How much malpractice coverage does my law firm need?

Determining appropriate malpractice coverage limits requires balancing your risk exposure against the cost of higher limits. Start by evaluating the typical value of matters your firm handles. If your attorneys regularly work on transactions or cases involving millions of dollars, a $250,000 policy limit would be dangerously inadequate. Conversely, a solo practitioner handling simple wills and uncontested divorces may not need $5 million in coverage.

Consider the practice areas your firm handles, as each carries different severity profiles. Real estate closings, securities work, and plaintiff personal injury cases tend to produce the largest malpractice claims, often exceeding $1 million. Estate planning, family law, and criminal defense claims typically fall in lower ranges but can still be substantial. If your firm handles a mix of practice areas, your limits should account for the highest-risk work you perform.

Client and contractual requirements also drive limit selection. Many corporate clients, government agencies, and referral networks require outside counsel to carry minimum limits, often $1 million per claim and $2 million aggregate. Court appointments for receiverships, guardianships, or trust administration may also specify minimum coverage levels.

A common approach is to carry per-claim limits equal to the largest single matter exposure your firm is likely to face, and aggregate limits of at least two to three times the per-claim limit. Most small firms with five or fewer attorneys settle on $1 million per claim and $2 million aggregate as a reasonable starting point. Firms handling high-value transactional work or complex litigation should consider $2 million to $5 million per claim. Remember that if your policy includes defense costs within limits, the effective indemnity coverage is lower than the stated limit.