The First Indemnity Professional Liability Blog

Posted By: John Randolph

How Much Insurance is Enough?
By Andrew Biggio

One of the most common questions attorneys – and pretty much anyone else purchasing insurance – typically asks is "How much insurance should I have?" or "How much insurance is enough?"

The answer, unfortunately, is different for everyone.

That's why First Indemnity offers a starting point with some basic parameters. Every attorney will have different needs and different concerns, but what follows is information that gives you somewhere to start.

A Coverage Guide for You

If you're a solo attorney just getting started and your client volume is low, you're going to want a professional liability policy that, broadly speaking, offers coverage of at least $250,000 per claim. A $500,00 aggregate limit is fine.

For attorneys with a slightly more mature practice, with say between three and six years of experience and working with five or fewer partners, you're going to want a policy that provides between $1 and $2 million per claim.

If you've been practicing for a decade or more and your firm has 10 or more lawyers, your policy must offer a minimum of $2 million per claim, with a $2 million aggregate.

Once you're beyond both the above years in practice and 15 attorneys or more, your insurance policy must provide a minimum of $5 million in coverage per claim.

Critical Issues to Consider

With a professional liability insurance policy, whether any legal fees would erode the coverage is the most critical issue to explore as you evaluate just how much coverage is enough. A policy where legal fees erode coverage will provide significantly less coverage than a policy where legal fees do not erode coverage, although premiums for the former may appear more attractive than the latter. In this scenario, you get what you pay for.

Another important issue to keep in mind is cyber liability coverage. Too often, attorneys assume any type of cyber breach is covered under a standard professional liability policy. In most cases, this is not correct. You cannot operate a business today without cyber liability coverage. Because small businesses – and professional services in particular – are increasingly targets of cyber criminals, it's simply a matter of when, not if, you will need such coverage.

Be sure to get quotes on higher levels of coverage than you think you might need. Keeping the above in mind will help guide you in your initial discussions with insurance professionals about how much coverage you'll need.

Ultimately, it's a business decision about how and where to spend money on insurance to mitigate risk to your business. When determining how much coverage is enough, the right answer is usually whatever amount helps you not worry about the consequences of the coverage you select.