# Questions to ask an insurance provider about a cost segregation practice

Professional liability, general liability and cyber cover for a cost segregation practice: what each responds to, what to ask a broker, and what no policy replaces.

## Short answer

A cost segregation practice carries three kinds of risk that insurance is written for: a claim that a study was negligently prepared and caused a client loss, which is professional liability; injury or property damage in the course of business, including on site visits, which is general liability; and loss or exposure of client data, which is cyber cover. Each policy responds to different events, and the details of what is covered, excluded and required of you vary by insurer and by state. This article gives you the questions to take to a licensed insurance broker so that the conversation is about your practice rather than a generic product. It is general education. It is not insurance advice, NBCSS is not a licensed producer, and no policy replaces a reviewer, an engagement letter or a competent study.

## The three covers, and what they are for

| Cover | Responds to | Typical questions it raises for a cost segregation practice |
|---|---|---|
| Professional liability (errors and omissions) | A client's claim that your professional work was negligent and caused a loss, for example an examination adjustment attributed to the study | Is cost segregation named as a covered service? Are tax-related claims excluded? Is the policy claims-made, and what is the retroactive date? |
| General liability | Bodily injury or property damage arising from your operations, including a site visit | Are site visits and work on client premises covered? Is there a limit for damage to property in your care? |
| Cyber | Loss, theft or exposure of data; response costs; some regulatory costs | Are client tax documents in cloud tools covered? What incident response is included? What security measures are required as a condition? |

Other covers may matter as the practice grows: employment practices, commercial auto for site travel, and business property.

## Questions to ask a licensed broker

Bring a description of the practice: services, typical client, revenue, staff, subcontractors, tools, site-visit frequency, and how client documents are stored. Then ask:

1. **Is cost segregation, as I do it, a described and covered professional service on this policy?** Some professional liability policies cover engineering services, some cover tax and accounting services, and cost segregation sits between them. A policy that covers neither, or that excludes tax advice broadly, may not respond to the claim you are most likely to face.
2. **What is excluded?** Ask specifically about exclusions for tax penalties and interest, for fee disputes, for work by subcontractors, for claims arising from a change in law, and for work performed before the retroactive date.
3. **Claims-made or occurrence, and what is the retroactive date?** Professional liability is usually claims-made: it covers claims made during the policy period for work after the retroactive date. Ask what happens when you retire, change insurers or close the practice, and what an extended reporting period costs.
4. **What are the limits and the deductible, and are defense costs inside or outside the limit?** A limit consumed by legal fees leaves less for a settlement.
5. **What do you require of me?** Engagement letters, written scopes, record retention, peer review, security measures. These are conditions; failing them can affect a claim.
6. **How are subcontractors and reviewers treated?** If another practitioner reviews your study, or you review theirs, whose policy responds?
7. **What must I report, and when?** Circumstances that could become a claim usually must be reported promptly; late notice can void cover.
8. **What does the cyber policy require about client documents in third-party tools?** If you use cloud or AI tools, ask whether their use is covered and what security controls are conditions.
9. **How are site visits covered?** Falls, damage to a client's property, injuries to others.
10. **Who is the insurer, and are they licensed in my state?** Insurers and producers are licensed by state insurance departments; the SBA's guidance on business insurance points to state requirements and to working with a licensed agent.

## What no policy replaces

- **A competent study.** The IRS guide expects the preparer to be identified and the methodology and assumptions stated; a policy does not make a percentage into a study.
- **A reviewer.** Independent review is how errors leave the file before a client or an examiner finds them. Insurers often ask whether you have one.
- **An engagement letter.** Scope, deliverable, fees, the role in an examination, limitations and the division of responsibility with the adviser. Many claims are disputes about what was promised.
- **Records.** The study, the workpapers and the source documents, kept for as long as the property is owned and beyond.
- **Honesty about limitations.** A report that says what was estimated and what was assumed is easier to defend than one that does not, and an insurer's counsel will ask for the limitations section before anything else.
- **A division of responsibility with the adviser.** Claims often turn on who was supposed to decide what; a written division, in the engagement letter, is evidence that the practitioner stayed within the study.

## Reading the policy

A policy has parts, and the questions above map to them. The declarations page states the named insured, the period, the limits, the deductible and the retroactive date; check that the named insured is the entity you actually contract through. The insuring agreement says what the policy covers, in its own defined terms; "professional services" is a defined term and its definition is the answer to question one. The exclusions remove things from the insuring agreement and are where tax-related, fee-dispute and prior-acts limitations live. The conditions are your obligations, including notice, cooperation and any required practices. Endorsements change any of the above and are often where a cost segregation description is added or an exclusion is removed. Read all five parts; a broker's summary is a summary.

## When to review cover

Review at renewal, and whenever the practice changes: a new service such as look-back studies or expert work in disputes; a first employee or subcontractor; a new tool that holds client documents; a move into a new state; a change of entity; a large engagement outside the usual range. Each can move the practice outside the policy's description of what you do, and an insurer's first question after a claim is whether what you were doing was what you told them.

## Common mistakes

- Buying a general professional liability policy without confirming the service description covers this work.
- Assuming an entity's liability separation makes professional cover unnecessary; it generally does not protect an individual from their own professional acts.
- Letting a policy lapse and losing continuity of the retroactive date.
- Not reporting a circumstance, such as a client's complaint after an examination, until it becomes a claim.
- Treating the broker's summary as the policy. Read the policy.

## About commercial relationships

Insurance providers advertise to practitioners, and some professional bodies have arrangements with them. NBCSS's rule is that education comes first, any commercial relationship is disclosed beside the recommendation, and nothing NBCSS publishes is insurance advice. No provider is recommended in this article. Speak with a licensed broker or producer in your state.

## What people ask on Reddit and other forums

The searches that lead people to these threads are usually phrased "E&O insurance cost segregation", "professional liability insurance for consultants", "cyber insurance small practice".

Insurance questions in the r/smallbusiness and "cost segregation reddit" threads about starting out are usually about whether E&O is needed at all. From the sources below:

**"Do I need E&O to prepare studies?"** No law requires it. Clients, advisers and referring firms often do, and a claim without cover is paid from your own assets.

**"Will my LLC cover me instead?"** Entity separation generally does not protect an individual from their own professional acts.

**"What's a retroactive date and why does it matter?"** The date after which your work must have been performed for a claims-made policy to respond. Continuous cover preserves it; a lapse can lose it.

**"Does cyber insurance cover client documents in cloud tools?"** Ask. Cover and conditions vary, and some policies require specific security measures.

## Questions people also ask

### Do I need professional liability insurance to prepare cost segregation studies?

No law requires it. Clients, advisers and firms that refer work often do, and a claim without cover is paid from your own assets.

### Will an LLC protect me instead?

Entity separation under state law generally does not shield you from liability for your own professional work. That is what professional liability insurance is for; the entity decision is a separate one made with counsel.

### What is a retroactive date?

The date after which your work must have been performed for a claims-made policy to cover a claim about it. Keeping continuous cover preserves it; a gap can lose it.

### Does cyber insurance cover client tax documents I put in cloud tools?

Ask. Cover and conditions vary, and some policies require specific security measures or exclude certain third-party services.

### Can NBCSS recommend an insurer?

No. NBCSS is not a licensed producer and does not give insurance advice. If it ever lists a provider, the listing will disclose the relationship, as its affiliate terms require.

## Sources

- https://www.irs.gov/pub/irs-pdf/p5653.pdf — IRS Publication 5653, Cost Segregation Audit Techniques Guide (Rev. 2-2025): Chapters 4 and 5.
- https://www.sba.gov/business-guide/launch-your-business/get-business-insurance — U.S. Small Business Administration, Get business insurance.
- https://nbcss.org/affiliate-terms — NBCSS Affiliate Terms.

## Related reading

- [Choosing a business structure for a cost segregation practice](/articles/choosing-a-business-structure-for-a-practice)
- [How to read a cost segregation report's limitations](/articles/reading-report-limitations)
- [Working with reviewers on a cost segregation study](/articles/working-with-reviewers)
- [Responsible AI use in cost segregation work](/articles/responsible-ai-use-in-cost-segregation)
- [Planning a professional website for a practitioner](/articles/planning-a-professional-website)
- [Support](/support)

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Published: 2026-09-25 · Last content change: 2026-09-25
Not professional advice: general educational information from the National Board of Cost Segregation Specialist (NBCSS); not accounting, tax, legal, financial, investment or engineering advice. Verify with a licensed CPA, enrolled agent, attorney or other qualified adviser before acting.