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A Premium Question: How is My Legal Malpractice Insurance Price Determined?
By Duane Crone | November 16, 2010
If you’ve ever compared the cost of legal malpractice insurance with another small firm owner or solo practitioner, you may have had an uncomfortable conversation. Chances are, your premium rates are different – in some cases, even radically so.
But before you start crying foul, let’s take a look at the elements that go into calculating your premium. Your legal malpractice insurance rates are calculated based on several factors:
- Number of practicing attorneys: Obviously, the more lawyers that need coverage, the more expensive it will be.
- Areas of practice: Most companies define between 40 and 50 separate areas of legal practice with individual rating factors. Areas identified as higher risk - including Intellectual Property Law, Entertainment Law, SEC work (taking companies public) and Plaintiff Personal Injury work - have higher rates than legal areas considered low risk - like criminal defense, mediation or arbitration, litigation defense and elder law. This leaves about 40 areas of practice floating somewhere around in the middle.
- Time spent on each area of practice: If you practice law in more than one area, you will be asked to identify the percentage of your time that is spent in each area. If there are multiple lawyers in your firm, your insurance company will want this information for each practicing attorney.
- Retroactive date: The more years of prior acts coverage you are carrying, the more expensive the policy will be. For a complete explanation of how your retroactive date impacts your policy price, see our claims made post.
- Location: Practicing in Manhattan is more expensive than practicing in Fargo. Generally speaking, major urban areas carry higher rating factors than less densely populated ones. Territory is an important ingredient in price composition.
- Coverage options: The deductible and limits of liability you choose for your policy will impact your rates, as you would expect. The deductible has a very small impact while the policy limit has a much larger one.
- Claims and disciplinary history: Just as in any other kind of insurance, your prior claims history will impact your legal liability insurance rates. Your carrier will also look at any disciplinary history.
What can you do to control costs? Your Mainstreet Legal Malpractice Insurance agent can help you explore coverage options to find the right levels of deductibles and liability limits for your firm. Another tip: if you’re not sure if you’re going to get work in a particular area of law that has a higher rate plan, don’t speculate. When your coverage is renewed, you’ll be asked to report on what you actually did and can make adjustments at that time. So be conservative, but practical.
If you think you might be paying too much for legal malpractice insurance coverage, call one of our Mainstreet representatives today for a free second opinion. We’ll help you cut through the confusion to find the best possible policy at the best possible price.
Topics: Uncategorized |
November 19th, 2010 at 9:27 pm
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