Sources of Coverage
- Traditional commercial carriers operate just like any other private business and are owned by shareholders who receive profits made, but also hold the associated risk.
- Physician-owned insurance companies are owned by the policyholders and work by pooling premiums and sharing risk among the policyholders. In some cases, if the fund grows premiums can be reduced or dividends may be paid to policyholders. Physician-owned insurers include mutuals, trusts, and risk retention groups (RRGs).
- Brokers don’t insure doctors themselves but function as guides helping physicians know what options exist and the pros and cons of those options. Brokers are able to shop the market for the best quality coverage and rates. A good broker may even be able to access negotiated rates with some carriers.
Types of Coverage
- Claims Made Policies – These policies are cheaper than occurrence policies, but that is because they mitigate less risk. Under a claims made policy both the alleged act of malpractice and the claim made by the patient must occur during the period that the policy is active. In other words, if an alleged act of malpractice occurs while the doctor is insured under a claims-made policy, but the patient files the claim after the policy period has ended the claim will not be covered.
- Occurrence Policies – As the name implies an occurrence policy covers any claim arising from an incident that occurred during the policy period. So, even if a patient brings a claim years after the alleged malpractice occurred and after the policy period has ended the claim will be covered as long as the incident occurred while the policy was in place.
- Nose and Tail Policies – These are separate policies that can be purchased in addition to a claims-made policy that extends the coverage beyond the policy period. A tail policy extends coverage into the future after the policy period has ended. For instance, when a physician who had a claims made policy retires he may want to purchase a tail policy to cover his liability in retirement. It’s also worth asking a potential insurer or broker about discounted or free tail coverage which is sometimes offered.