Before you consider buying malpractice insurance, it is important to understand the basics of insurance.
1. Why do I need insurance?
You need insurance in order to protect yourself and your clients. As with other types of insurance, malpractice coverage can protect your personal assets against loss. In addition, as attorneys cannot limit their personal liability by agreement or entity selection, insurance provides protection against catastrophic loss.
2. Is it mandatory?
While malpractice insurance is necessary for a growing practice, many lawyers starting small firms choose to start practicing without insurance. The main reason for this is prohibitive cost. Before making this decision, check with your state bar to determine if malpractice insurance is mandatory. If it is mandatory, your bar association will offer resources and recommendations of insurers.
3. How much is insurance and what affects the price of insurance?
While factors vary in each case, the following factors generally determine price:
- Jurisdiction: Each geographical area is assigned different risks based on the malpractice litigation climate.
- Practice Area: Your practice area affects the price of your coverage. Practice areas with higher rates of malpractice claims or greater exposure are more expensive to insure. According to many studies, the personal injury (plaintiff) practice area leads to the greatest number of malpractice claims.
- Attorney Record: The disciplinary and malpractice record of the attorney is crucial in assessing risk.
- Policy Terms: The cost effect is similar to those in other types of polices. The amount of coverage and the deductible affect costs. In addition, negotiated terms, such as coverage of defense costs, can affect the price dramatically.
4. How much coverage should I buy?
The amount of coverage you should buy depends on your practice and your financial circumstances. As with any insurance policy, each party must do a risk-benefit analysis. Assess the value of your assets. Remember to also review how much coverage you'll need to protect your client. Do not simply buy the cheapest or easiest insurance on offer.
5. Where do I go to get insurance?
The first step should be visiting your local bar association. Bar associations are invaluable, and often neutral, sources of information about insurance. The association can introduce you to different companies and give you a starting point. You can also use the internet to research options and educate yourself about insurance companies.
6. What can I do to lower the risk of malpractice claims?
Studies suggest that malpractice claims are often avoidable. The key to avoiding claims is to implement a thorough risk management program.
7. I'm a new lawyer. Can I get insurance?
All bar associations offer insurance resources to their members. Begin your research at the local bar association. A number of insurance companies are eager to insure new lawyers in order to establish a relationship they hope will last for years.
8. What do I need to know about my insurance company?
Generally, your local bar association will be able to tell you about the reputation of a particular company. If this information is not available, you can conduct your own due diligence of the company by reviewing its rating, payment history and stability.
9. Can anyone help introduce me to different insurance options?
An insurance broker is an invaluable resource. Make sure to use an independent broker (one not affiliated with any particular company) and ask the broker to offer you multiple options and quotes. In addition, count on your network when researching options. Contact colleagues and ask them about their insurance coverage and practices.
10. What do I need to tell the insurance company?
A good broker will guide you through the application process. Once you make a decision on the insurance company, you will be asked to fill out an application. The insurance company will use this information to prepare your policy. The difficult part of insurance purchasing is the initial exploration and decision-making process. Once you have made your decision, the application process may take as little as a week.