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How Much Is Malpractice Insurance for Lawyers?

With malpractice lawsuits on the rise, carrying malpractice insurance is common sense.

If you have a home, chances are you make a point of paying for homeowners insurance. Similarly, if you are a lawyer, you need business insurance to protect your legal practice.

In the same way that accidents can happen to responsible homeowners, even the most experienced lawyers can make mistakes. Without malpractice insurance, those mistakes can be very expensive.

How much is malpractice insurance for lawyers? It depends on factors such as what type of law you practice, whether your area of expertise is high risk, and other considerations.

The bottom line is, malpractice insurance for lawyers won’t cost you as much as a lawsuit. Keep reading to learn about how insurance agencies calculate the cost of malpractice insurance.

What Is Malpractice Insurance For?

Malpractice insurance is a type of professional liability insurance for lawyers. Doctors and other medical professionals also use malpractice insurance.

This type of insurance protects these types of professions from being held liable for doing harm. Malpractice insurance is the best way to cover yourself in the event you make a mistake that causes a client or patient to sue.

Some states require lawyers to carry malpractice insurance. Others require lawyers to disclose to their clients whether they carry malpractice insurance. Many states have no requirements.

If you do not have malpractice insurance for your law practice, you risk the possibility of paying clients’ damages out of pocket. This might lead to needing to file for bankruptcy.

How Much Is Malpractice Insurance for Lawyers?

When an insurance provider evaluates the cost of malpractice insurance for a lawyer or law firm, they take several factors into account. The biggest factor they consider is the amount of risk that is involved.

Different legal specialties have different levels of risk. Insurance agents calculate risk based on a combination of frequency and severity. How frequently the specialty reports claims and how severe the claims are.

Let’s dig into several factors that impact the way an insurance agent will calculate the risk and associated costs of malpractice insurance for your law practice.

What Services Does Your Practice Provide?

The services your practice provides will be determined by the area of law you practice. The services a family lawyer offers are inherently different from those of a criminal lawyer, for example.

The area of law you practice and the services your law firm provides has a major impact on how much your malpractice insurance will cost. This is simply because some practice areas have higher levels of risk than others.

The higher your practice’s level of risk, the higher the cost of your firm’s insurance premiums. To evaluate these costs, insurance agents must perform constant calculations across all legal areas of practice.

Is Your Area of Practice High Risk?

Knowing which practice areas are higher or lower risk is valuable information, whether you are just starting out or considering growing your practice. Before you decide to add a specialty, do some research on its risk level.

Some practice areas in particular that have low-risk severity include family law, bankruptcy, and criminal law. Most legal defense areas also have relatively low-risk severity.

On the other end, real estate law, personal injury, as well as wills, trust, and estate law tend to be at a higher risk and therefore can have higher malpractice insurance premiums.

What Size Is Your Firm?

Larger law firms pay higher premiums than smaller firms do. This is simply because there are more practicing lawyers to insure.

As you add lawyers to your practice, you can expect your insurance premiums to increase. However, your premiums won’t necessarily go up exponentially with each additional hire.

Some insurance agents may offer discounts to growing law firms in order to entice them to continue to use their services.

Where Is Your Firm Located?

In the United States, each state can set its own minimum premium requirements for different types of insurance. States can also set different premium rates for each area of law practice.

For these reasons, it is typical for malpractice and other insurance rates to fluctuate yearly. These rates also get determined based on how many malpractice claims occur by practice area in each state.

Finally, insurance companies can charge different premiums based on the county in which your firm practices.

If insurance companies notice a rise in malpractice claims in a particular county, they will raise premiums in that county rather than raise premiums for the entire state.

Insurance companies need to be able to adjust premium rates in order to protect their interests, while also balancing with the need to retain clients.

How Much Coverage Do You Need?

The size of your firm will determine the policy limit you need to effectively protect your practice. Whereas a small law firm may be sufficiently covered with a million-dollar policy limit, a larger firm would find that inadequate.

On the other end, you want to avoid purchasing too much insurance. The higher the policy limit you require, the higher your insurance premium will be.

When determining the policy limit that is appropriate for the size of your law firm, you need to take into consideration the costs of your defense and the cost of any potential settlements.

Consult an Insurance Agency

How much is malpractice insurance for lawyers? As with most questions related to cost, the answer is, it depends. The factors that will determine the cost of your malpractice insurance premiums include:

  • Size of law firm
  • Location of law firm
  • Area and scope of practice
  • Level of risk
  • State minimum premium rates
  • Amount of coverage needed

If you are practicing law in New Jersey without carrying malpractice insurance, you are taking a significant financial risk with your practice. To learn more about the benefits of malpractice insurance, contact us today.