Professional indemnity insurance is a significant cost for solicitors and law firms. The cost of solicitors indemnity insurance is quite variable but can come in at £3,000 or more even for an individual solicitor. And the larger the firm, the higher the costs.
Insurance providers will cost policies based on a host of factors to price the risk accurately. Insurance providers will want to learn all about the business before offering a quote. As a result, it can take a while to get quotes back from insurers. For this reason, it’s very important to start shopping for solicitors professional indemnity insurance with a few weeks to go before you need the policy to start.
How much is solicitors professional indemnity insurance?
Solicitors professional indemnity insurance premiums typically range from 1% to 6% of the solicitor’s fee income. But of course, there will be exceptions. The exact percentage used in the insurer’s calculation will depend on many factors, which are used to help quantify the risk presented by insuring the solicitor.
Here is a list of some of the factors that affect the cost of solicitors professional indemnity insurance:
- Annual turnover
- Fee income
- Legal services performed
- History of claims
- Number of years in operation
When filling out an application, it’s important to provide as much information as possible and as accurately as possible. Insurers will want to fully understand the legal services provided so they can accurately assess the risk.
It’s equally important to declare all of the legal services provided. Failing to do so could invalidate a policy, essentially leaving you uninsured. And if a legal practice changes the services offered (e.g. by hiring a new solicitor with new expertise), then it’s critical to inform the insurer immediately. The premium may increase, but this can be a necessary cost of building a business.
What does solicitor PI insurance cover?
Solicitor PI insurance covers legal defence costs and compensation payments or settlements for situations where a client claims the solicitor was professionally negligent (e.g. gave incorrect advice), resulting in the client losing money.
It can also covers claims where there was simply a perceived loss of money for the client. It will also protect against frivolous claims where the solicitor has done nothing wrong, but the client still takes legal action.
How to save money on solicitors professional indemnity insurance
Saving money on solicitors professional indemnity insurance is similar to saving money on business insurance for a wide range of professions.
- Start shopping early. It can take a while to get solicitors PI insurance quotes because insurance underwriters will want a complete picture of the business and the work being done before offering cover. There will be forms to fill out that can include business plans, disclosure statements, reasonable search forms and more. This all takes time to organise on the solicitors end and time to process by the underwriter. If you don’t leave enough time, you might feel pressured to take an expensive offer. By starting early, you’ll have time to check other insurers if initial quotes are not what you expected to pay or feel is reasonable.
- Compare prices. Most solicitors PI insurance will be purchased via a broker. Using a broker can help you save money on PI insurance because the broker can send your details to multiple insurance companies and help you find the best price. They can also help you understand the differences between policies and companies to help you find the best policy, not just the cheapest.
- Understand what cover you need. Solicitors can need a range of coverage beyond professional indemnity insurance. And while it’s important to have the cover you need, avoid overpaying by only getting the cover you need. For example, a solicitor that only works remotely and never meets clients in person would not need public liability insurance. Most solicitors, however, probably would need this cover to protect against accidents while meeting clients in person that could be blamed on the solicitor or law firm.
- Pay annually instead of monthly. Insurance companies typically charge interest for policyholders who want to pay monthly. These charges can raise the cost of business insurance for a solicitor or law firm by 20% or even more. As a result, you can save around 20% on your solicitor insurance costs by paying upfront annually.