The cost of professional liability insurance varies depending on several factors, including the number of attorneys in the firm, the amount of coverage needed, the type of law practiced by the firm, the firm’s location, the claims precedence compared to the areas of law practiced by the firm, the years of experience of the law firm’s attorneys, the firm’s risk management operations, the firm’s prior acts coverage date and the industry-wide risk factors and claims environment involved with the legal profession. In short, many factors go into the cost of a law firm’s professional liability insurance. Here are some additional details that commonly affect the cost of professional liability insurance:
- Areas of Law Practice: Your specific area of practice or how much of your business is specialized into a certain type of practice is considered when factoring rates for coverage. Typically, a law firm that specializes in a certain type of law practice will receive a more competitive rate than a firm that's made up of smaller percentages of many different types of areas of law practice.
- Desired Coverage Limits: The amount of coverage you choose – or, your policy limits – will affect the cost of your premium. Higher limits usually mean paying a higher premium.
- Deductible: The amount of your deductible can also affect the cost of your premium. A higher deductible may lower your premium, but it means you will have to pay more out-of-pocket expenses in the event of a claim.
- Claims History: Having a history of claims (especially recent claims that have occurred in the last five years) may increase the cost of your premium regardless of whether the firm was found to be guilty of the alleged claim or successfully settled.
- Location: A firm’s location or locations may also affect the cost of coverage. Different states have different claims environments or may have unique risk factors for attorneys that can affect the overall cost.
The cost of professional liability insurance ranges from less than a few hundred dollars to several thousands of dollars per year, depending on the varying factors mentioned. This cost may also include additional coverage options, such as cyber liability.
It is important to scrutinize the underwriting process to accurately but strategically represent your firm’s business to the prospective insurance carrier.
It's important to remember that the cost of professional liability insurance is a necessary expense to protect lawyers and their businesses from the financial risks associated with lawsuits or alleged claims made against their practice. While an additional expense, it may ultimately save you money and protect the future of your business.