Authored by Sara Weathers
A new report featured in the Nashville Business Journal reveals a troubling trend: many small businesses, including law firms, are underinsured despite believing they have adequate protection.
Hiscox found that 77% of small businesses are underinsured, and many misunderstand the coverages they do have. This is especially concerning for law firms, which face unique operational, professional, and cyber risks that can be financially devastating if not properly insured.
The Coverage Gaps Are Bigger Than Firms Realize
According to the survey:
- 74% of business owners misunderstand general liability coverage
- 83% can’t accurately describe professional liability insurance
- 77% don’t know what a business-owner’s policy actually covers
For law firms where errors and omissions, data breaches, and office disruptions can halt business overnight, misunderstanding coverage isn’t a small oversight; it’s a major liability.
Rising Risks Make Adequate Insurance Non-Negotiable
Nationwide reports a surge in severe-weather concerns among business owners, and law firms are not immune to property damage, operational downtime, and costly repairs. In fact, 60% of businesses hit by severe weather spend $5,000–$20,000 out of pocket, and less than half had those losses covered by insurance.
Even more alarming is the cyber landscape. Hiscox found that small businesses face an average of 35 cyberattacks per year, and ransomware is involved in one-third of all data breaches. For law firms entrusted with highly sensitive client data, even a single successful attack can result in lost clients, reputational harm, and substantial recovery costs.
Why Firms Need to Pay Attention Now
Shrinking premiums by cutting coverage may feel tempting in an inflationary environment, but for law firms, it’s short-sighted. Underinsurance can make the difference between a temporary setback and a firm-ending loss.
Hiscox recommends:
- Understanding your industry-specific risks before renewing coverage
- Being transparent with your broker or agent about all firm operations
- Reevaluating coverage every two years or after significant growth or service changes
Law firms face heightened risks from operational, professional, and digital threats. With growing risks such as storms, cyber incidents, and claim denials, it is crucial for law firms to secure comprehensive and accurate insurance. Underinsurance is a major vulnerability that could threaten a firm’s survival.
Have questions about your firm’s coverages? AdvoCap Insurance is here to help!
