, payroll information, and corporate filings. That data makes CPAs prime targets for cybercriminals. It also makes cyber insurance no longer optional but essential. CPA firms across the Bay Area — from San Jose and Campbell to Los Gatos and Santa Clara — are finding that insurers now demand documented proof of specific security controls before issuing coverage.
Cyber insurance readiness means proving your firm follows cybersecurity best practices through IT documentation and compliance records. For CPA and tax firms, missing policies, weak controls, or outdated systems can lead to denied claims after a breach. Strong documentation ensures coverage, compliance, and client trust.
Yet many firms learn the hard way that buying a policy is not enough. According to Marsh McLennan’s 2024 cyber insurance report, 41% of cyber insurance applications are denied on the first submission — primarily due to missing MFA or inadequate endpoint protection. Cyber insurers want proof your firm had the right protections in place before the breach. Without proper IT documentation and security protocols, claims can be delayed or outright denied.
Defining Cyber Insurance Readiness
Cyber insurance readiness is your firm’s ability to meet insurer requirements and demonstrate compliance when filing a claim after a cyber event. It involves:
Documenting IT and security practices Demonstrating compliance with frameworks (FTC Safeguards, SOC 2, HIPAA, PCI DSS) Showing evidence of proactive monitoring and controls Training staff on cybersecurity awareness
For CPA and tax firms, this preparation ensures that if a ransomware attack, phishing scam, or data breach occurs, the insurer has no reason to deny your claim.
Why CPAs and Tax Firms Face Higher Risk
Firms that specialize in tax preparation and financial services face some of the highest risks in professional services. Common threats include:
Ransomware attacks locking up client tax files during busy season Phishing emails targeting staff with urgent “IRS” messages Data breaches exposing personal and financial details Compliance failures that trigger fines alongside recovery costs
Cyber insurance helps cover:
The cost of investigating and recovering from an attack Legal fees and regulatory penalties Client notification and credit monitoring services Ransom payments in some cases
But remember: insurers only pay out if you’ve met their security requirements. That’s where IT documentation makes the difference.
Why IT Documentation Can Make or Break Your Claim
Insurance adjusters don’t take your word for it. They want proof. Without documentation, you may not be able to demonstrate that your firm had reasonable protections in place.
Key documents often requested during claims include:
Written information security policies (WISP) - outlining firm-wide protections Access control records - who has access to what data and when it was revoked Patch and update logs - proof systems were regularly updated Backup and recovery plans - and evidence they were tested Employee training records - showing your team was educated on phishing and data handling
If these are missing, insurers may argue that negligence voids coverage.
Common Gaps That Threaten Coverage
Even well-intentioned firms can miss the mark. Some of the most common issues that prevent CPAs from receiving full coverage include:
Outdated or incomplete security policies - Never revised after remote work or new software adoption. Weak authentication practices - Not enforcing multi-factor authentication (MFA) for client portals or email. Unverified backups - Having a backup system but never testing recovery. Poor vendor oversight - Not documenting how third-party software (QuickBooks, CCH, Lacerte, Clio, ShareFile) is secured. No employee security training - Leaving staff unprepared for phishing attacks.
Each of these oversights creates both a security vulnerability and an insurance risk.
Building Cyber Insurance Readiness in Your Firm
The good news? Preparing your firm doesn’t require enterprise-level budgets. With a structured approach, you can meet insurer expectations while also strengthening your firm’s resilience.
Build a Compliance-First Mindset
Frame documentation and cybersecurity as part of client trust, not just a regulatory checkbox. Adopt frameworks like the FTC Safeguards Rule to guide your policies.
Document Everything
Keep organized, accessible records of updates, security checks, and employee training. These should be centralized and ready to share with auditors or insurers.
Implement Security Essentials
Multi-factor authentication (MFA) Endpoint detection and response (EDR) Encrypted data storage and email Role-based access controls
Test and Prove Backup Systems
Schedule regular recovery tests and keep logs. Insurers want evidence your backups actually work.
Train Your Staff
Phishing simulations and role-based training reduce the human-error risk. Document attendance and results.
Partner With a Specialized IT Provider
Generic IT vendors may not understand the urgency of tax season or the compliance rules that apply to your firm. Providers with CPA and legal industry expertise (like One82) can design documentation and controls that satisfy both regulators and insurers.
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Key Takeaways
Cyber insurance readiness ensures your claims are honored by proving compliance and strong security practices. For CPA and tax firms, IT documentation, from patch logs to training records, is often the deciding factor in coverage approval. Common coverage killers include weak authentication, untested backups, and missing policies. Building readiness requires a mix of documentation, staff training, proactive monitoring, and compliance alignment. Specialized IT partners can help firms meet insurer requirements while improving day-to-day security and productivity.
Safeguard Your Coverage and Your Clients
Cyber insurance is not a replacement for strong cybersecurity, it’s a safety net. But like any insurance policy, it only works if you meet the conditions. For CPA and tax firms, cyber insurance readiness is about preparation, proof, and protection.
When your firm can demonstrate airtight documentation and compliance, you safeguard not only your insurance claims but also your clients’ trust and your professional reputation.
Frequently Asked Questions
What is cyber insurance and why do CPA firms need it?
Cyber insurance is a policy that helps protect businesses from financial losses related to cyber incidents, such as data breaches or ransomware attacks. CPA firms, which handle sensitive client information, are particularly vulnerable to cyber threats, making this insurance essential for safeguarding their operations and finances.
How can CPA firms prepare for cyber insurance claims?
To prepare for cyber insurance claims, CPA firms should maintain thorough IT documentation and adhere to cybersecurity best practices. This includes creating security policies, conducting regular system updates, training staff on security awareness, and ensuring compliance with relevant regulations. Proper documentation can significantly improve the likelihood of a successful claim after a cyber incident.
What are the common cybersecurity risks faced by CPA and tax firms?
CPA and tax firms face various cybersecurity risks, including ransomware attacks, phishing scams, and data breaches. These threats can compromise sensitive client information and disrupt business operations, particularly during peak seasons like tax time. Understanding these risks is crucial for implementing effective security measures.
How does One82 assist CPA firms with cyber insurance readiness?
One82 helps CPA firms by offering guidance on cybersecurity best practices and ensuring compliance with necessary frameworks. By assisting with IT documentation and security protocols, One82 helps firms strengthen their cyber insurance readiness, which can lead to better protection and successful claims in the event of a cyber incident.
