As any lawyer worth their salt knows having professional indemnity insurance is not only important, but a regulatory requirement. However, whilst obtaining the insurance is an obvious decision, choosing the right option for you and your company is not always that simple. Particularly since 2013 which freed solicitors from being tied to their 1st of October renewal date, which often saw law firms scramble in some of their busiest working periods to comply with insurance deadlines as well as the needs of their clients’.
Choosing the right date
Our research suggests that around 40% of policyholders have now moved their renewal date away from 1st October, indicating that firms are increasingly open to longer periods of insurance – stretching to eighteen months, or even two years in some cases. This is not only helpful in reducing the burden on law firms in preparing the necessary proposal forms and accompanying documents, but can also immensely benefit those expanding or growing firms who can lock insurers in despite a growing turnover.
Of course, choosing the date of your renewal is just one aspect in identifying your cover.
An appropriate level of cover
It is also necessary to isolate what an ‘appropriate’ level of cover means for you. Whilst there still remains a reguulatory minimum of either £2 million if you are acting either in a partnership or as a sole practitioner or £3 million if you are defined as a firm by the SRA. In some cases this may not go far enough in protecting firms particularly as claims may well go back several years, or in the case of a change in client’s circumstances or that, on occasion, the potential claim of a value may be significantly higher than the original cost of the transaction.
Looking to the future
More than that, if you are looking to expand your business significantly in the next year and take on clients with a higher value transaction than previously, then your insurance must pre-emptively cover for that, as you cannot take out additional cover for only one transaction.
In considering the future, and particularly when you are looking to shut down operations and retire, or perhaps leave the practice to another individual, the SRA necessitates that you purchase run-off cover to offer financial security in the case of a claim made after the firm shut or an individual ceases to practice law. This is particularly important given that around 40% of claims are made more than three years after the original error.
If you would like to discuss your professional indemnity insurance please feel free to give us a call on 0208 511 1098 or drop us an email on firstname.lastname@example.org