Finding the cheapest medical malpractice insurance policy is easy to do, but it is not the smartest way to go about choosing the right type of malpractice insurance. There are several factors to consider when choosing the right type of insurance for your practice. Physicians and surgeons, office administrators, and healthcare professionals should look for a medical malpractice insurance policy that has the important policy features needed, that is the correct policy type for the situation and is underwritten by a company that is financially solid with an excellent track record of taking care of its insureds.
Different types of malpractice insurance need to be understood before purchasing a policy. First, there are Claims Made policies and Occurrence policies. Which one is right for you depends on the situation. Next, there are different types of medical malpractice insurance companies: Stock, Mutual, and Risk Retention Groups. Depending on your situation, the type of company is important.
The 2 Types of Medical Malpractice Insurance Policies:
- Claims Made
- Occurrence
The Types of Medical Malpractice Insurance Companies:
- Stock Company
- Mutual Company
- Risk Retention Group
When choosing which type of policy for your practice, consider Claims Made vs. Occurrence coverage. A Claims Made policy is one in which the coverage is forced when the claim is made. Even if the incident occurred months or years before, the policy covers the claim when the claim is filed with the carrier. This is important because most medical malpractice suits come in long after the procedure or care happened. Claims Made policies provide coverage for current and prior acts going back to an agreed-upon date called the Retroactive Date. This is usually the date you started practice, which is potentially years or even decades back. The policy will only cover incidents and claims after the Retro Date and up to the current date. If this policy is canceled, it is necessary to purchase Tail Coverage.
Pros & Cons of Claims Made Coverage:
Pros:
- Less expensive than Occurrence
- Easily portable
- Covers back to Retro Date
- Ensures you’re always covered for prior acts
Cons:
- Extended Reporting Endorsement (Tail Coverage) is expensive
Tail Coverage is an endorsement of a policy called an Extended Reporting Endorsement. This endorsement is usually free for death, disability, or retirement. But suppose these 3 circumstances don’t apply, and you are canceling your policy. In that case, you must either get a new policy that includes prior acts coverage back to your Retro Date, or you must purchase the tail, which is roughly 2 – 3 times your premium at the time of cancellation. The tail is typically permanent and into infinity, but there are exceptions and some limited tails.
Occurrence Policies, on the other hand, are policies where coverage is provided when the incident or alleged negligence occurred. So, if a claim is reported from an incident that happened 2 or 3 years ago, you have to go to the insurance company you had at that time. You don’t need tail coverage with an occurrence policy, which is attractive in a situation where you know you are going to cancel the coverage or change jobs shortly. Occurrence policies have higher premiums than Claims Made policies. The reason for the higher premiums is that the Occurrence policy is on the hook for coverage and claims that happened during the policy period, even after the policy is canceled. One drawback to an Occurrence policy is that there is no coverage if the insurance carrier becomes insolvent or goes out of business. A Claims Made policy avoids this problem because claims are filed with the current carrier, no matter when the incident occurred.
Pros and Cons of Occurrence Coverage:
Pros:
- No Tail Coverage is needed when the policy is canceled
Cons:
- Higher premium than Claims Made
- Could be difficult to find coverage years down the road
How do you choose the right type of medical malpractice insurance policy for you? If you are in private practice and plan to stay in private practice for many years, and you have no plans to go to work for a hospital, university, or other large group, a Claims Made policy makes the most sense. It will be affordable, and you will qualify for a free tail upon retirement. The Claims Made policy helps you avoid a situation where you have to go back and find your previous insurance carrier if a claim comes in from a prior act after you’ve switched to a new insurance carrier.
On the other hand, if you only need medical malpractice insurance for a few years because you plan to go to work for a hospital or a university in the future, you would be best served by an Occurrence policy. That way, you won’t have to purchase a Tail when you cancel the coverage, and your new employer will not have to cover your prior acts.
How do you know what type of insurance carrier to choose? 3 main types of insurance companies write medical malpractice insurance: Stock, Mutual, and Risk Retention Groups (RRG). A Stock company is one in which the company is owned by stockholders, and the company is meant to make a profit for the stockholders. A Mutual company is owned by the insureds, which are physicians, and often the leadership is made up of physicians and is meant to benefit the physician insureds. An RRG is typically created for a specific situation, a specific specialty, or a group that has common interests. RRGs usually require a capital investment in addition to the annual premium.
The Types of Medical Malpractice Insurance Companies:
- Stock Company – Owned by stockholders, in business to make a profit
- Mutual Company – Owned by policyholders, in business to benefit policyholders
- Risk Retention Group – Created for a specific group with common interests, requires investment
All of these types of carriers are legitimate insurance companies and have their place. Sometimes, depending on the state or medical specialty, a physician will only have a choice of one type of company. In other cases, you might have the choice of all three types. Compare price, financial stability, AM Best rating, longevity in the market, and quality of risk management services to narrow down the best choice for your practice.
Working with the specialists at eQuoteMD can help you understand the options, shop the market, compare coverage and policy limitations, and make the right decision. We have solutions for every specialty in every state.
