Is Your Law Firm Paying for Malpractice Insurance It Doesn’t Need?

The cost of malpractice insurance for lawyers depends on the risks an insurer agrees to cover. But paying a higher premium doesn’t necessarily mean your firm is better protected.

Renewing your policy without reviewing its terms could mean paying more than necessary. A change in practice areas or the departure of an attorney may significantly affect the premium calculation. However, removing coverage without understanding its purpose can leave the firm exposed to claims from previous legal work.

Before your next renewal, it’s worth reviewing which adjustments could reduce costs without compromising necessary protection. At L Squared Insurance Agency, we help law firms make these decisions with a clear understanding of their coverage and the costs involved.

Are Your Coverage Limits Still Right for Your Practice?

Lawyers malpractice insurance policies generally have two liability limits: a per-claim limit and an aggregate limit for the policy period.

For example, a $1 million/$2 million policy provides up to $1 million for a covered claim and $2 million in total for covered claims during the policy period, subject to the policy’s terms.

Increasing these limits can increase your premium. But does every law firm need the highest limits available?

The answer depends on the firm’s exposure. A solo attorney handling routine legal matters may have different insurance needs than a firm representing businesses in multimillion-dollar transactions. Client contracts may also require specific minimum insurance limits.

Before reducing your limits to save money, consider the potential size of a malpractice claim against your firm. Also, check how defense expenses are treated. Under policies where defense costs reduce the liability limits, the amount available to pay a settlement or judgment may be less than the stated limit.

Has Your Law Firm Changed Its Practice Areas?

Practice areas are an important factor in calculating lawyers malpractice insurance cost. Insurers evaluate the type of legal work performed because the frequency and potential severity of claims differ by practice area.

For example, a firm that previously handled real estate transactions but has shifted toward estate planning may present a different risk profile at renewal.

If your application still reflects an outdated distribution of legal work, the insurer may not be evaluating your current practice accurately.

Review the percentage of revenue or work attributed to each practice area, using the reporting basis and period requested by the insurer. Be precise about the services your firm provides.

However, remember that a change in practice areas doesn’t eliminate liability for earlier work. Your policy’s prior acts provisions remain important, particularly when moving to a different insurer.

A change in practice areas may create an opportunity for a better premium, but the insurer must evaluate the firm’s full exposure.

Are You Paying for Attorneys Who Have Left the Firm?

Attorney count and experience can affect malpractice insurance premiums. When an attorney leaves a firm, the insurer should be notified so the firm’s current staffing and coverage arrangements can be reviewed.

But removing an attorney from the firm’s active roster doesn’t necessarily mean the firm no longer needs protection for that attorney’s previous work.

Consider an associate who handled litigation matters before leaving the firm. A malpractice claim arising from that work could be filed after the associate’s departure.

The firm’s coverage for former attorneys depends on the policy’s definition of insured, prior acts provisions, and other applicable terms.

The same issue deserves attention when a partner retires or a firm closes. Depending on the circumstances, an extended reporting period endorsement may be necessary to preserve the ability to report claims involving past work.

Before assuming an attorney’s departure will reduce your premium, ask your insurance agent how the change affects both the current policy and liability for earlier legal services.

Could a Different Deductible Reduce Your Premium?

A higher deductible can lower the cost of malpractice insurance for lawyers because the firm agrees to retain more financial responsibility when a covered claim occurs.

For example, consider two hypothetical policies. Policy A has an annual premium of $4,500 with a $2,500 deductible. Policy B costs $3,800 annually but comes with a $10,000 deductible.

Choosing Policy B saves $700 per year, but the firm accepts an additional $7,500 in potential deductible responsibility if a claim occurs, assuming the same deductible structure.

The details matter. Depending on the policy, the deductible may apply to damages, defense expenses, or both. Some policies also have provisions that affect how deductibles are applied or reduced.

A higher deductible may make financial sense for a firm with sufficient reserves. For another firm, the lower premium may not justify the increased out-of-pocket exposure.

L Squared Insurance Agency can help you compare deductible options and understand how much you’re really saving before choosing a policy based on its premium.

Are You Comparing Insurance Policies or Just Their Prices?

Two insurers can offer the same liability limits and significantly different premiums. That doesn’t mean the policies provide identical protection.

When comparing malpractice insurance for lawyers, pay particular attention to the following provisions:

• • • Prior acts coverage. Will the new policy preserve coverage for eligible work performed before its effective date? Changing insurers without maintaining the appropriate retroactive date can create serious gaps.
    • Defense costs. Are legal defense expenses paid within or outside the policy’s liability limits? How do those expenses affect the deductible?
    • Exclusions. Does either policy restrict coverage for legal services or activities relevant to your firm?
    • Extended reporting periods. What options are available if the firm closes or an attorney permanently leaves private practice? What eligibility requirements and costs apply?
    • Claims reporting requirements. What must the firm report, and when? Missing a reporting deadline under a claims-made and reported policy can jeopardize coverage.

A lower premium is valuable only when the policy still provides the protection your firm needs.

This is also where comparing insurers becomes more complicated than comparing prices. Underwriting requirements and available endorsements differ, so an experienced insurance agent can help identify meaningful differences between quotes.

Lawyers Malpractice Insurance Cost Is Flexible

The price of lawyers malpractice insurance isn’t fixed across the market. Insurers use different underwriting guidelines, and the same law firm may receive substantially different quotes for comparable coverage.

Your existing policy may still be the right choice. But a renewal is an opportunity to review the premium, confirm that the coverage reflects your firm’s needs, and see if another insurer offers better terms.

At L Squared Insurance Agency, we work with attorneys and small law firms to compare available malpractice insurance policies and understand the financial consequences of coverage decisions. Before accepting your next renewal, contact our agents to see what options are available for your practice. Get a quote today.