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LawInsure: a new insurance scheme for the legal sector from Gallagher
Read time: 4 mins Added: 08/10/25
Depending on premises costs, professional indemnity insurance (PII) is often the second largest annual cost for law firms, after salaries. But whereas salary and premises costs are spread throughout the year, PII is paid for annually. That annual payment represents a huge hit to a firm’s cash flow, and many law firms use PII loans to fund this annual insurance payment. A much smaller proportion of law firms also fund their tax payments in this way.
At Lloyds we work closely with Gallagher, who have introduced a new specialist team and proposition to support law firms with sourcing effective PII cover, as well as offering access to a team of specialists with a wealth of sector experience.
Through this new scheme, Gallagher will also be offering exclusive discounts on Professional Indemnity Insurance for Lloyds customers. This is a new offering by Gallagher and Lloyds, and it is never too early to receive a quote for your upcoming PI renewal to compare with your current premium. For more information speak to your Relationship Manager today or contact us to arrange a conversation.
PII & Tax Loans: A Smarter Way to Pay
Law firms use PII loans to spread the cost of professional indemnity insurance, typically over a period of 12 months. This frees up capital that can then be used for working capital and for developing the practice.
Similarly, firms can spread the burden of tax payments over the whole year, rather than paying it all when the tax falls due.
Importantly, loans of this type tend to be inexpensive when compared with overdraft finance. Also, unlike an overdraft, a PII loan and a tax loan are for a fixed term – so the lender cannot demand immediate repayment (unless the terms of the loan have been breached).
From Quote to Cover: How PII Loans Work
Whereas an overdraft can simply be renewed annually, each PII loan is a new agreement.
The PII loans are set up (but not completed) well in advance, to give the lending organisation time to do its due diligence on the firm. At the point where the insurance cover is agreed, and the actual premium for the year is known, the PII loan agreement can then be completed.
Thanks to the use of electronic signatures, this last stage can be done in as little as 24 hours, although most firms take two or three days to review the final documentation and sign it off.
The funds are then made available, ready for payment before the day on which the insurance comes into force (most commonly 1 October).
In theory, a PII loan can still be set up after the firm has paid the premium. But in reality, any firm with the funds to achieve the PII payment in the first place tends to not need a loan.
Why Early Planning Matters for PII Loan Applications
In the past, lenders could rely on minimal due diligence, especially for returning law firm clients. But with growing scrutiny across the legal sector, funders now take a more cautious approach, mirroring the increased checks by PI insurers.
To avoid delays, firms should prepare for detailed questions and provide accurate, up-to-date financial information. Setting up the loan facility early, based on a realistic insurance premium forecast, is key, especially for new customers who may face additional Know Your Customer checks and security discussions.
If your firm is involved in a merger or acquisition, expect further complexity and potential delays. Planning ahead helps ensure smooth approval and timely funding.
What to Expect from PII Loans
The terms of a PII (or tax) loan are straightforward.
Although some providers may offer shorter and longer periods, most loans are for 12 months – to match the term of the insurance being paid for. Repayments are by equal monthly instalments. There will usually be an option to repay the loan early, upon payment of an early repayment charge.
If your firm is switching to a new lender, that lender may well ask for personal guarantees from all the partners/directors, however this is not usually necessary for a firm that is an existing customer. Of course, the requirement for such security will reflect the financial health of the firm seeking the funding.
Applying for PII and Tax Loans: Why Preparation Matters
Like any borrowing, the terms offered will depend on your firm’s financial health and the quality of your application.
Submitting a well-prepared application is key. Late submissions or incomplete financial information can lead to delays and less favourable terms. If your application is rejected and you need to approach a non-mainstream funder, expect higher interest rates and charges due to increased risk.
A Holistic Approach
When you are thinking about funding, consider all your firm’s funding requirements (plus any related partner funding) and then work out the best package of funding overall.
- Working capital, which is affected by your utilisation rates and lockup period.
- Professional indemnity insurance, which perhaps cannot be funded by cash flow alone.
- Tax and VAT payments, which can create other awkward pinch points in a firm’s cash flow.
- Asset finance, for example cars, computers and furniture, which can be financed over the useful life of the asset.
- Offices and their refurbishment, potentially funded by a commercial mortgage. Unlike most commercial mortgages, which have a term of 15 years, a mortgage for a law firm can be 25 years. The capital and interest payments are often no more expensive than rent payments would have been, although some firms may prefer the flexibility of not owning premises.
- Practising certificates, which can add up for multiple fee-earners (and can be added to the funding requirement when taking a PII loan).
- Practice acquisition, which leads to a consolidation of the funding of both firms.
- Partner buy-ins and exits, and the associated partner capital loans and capital repayments.
Funding for PII and Tax Top Ten
- Use a PII loan to spread out the cost and de-risk your cash flow.
- Shop around for the best terms. Can you improve on what you've been offered?
- Set up the loan facility well in advance of when you'll need it to be actioned.
- If you are a new customer for the lender, allow extra time.
- Provide a full, up-to-date set of financial information on your firm.
- Provide any additional information that is evidence of your firm being low-risk.
- Consider whether the cost of practising certificates should be added to your PII loan.
- Use a PII loan and/or a tax loan as part of a holistic finance package for your firm.
- Schedule time to review and sign the loan agreement.
- If you end up with a non-mainstream lender, expect to pay more.
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Lloyds Bank plc is an introducer to Arthur J. Gallagher Insurance Brokers Limited who arrange and administer Lloyds Bank Business Insurance Services and source products from a panel of insurers.