Purchasing Malpractice Insurance

Even though malpractice insurance in not necessarily required in every jurisdiction, it is something that you should consider purchasing, especially if you are new to the practice of law. Malpractice insurance protects you and your firm in the event that a disgruntled client brings a malpractice suit against you. Even though you may be on a tight start-up budget, insurance is a "must-have" and will run a new attorney approximately $700 per year (which can be paid in monthly installments).

If you are just starting out and do not anticipate having a large volume of clients right out of the gate, you may want to look into part-time practitioner's malpractice insurance. The premium is lower (obviously) than the yearly rate on a full-time policy, however, most part-time insurance policies will limit you to 10-20 billable hours per week.

Research insurance carriers and make sure that you understand what you are getting for your money.  Check to see if your state or local bar association recommends a certain carrier. Decide how much of a deductible you can afford to pay. If you take out a policy with a $10,000 deductible and know that you will probably not be able to come up with that much cash on demand, your insurance policy will be virtually useless. For most firms starting out with limited capital, $1,000-$2,000 is a reasonable deductible- most people can scrape a grand or so together in emergency situations.

Another consideration that you should make is how much insurance you need in terms of policy limits. Most jurisdictions require you to have a $100,000 per claim/$300,000 annual aggregate limit. For lawyers who are under insured, you may be required to disclose this fact to all of your potential clients. The minimum requirement should be suitable for solo practitioners and small firms that are practicing basic criminal defense, family law, landlord-tenant issues, simple wills and small claims matters. However, if you intend on venturing into a legal field such as tax or securities where there are often large amounts of money riding on the line, you should consider a high limit policy with an annual aggregate of $1,000,000 or more.

One last tip- if you have to jump through hoops and bend over backwards in order to get a quote for malpractice insurance, think twice before signing a contract with them- insurance companies are usually on their best behavior when signing new clients. Things tend to get more unpleasant if you actually have to make a claim.