Breeze Logo

Insurance for lawyers & attorneys: 5 key types of coverage

Read time
6 mins

Attorneys and law firms are at risk every day they operate. These include everything from failing to know and apply the law in a particular situation, to hackers stealing your client information, to shutting down your practice temporarily to deal with a serious illness.

These risks can result in financial hardship if not properly mitigated. To minimize potential business losses, here are five types of insurance that attorneys and law firms should have.

Business insurance for lawyers & attorneys

Most, if not all, businesses need general liability coverage as well as property insurance. This includes law firms.

General liability insurance protects against financial loss as the result of bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments.

If you practice out of a separate office, you need commercial property insurance. It protects your business against loss and damage to your facilities, equipment, and computers caused by events such as fire, weather, civil disobedience and vandalism.

If you run your firm out of your home, you should add a rider to your homeowner’s policy that offers additional protection on business equipment and liability coverage for third-party injuries.

[ Related read: A simple guide to small business insurance in 2021 ]

Malpractice insurance for lawyers & attorneys

Doctors aren’t the only professionals sued for malpractice.

You’re not perfect; you may make mistakes in your law practice. Errors can sometimes have adverse consequences for your clients.

Even if you do everything correctly, you may have clients who sue you for malpractice anyway because they’re not happy with your results.

Also known as legal professional liability (LPL) coverage, malpractice insurance helps protect attorneys and law firms from liability resulting from perceived or actual negligence. This type of insurance often covers attorney's fees and court costs, the cost of arbitration, settlement costs and any financial damages incurred by the suing client.

The cost of LPL coverage will be based on:

  • The size of our firm
  • The type of law you practice. Specialties like securities and international law are considered more susceptible to malpractice suits than areas like criminal and immigration law.
  • Where you practice. Urban areas such as New York, Los Angeles and Chicago make your firm a greater risk to insure.
  • Past malpractice claims
  • Your legal experience
  • Your risk management practices
  • The amount of coverage you apply for. A typical maximum benefit limit is $10 million, though small firms that specialize in low-risk areas of law may get by on $1 million in coverage.

Before you purchase a malpractice policy, it’s important to know whether a policy offers prior acts coverage.

Malpractice claims can take years to be brought to court and get settled. If you’ve practiced law without a policy or you’re switching carriers, you should know whether the new policy offers prior acts coverage. This means your insurance will cover you for activities undertaken before you purchased the policy, provided the activity occurs within the policy’s retroactive date.

For example, you worked with a client a year before buying a policy. That client later sues you for malpractice. Without prior acts coverage, your policy will not cover the expenses of the suit or the possible claim.

You should also verify if a policy covers non-firm legal activities. If you provide pro bono services or volunteer legal work, you should verify whether your malpractice policy covers any claims arising from those activities.

Most policies decline to cover prior acts and non-firm activities.

Disability insurance for lawyers & attorneys

All practicing attorneys should also have disability income insurance. Disability insurance can replace much of your working income if an injury or illness limited your ability or even prevented you from practicing law.

According to the Social Security Administration, about 25 percent of 20-year-olds will become disabled at some point before reaching age 67.

Your lifestyle is at risk if you can’t work for months or even years. If you’re a typical attorney, you graduated law school with between $100,000 to $200,000 in student loan debt, which isn’t forgiven if you’re unable to work.

Any amount of time you can’t practice law means choosing between draining your savings or missing your mortgage payment and other bills. Plus, no other profession would come close to providing the monetary and intrinsic rewards of being a lawyer.

Learn More: Disability Insurance for Lawyers & Attorneys

Breeze builds custom disability insurance policies for lawyers. Get started here.

Cyber insurance for lawyers & attorneys

A recent survey by the American Bar Association showed 29 percent of respondents indicated having a data security breach.

Your clients’ financial records, privileged communications, and other sensitive information are a potential goldmine to hackers and cybercriminals. Law firms are increasingly becoming targets of phishing, ransomware and other cyberattacks.

It’s not just intentional attacks you have to worry about. Your firm’s data can be put at risk by lost equipment, network crashes, or lax protocols exacerbated by professionals taking work home and storing client data on mobile devices.

Some attorneys may think their general liability or even their malpractice insurance covers the costs of data breaches. This is seldom the case. That’s why many insurers have created separate policies to help businesses mitigate the financial risk of cyber liability.

Cyber liability insurance typically covers a portion of the following expenses related to a breach:

  • Network and equipment damage
  • Technology recovery and replacement
  • Client notification
  • Credit monitoring for clients whose data was compromised
  • Investigative costs
  • Public relations
  • Lost income
  • Regulatory fines and penalties
  • Lawsuits from clients or vendors

The cost of coverage will vary. Some of the factors insurance companies use to price their coverage include:

  • Size of your firm
  • Type of data you store
  • Data transmission and storage methods
  • Network security protocols
  • Claims history

Life insurance for lawyers & attorneys

If you’ve dealt with estate or probate law, you know that a number of conflicts can arise when a person dies.

You can minimize some of these issues by having a life insurance policy on your life with clearly designated beneficiaries.

If you die unexpectedly, the death benefit can replace your income that would be lost. Life insurance helps the survivors pay bills, cover debts, and pay for funeral expenses.

If you’re a partner in a firm, life insurance can also provide the funds needed for the remaining partners to buy your share from your estate. And if the transfer of your business to heirs might incur an estate tax, a life insurance policy can help your heirs pay that bill.

Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published August 3, 2021
Related Articles

Get started online — anytime, anywhere.

(Seriously, it's a breeze.)