Insurance for a new law firm
What a new law firm is actually exposed to
The exposure follows the work, and it is uneven. Conveyancing carries the sharpest edge: identity and vendor fraud, defective title, missed searches, undertakings given and not performed, and lender claims where the loss is the whole advance rather than the fee. Dreamvar v Mishcon de Reya is the case a new property practice should read before its first completion, because it is about where the loss falls between two firms that both behaved reasonably.
Litigation produces the cleanest claims of all — a limitation date missed, a claim struck out — so the fight is about what the underlying claim was worth rather than about breach. Wills, probate and trusts generate claims from people who were never your client. Corporate and commercial work concentrates the risk in drafting.
Two exposures cut across all of it. Undertakings bind you personally and are enforced summarily, so decide who may give one before anyone gives one. Client money makes you a target: a compromised mailbox and an altered set of bank details is now a more common route to a large loss than any drafting error. How several claims from one source are treated matters as much as the limit — see aggregation under the SRA minimum terms.
What cover a new firm needs, and why
Qualifying professional indemnity insurance is not optional and not a policy you design. It has to be written on the SRA Minimum Terms and Conditions with a participating insurer, and be in place before the firm practises. This is the hard gate between authorisation and opening.
Top-up cover above the minimum. The SRA’s guidance on adequate and appropriate indemnity insurance says holding the minimum “does not necessarily mean such cover would be considered adequate and appropriate in all cases”, and expects firms to consider excess layer cover above it. A firm doing conveyancing or commercial transactions should assume the minimum is not the answer.
Cyber and crime. The minimum terms address your liability to clients for legal work. They are not designed to rebuild your systems, fund an incident response, or answer the theft of the firm’s own money. This is the gap new firms most often leave open.
Office, contents and business interruption for premises and equipment. Employers’ liability as soon as anyone works under your direction, including part-time help. Public liability if clients attend your office or you attend theirs. Directors and officers cover if the firm is incorporated.
What the SRA expects of a new firm
You cannot practise first and insure afterwards. Authorisation and qualifying insurance run together, and the policy has to be on the Minimum Terms and Conditions rather than on whatever wording an insurer prefers. Those terms exist to protect clients, which is why a firm cannot contract out of them and why the cover behaves differently from an ordinary commercial policy.
Three features matter most when you are setting up. The minimum sum insured for any one claim differs according to how the firm is constituted: as published in the SRA Indemnity Insurance Rules and checked in August 2026, at least £3 million for a relevant recognised body or relevant licensed body and at least £2 million for other firms. Defence costs carry no monetary limit, which is materially better than most commercial professional indemnity wordings. And run-off extends the period of insurance for a further six years once the firm ceases.
Two warnings on those figures. The SRA reviews and consults on these rules, and drafts published for consultation are not the rules — more than one document in circulation carries different numbers. And which limit applies to you depends on how your firm is authorised. Work from the current rules on sra.org.uk, or send us the structure and we will confirm which applies.
Where a new firm takes over the files, staff or goodwill of an existing practice, the minimum terms contain successor practice provisions that can bring the earlier firm’s liabilities with them. Raise it with your broker before you agree anything. Dishonesty is also treated distinctively — see the innocent partner position.
What clients and lenders typically require
Private clients rarely ask, because the regulatory floor already answers the question. Institutional work is different: lender panels, corporate panels and public sector tenders tend to specify a limit above the regulatory minimum, and they want evidence rather than assurance. If you intend to do lender work, find out what those panels require before you set your limit. Your own paperwork matters as much, because a claim usually turns on what the retainer was — see engagement letters and liability caps.
What an underwriter wants to see from a firm with no trading history
The market for new firms is narrower than the market for established ones, so presentation does more work than usual.
The work split, in percentages. Conveyancing above all — residential, commercial, volume or occasional — then litigation, private client, corporate, family, immigration, employment. This drives both the rating and whether an insurer will look at you at all.
The people. Where each fee earner qualified and practised, for how long and on what. For a firm with nothing else to look at, this is the risk. Supervision matters as much as headcount: who reviews whose work, and what happens on a file outside someone’s usual area.
Claims and circumstances, personally as well as corporately, asked after full enquiry and reaching back into previous practice. Anything capable of attaching to an individual is disclosable. Disclose it and let the underwriter price it.
Controls. The undertakings register and who may give one. Client account controls and dual authorisation on payments. How a change of bank details is verified. Anti-money-laundering checks. Diary and limitation date management. File review. Cheap to describe, expensive to omit.
Whether the firm is a successor practice, and if so to what, with the earlier firm’s claims record. The general checklist for any start-up is in what you need to get a quote, and what drives the price explains which levers move the premium.
Getting cover in place before the first client
Start earlier than feels necessary and build it into the authorisation timetable, because you cannot open without it. Qualifying insurance for a new firm is placed by underwriters who want to understand the people, and that is a conversation rather than a form.
The claims-made structure does the rest. The policy that responds is the one in force when a claim or circumstance is notified, so an uninsured gap cannot be repaired afterwards, and knowing about a problem before you buy affects whether it is covered at all. If something happens in the first weeks, read what and when to notify before deciding it is too small to mention. More in cover before you start trading.
Frequently asked questions
Can a new law firm practise before its professional indemnity cover is in place?
No. Qualifying insurance on the SRA Minimum Terms and Conditions, from a participating insurer, has to be in place for the firm to practise. Arrange it alongside authorisation rather than after it.
What is the minimum level of cover a solicitors’ firm must hold?
The SRA Indemnity Insurance Rules set a minimum sum insured for any one claim which differs according to how the firm is authorised. As published on sra.org.uk and checked in August 2026, that is at least £3 million for a relevant recognised body or relevant licensed body and at least £2 million for other firms, with no monetary limit on defence costs. The SRA consults on these rules, so confirm the current position rather than relying on a figure quoted elsewhere, including here.
Is the minimum sum insured enough?
Not necessarily, and the SRA says so. Its guidance on adequate and appropriate indemnity insurance states that holding the minimum does not necessarily mean the cover would be considered adequate and appropriate in all cases, and expects firms to consider top-up or excess layer cover. For conveyancing and commercial work the minimum is unlikely to be the right answer.
Does the minimum terms policy cover a cyber attack or stolen client money?
Not in the way firms often assume. The minimum terms are about civil liability to clients arising from legal practice, not about restoring your systems or answering the theft of the firm’s own money. Cyber and crime cover is a separate purchase.
What happens to the cover if the firm closes?
The minimum terms require run-off cover extending the period of insurance for a further six years from the point the firm ceases. It is a real and sometimes substantial cost, and it is better understood when you set the firm up than when you wind it down.
We are taking over another firm’s files. Does that change anything?
It can change a great deal. The minimum terms deal with successor practices, and a new firm that succeeds an existing one may take on liability for that firm’s past work. Tell your broker before the arrangement is agreed, and expect the other firm’s claims history to become part of your presentation.
Related reading: Insurance for a new business · Solicitors’ PI insurance guide · What you need to get a quote · Cover before you start trading
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.