Your malpractice insurance policy is one of the most important investments you’ll make as a physician. Due to the medical and legal climate of the United States, this coverage isn’t cheap, but it could protect your assets if you ever need to use it.
Choosing your malpractice insurance should be a strategic decision. While cost is a factor, never buy a policy simply because it’s the cheapest. There’s so much more involved in evaluating your malpractice coverage options, and if you’re missing a crucial piece, you could be leaving your entire practice unprotected.
Before you sign a contract for your malpractice insurance, use these tips to ensure you’re getting everything you need in your policy.
1. Evaluate the Type of Policy
The very first thing to ask your agent is what kind of policy they’re trying to sell you. There are two main forms: claims-made and occurrence policies.
Claims-made malpractice policies are the general form. They have a retroactive date and an end date with a “tail.” These dates are important, as they set the first date your policy is effective and the date it ends. The tail means that the insurance carrier will cover any claims made after the end date, provided the occurrence happened during the effective period of coverage.
Claims-made coverage happens when a claim is filed against you. While the policy is in force, the carrier covers any claims reported.
The other option is “occurrence” malpractice coverage. This kind of policy takes effect when the incident in question happens. If the claim occurred in a particular year, but the incident happened before that, the policy from the incident covers the case.
Some carriers try to sell you on the claims-paid policies, a less common type of coverage. These policies restrict you because if a claim is filed, you must keep the same carrier until the claim is fully paid out.
2. Watch the Retroactive Date
Now that you understand the types of policies, you’ll see the importance of the retroactive date. This is particularly crucial under a claim-made policy.
Your carrier determines the date the policy will take effect and cover previous incidents. Whatever your retroactive date is, you’ll need to ensure you have coverage for any incidents before that date.
This date is the beginning of coverage, and it doesn’t change unless you switch policies from claims-made to occurrence. Keeping this consistent helps you avoid the need for additional tail insurance to protect you from prior acts.
Understanding Tail Coverage
Whether or not you need tail coverage can be confusing, especially when you change jobs frequently. Medical Malpractice Tail policies are designed to ensure there is no gap in coverage between your insurance policies.
Tail coverage can cost 200% of the previous policy’s premium, so you don’t want to get this insurance unless you really need it. If you’ve changed jobs and left a group where your malpractice was covered, such as moving from a nurse’s role to a doctor, you should invest in a tail policy. Keep that in mind as you plan financially for the job switch.
If you switch carriers but keep the same claim type, you do not need tail coverage provided the retroactive date remains the same as your previous carrier.
3. Check the Limits of Liability
Every carrier has something called a policy limit. This is the liability limit that your insurance carrier will pay out per claim. The standard limits of liability are often set per state and are in your policy as something like “$1,000,000/$3,000,00” (the average limit for medical malpractice).
The first is the limit per claim, and the second is the aggregate total amount the carrier pays during a policy period. If the policy is renewed each year, the insurer would pay $1,000,000 for each claim but no more than $3,000,000 for the whole year.
A claim that is settled for over the per-claim limit is your responsibility. Additionally, once your total claims for the year total more than the second number, that is also your responsibility. If your field of practice is known for having large settlements, it may be in your best interest to pay more for a policy with higher limits of liability.
The practice or organization employing you will likely have a minimum policy limit required. You can always go beyond this minimum if you choose.
4. Read the Defense Costs
In the event of a claim against you, you’ll need to hire a lawyer to defend you, and this is usually provided by the insurer. But don’t assume the costs are excluded from your policy limits until you check the terms.
Check with your agent and review the portion of your policy that discusses defense costs. Are they within or in addition to the policy liability limits?
Since legal costs can be expensive, this is an important distinction. Look for policies that say “defense in addition,” not “defense within.” If your terms say the first, any legal costs are not included in policy limits. If they say the second, those lawyer expenses are subtracted from the limits of liability.
5. Pay Attention to the Exclusions
You’ll rarely find a policy that doesn’t include some form of exclusions. The typical malpractice coverage has exclusions for any claims based on reckless conduct, illegal actions, and fraudulent applications. Dig into the definition of each exclusion. For instance, reckless conduct could include performing treatment while under the influence of certain prescription medications.
Other exclusions could be treatment performed outside of a specific location. If you work in multiple clinics or at different job sites, you may need to take out more than one policy.
If the excluded coverage is something essential to your job, keep looking for a new policy or ask about a rider.
Finding the ideal malpractice insurance means doing your research and comparing multiple carriers. The premium is important, of course, but look for these five factors to ensure you’re paying for what you need for your practice.