Factors Affecting Cost of Malpractice Insurance
Main factors affecting the cost of malpractice insurance include how long the lawyer has been in business, amount of coverage required, amount of deductible and the area of law being practiced.
Years in Business
Surprisingly, the malpractice insurance cost for new lawyers is less than experienced lawyers. The rationale for this is that new lawyers do not take on complex cases so there is less chance of making an error in representing a client. A lower risk means lower premiums. New attorneys may be able to find rates as low as $700 a year.
Attorneys at eleven to twenty years into practice have the highest risk of being sued for malpractice. By this point attorneys are taking on more complex cases. The more complicated the case, the more chance there is for error. Higher risk means higher premiums.
According to Black's Law Dictionary, experienced attorneys can pay anywhere from $5,000 to $15,000 a year.
Amount of Coverage Required
Attorneys need to look at their business income and assets as well as personal assets. How much can an attorney afford to lose? $100,000? Less than $100,000? $1,000,000? Or somewhere in between? When a private practice attorney is sued, the client can go after their personal assets, not just the business assets.
Other factors to consider into the cost of losing a malpractice case is the number of billable hours the attorney misses while fighting his or her own lawsuit. Think about the income from potential clients that may be lost. Attorneys being sued for malpractice need to retain and pay their own attorney to represent them.
If an attorney cannot afford to lose much in a malpractice suit, he or she will want to consider higher amounts of coverage.
Just like car insurance, the lower the deductible, the higher and the premiums. If attorneys want to pay lower premiums, raise the deductible. This goes back to the question of how much money an attorney can afford to lose.
Area of Practice