Protect your firm with insurance for law firms

Looking to purchase insurance for your law firm? Purchasing insurance for a law firm can be incredibly difficult, confusing, and expensive. Could it be that most firms are underserved by their current insurance brokers? 

Insuring your firm doesn’t have to be a headache. In fact, with the right insurance broker, the process can be simple and streamlined.

Insurance provides lawyers with protection from potential claims and helps ensure financial security, success, and longevity. In this post, we will dive into everything you need to know about insurance for law firms, from the coverage options to costs, and even some tips on navigating the legal insurance world.

Why law firms need insurance

All businesses, especially those that provide professional services, should invest in insurance. However, it is even more important for law firms to invest in insurance because lawyers are at an increased risk of claims from malpractice suits and data breaches.

Investing in insurance for your law firm can protect your business from financial liability, legal penalties, and any losses from cyber attacks or business interruption. 

Financial risk transfer

The most obvious reason that law firms purchase insurance is as a risk transfer. If your law firm is sued and you don’t have insurance, your firm is responsible for paying its own legal fees, penalties, fines, and settlements. But, when you purchase coverage, this financial obligation shifts to the insurance company. 

Protects against malpractice claims

While there are several different types of insurance for law firms, the most important is professional liability insurance, which protects lawyers against malpractice claims for negligence or failure to perform their professional duty. This insurance policy covers legal defense costs, settlements, or judgments arising from such claims.

Certain policies may be legally required

In some states, such as Oregon and Idaho, lawyers must be covered by legal professional liability insurance. Others may not require firms to invest in the policy but heavily encourage it by forcing non-insured firms to disclose it to clients. 

Additionally, every single US state besides Texas requires companies with employees to invest in workers compensation insurance. So, law firms with employees on the payroll will likely need to pay for this policy.

Insured firms attract more clients

Law firms with insurance coverage, particularly legal malpractice insurance, tend to attract more clients because it signifies professionalism. After all, your goal as legal counsel is to provide your clients with peace of mind, so insurance coverage can only better your case. Clients feel reassured knowing that the firm has the financial backing to address issues if something goes wrong. Insurance coverage can also demonstrate your firm’s proactive approach to risk management and accountability.

What type of law firms need insurance?

Frankly, there aren’t really limitations to the type of lawyers or law firms that could benefit from insurance. That said, there are some law firms that need to be insured more than others. 

Here are some different types of lawyers and firms that should consider insurance coverage:

• Individual, independent attorneys
• Large firms with many employees
• Pro bono lawyers
• Corporate lawyers
• Criminal lawyers
• Family law firms
• Estate lawyers

9 insurance policies that every law firm needs

Every law firm has different insurance needs, and while some can get by with a couple of simple policies, others will need extensive coverage. Let’s take a closer look at 9 of the most important insurance policies for law firms.

1. Professional Liability insurance

Also known as errors and omissions insurance and legal malpractice insurance, this is typically the first insurance policy a lawyer or law firm will purchase. Legal professional liability insurance is easily the most important policy for law firms as it covers the most likely area for a claim. Unfortunately, even the best attorneys are vulnerable to a legal malpractice lawsuit, as even a minor slip-up or missed deadline can lead to a claim.

The scenarios that can lead to a malpractice lawsuit are wide-ranging, which is why it is incredibly important for law firms of all sizes to invest in this coverage. Here are a few common mistakes that can lead to legal malpractice claims:

• • Misinterpretation of the law: Incorrectly applying or misunderstanding the law, leading to legal mistakes that harm their client’s case.
  • Missed deadlines: Failing to meet critical filing or procedural deadlines, which can result in the dismissal of a case or other legal setbacks.

• Misuse of finances: Mishandling client funds or failing to properly account for financial transactions.

• Conflict of interest: An attorney has competing interests, resulting in biased or ineffective legal counsel.

• Errors in communication: Failure to effectively communicate with clients, leading to misunderstandings, missed opportunities, or unmet client expectations.

• Inadequate investigation or discovery: Insufficient research or failure to uncover key evidence, weakening the client’s case and potentially leading to unfavorable outcomes.

As you can see, there are many different reasons for bringing forward a malpractice suit, so it is astonishing that some lawyers do not carry this line of insurance or let it lapse.

This coverage will be able to cover your legal defense costs and expenses related to trials (e-discovery, expert witnesses, etc.), as well as damages or settlements awarded against your firm. Notably, the policies rarely cover fines and penalties, but better policies may provide a defense in the event fines and penalties are being alleged.

2. General Liability insurance

A staple coverage for most businesses, general liability insurance protects your firm from many different types of lawsuits. This policy includes the very important premises liability, which covers any injuries that occur on your property. Since most business is conducted in the office, and communication with clients is handled via telephone and email, general liability coverage limits for law firms are generally pretty low compared to other industries.

3. Commercial Property insurance

Property insurance covers any property owned by your law firm, including computer hardware, buildings, and furniture. This policy also provides protection in the event of a fire, flood, or other unexpected circumstance that can affect the building, your property, and your ability to work. 

4. Business Owners Policy (BOP)

Instead of purchasing the above two policies separately, many firms opt for a Business Owners Policy (BOP), which combines general liability, commercial property, and business interruption insurance into a single policy. BOPs are typically more affordable than purchasing individual policies, with law firms saving at least 10% on premiums.

5. Cyber Liability insurance

Cyberattacks are on the rise, and no industry is completely safe. Law firms deal with a lot of sensitive information, so it’s no surprise that they are a constant target of hackers. In a recent survey from 2024, nearly 40% of law firms were victims of a data breach, and around 56% of those that were attached lost sensitive information. This is where cyber liability insurance comes in. 

In today’s day and age, cyber liability and cybercrime are a close second and necessary to protect. Remember, law firms are responsible for a large amount of sensitive client and partner data, making data security an absolute must, and data breaches are one of the greatest risks lawyers face. 

As the need for cyber protection and insurance grows, more and more businesses are investing in cyber liability insurance to shield them from the financial and reputational fallout that can come with an attack.

Hackers are very interested in the type of highly sensitive data that law firms have at their disposal. This type of information can easily be sold to opposing legal parties, the media, or anyone else who could use this type of data to their advantage.

Law firms are also at risk of becoming targets for social engineering attacks such as phishing scams. Law firm phishing scams can be particularly damaging to your business’s reputation.

Cybercrime often involves a criminal trying to trick the law firm into sending funds to a fraudulent account or hijacking the email of an attorney and directing clients to send funds someplace illegitimate. 

Read our article on cyber insurance needs for law firms for more advice on this policy.

6. Employment Practices Liability Insurance (EPLI)

The need for employment practices liability insurance (EPLI) coverage grows in concert with the size of your firm. If you’re a solo attorney, then you obviously won’t need this one. However, as a firm adds partners or employees, the internal issues become more complex, and the personalities are less predictable. 

Any law firm that has employees, no matter how many, should consider EPLI coverage. EPL insurance will protect your firm from potential employee-related claims, including discrimination, harassment, failure to promote, and wrongful termination. 

Professional services firms are also strongly encouraged to get third-party coverage to protect against claims from outside the firm. If you are a large law firm with a high turnover rate, there is absolutely nothing to consider; you need to have EPLI.

7. Directors and Officers (D&O) insurance

This is another policy that may not be necessary when your firm is first starting out but becomes important as the business grows. As in most other businesses, D&O insurance for law firms will protect the firm against suits directed at the executives and directors of the company related to the mismanagement of the firm. 

Law firm officers have a unique risk as the attorneys inside the firm could be amongst the most likely to sue the firm’s directors and officers. 

A policy must be tailored for a law firm, as a normal D&O policy would not cover this exposure. Additional law firm D&O exposures include a botched acquisition, over-extending on partner lateral hires, or tortious interference.

8. Workers Compensation insurance

Since this type of commercial insurance is required in just about every state (except Texas), there’s not much to think about — if you have employees on the payroll, your law firm just needs to have it. Thankfully, since law offices are not high-risk workplaces, workers compensation likely won’t cost your law firm an arm and a leg.

However, accidents will always happen, and workers’ compensation will cover your firm if your employees ever sustain any type of injury at work (whether it’s at your office, at the courthouse, or anywhere else they may be representing your firm in a professional capacity).

9. Commercial Crime insurance

While this may not be the first policy that your firm will purchase, commercial crime insurance protects you against financial losses resulting from theft, fraud, or embezzlement by employees or third parties. This coverage further safeguards sensitive information, client funds, and valuable assets handled by law firms. Additionally, it can cover legal expenses related to investigating and addressing incidents of commercial crime.

How to find the right insurance for law firms

Get help from an insurance broker

Unless you have experience in the insurance industry, you’ll probably struggle to navigate policies and determine the best coverage for your firm. Insurance policies are loaded with complicated jargon and are generally not very easy to understand. 

This is why we recommend going with an experienced broker to help you navigate policies. The best way to ensure your law firm gets the right insurance is to allow an expert who understands the needs of your business industry to guide you through the process. 

Embroker specializes in tracking down the best insurance coverage for your law firm and can even create customized policy packages for you. 

Our law firm insurance packages include all of the essential policies that your business may need, making the process all the easier since you won’t have to purchase each coverage option individually.  

Do your own research

While an insurance broker like Embroker can do most of the heavy lifting in finding you the best law firm insurance, you should still research companies on your own. Before sealing the deal with an insurance policy, comparing a few different options is always a good idea. You should always check the company’s reviews, compare the cost of premiums, and research each policy’s limits and exclusions.

You can never be too careful about what types of policies you purchase. 

Determine your practice’s risks and coverage essentials

How many employees do you have? What kind of law does your firm practice? How complex is the organizational structure of your business? All of these (and more) are risk factors that will help you determine the type of insurance you need and the scale of the coverage. For example, if you manage a large law firm with board members and executives, you should purchase D&O coverage. Additionally, if your law firm has several employees and supervisors, you should consider EPL insurance.  

Every law firm’s coverage will vary depending on their individual risk factors and business needs.

Understand the policy’s terms, limits, and exclusions

It is crucial to make sure that you understand the limits and rules of the policies, what they entail, and what needs to happen for the coverage to be activated. Larger firms should purchase insurance with higher policy limits, while individual lawyers or small teams may not need as much coverage. 

Since you are an attorney or a team of attorneys, be sure you understand what the policies offer you in terms of representation. Can you represent yourself, or does the policy require you to use a third-party law firm to handle the claim?

Insurance for larger law firms

Large law firms have different coverage needs than smaller firms due to the increased complexity and larger scale of their operations. For example, large firms typically face higher premiums and more stringent underwriting criteria because they handle more complex and higher-stakes cases, leading to greater exposure to risk and potential claims.

Here are a few key differences between larger law firms and smaller independent firms:

• Coverage needs: Large firms tend to have more employees and more complex operations, so they typically need more coverage, including specialized policies for specific practice areas, cyber liability, and management liability.
• Risk management: These larger firms also usually implement more sophisticated risk management strategies, which may include in-house legal teams or dedicated risk management departments, to minimize claims.
• Premium costs: With more attorneys, employees, and higher profile cases, large firms generally pay higher premiums than smaller law firms.

Further considerations for insurance for law firms

As you can tell by now, navigating insurance for your law firm comes with a high learning curve and there are seemingly endless loopholes to jump through along the process. Here are some final things you should know.

Premiums increase with risk exposure

As with any industry, lawyer’s insurance premiums increase as their exposure to risk and claims grow. This is particularly evident as attorneys gain experience and handle more complex cases. For example, a new attorney with a shorter legal history is less likely to face a legal malpractice claim for past services. In contrast, experienced lawyers and growing firms are more vulnerable to errors due to the complexity of their cases, a longer history of legal work, and generally higher stakes. This means that the new attorney may pay lower insurance premiums than the larger, growing firm.

Billing hours and claims risk

The number of hours an attorney bills also impacts their risk of claims. For example, an attorney billing 1,500 hours is significantly more prone to claims than an Of Counsel (OC) attorney billing only 600 hours. Some insurance companies might even cover part-time attorneys without additional charges, which could be a cost-saving opportunity for firms.

Premium costs eventually “mature”

As attorneys gain experience, their insurance rate per attorney eventually “matures,” meaning additional years of experience do not further affect the premium. However, law firms don’t need to wait for this maturity to manage costs. Premiums can be reduced immediately by having a broker negotiate with carriers. A savvy broker who understands carrier underwriting can work these nuances in your favor, ensuring the best deal year after year with minimal effort on your part.

Importance of comprehensive coverage

Lawyers can be highly exposed to gaps in their insurance coverage for professional liability and other lines. Brokers often fall short of serving their clients when they leave these gaps, especially if they lack experience in securing the right insurance for legal professionals. It is crucial to have a broker who is willing to handle all lines of coverage for your firm. A broker who specializes in law firms can provide confidence that all insurable risks at your firm are properly covered. Ensure your broker can identify coverage gaps on your behalf, working with multiple insurance carriers to secure appropriate policies.

How much does insurance for law firms cost?

Not sure if you’re getting a fair deal on insurance for law firms? A frequent question we hear — and a common problem with insurance underwriting in general — is that no one really knows how underwriters arrive at a premium.

That said, we do know some of the key factors that affect law firms’ premiums. These factors include the number of attorneys, areas of practice, location, and claims history. 

As mentioned, a bigger law firm with several employees specializing in a particularly risky area of practice will pay higher premiums than a solo attorney who runs a relatively low-risk practice.

You’ll also need to determine what policies your firm requires and choose deductibles and policy limits, both of which have major impacts on the overall cost of your coverage.

So, how much does insurance for law firms cost on average?

The unsatisfying answer is: It really depends.

For an accurate pricing estimate, get a quote for your law firm insurance today!

Why choose Embroker for your law firm insurance?

Today’s legal landscape is incredibly complex, which is why attorneys and law firms need professional advice and assistance when it comes to buying insurance to ensure that their coverage gives them the best possible protection from all possible risks.

At Embroker, we ensure that your firm gets all of the coverage and support you need. We provide customized packages for law firms that streamline the insurance buying process and drastically cut down on the amount of time you’ll spend buying policies.

We believe that your firm deserves to have insurance products available that are expertly designed to cover the specific risks and liabilities that come with running your law firm.

Just like other businesses, law firms have clients and employees, which means that law firms need to be protected from a wide variety of risks that aren’t very different from the risks that businesses of any other industry face and are protected from with the help of insurance.