If you’re joining a practice or working for a hospital or large health network, your options for malpractice insurance will be limited… you’ll just get the same coverage as everyone else in the group. But if you’re practicing on your own, YOU get to call your own shots. This can be both empowering and a little intimidating. What kind of policy should you get? How do you make sure you pick the right coverage that will keep you protected, while also keeping your budget in mind? Today we’ll give you some thoughts on the best type of malpractice policy for self-employed doctors. And the answer might surprise you!
There are 2 types of malpractice insurance in the market: Claims-Made and Occurrence. The easiest way for you to remember the difference between these 2 policy types is that the name describes how the coverage is triggered.
If you have an Occurrence policy, your malpractice coverage is triggered based on when the incident actually occurred.
If you have a Claims-Made policy, your malpractice coverage is triggered based on when the claim is made against you.
So, let’s unpack it a little… starting with the Occurrence policy.
If you have an Occurrence policy, the coverage triggers based on the date when the incident actually happened, regardless of when the claim was filed against the provider. So, if a doctor treated a patient on January 1, 2022 but the claim wasn’t filed for 3 years, the “triggering” date is the date that the incident actually occurred – which in this example would be January 1, 2022.
As long as the doctor had insurance in place at the time of the incident, he has coverage.
So, here’s how that works…
A doctor will buy an Occurrence policy Day 1 and renew the coverage every year until the time comes when he needs to cancel. After he cancels the insurance, then he can actually just walk away.
There’s nothing else required at the end of an occurrence policy – meaning, no tail insurance. He simply moves on.
Those occurrence policies will stay active and in force with the insurance carrier that he bought them from, so if a claim is ever made against him for a patient that he treated during the years in which he was insured on the occurrence policy, those policies are available for him to access for coverage.
Now let’s look at the other type of insurance – Claims-Made coverage.
Claims-Made coverage triggers based on when the claim is MADE against the provider. As long as the incident occurred during the coverage period and an active policy is still in place, the doctor will be covered for the incident. Here’s what that would look like…
A doctor will buy a Claims-Made policy Day 1 and renew the coverage every year until the time when he needs to cancel. But once he cancels the insurance, he’s not done.
A claims-made policy is really 2 policies in 1. You have to carry the insurance while you’re actively practicing and then after you cancel, you have to get a second policy – this is called tail insurance.
Your tail starts at your cancellation date and then it extends your coverage into the future for any claims that may be made against you after you’ve already walked away from that policy.
Why does a doctor need tail insurance? Because he must have an ACTIVE insurance policy in place in order to be covered for a claim made against him – even it it’s years down the road.
So when a doctor buys tail, he has an ACTIVE policy that will cover him into the future for any claims that may still be made against him for services that he rendered in the past.
So how do you know which kind is best – especially if you’re a self-employed provider?
Well, the good news is that as a solo provider, YOU get to call the shots. You’re not dealing with an employment contract that could restrict you with tail insurance or handcuff you into paying your way out if you want to leave the practice. As a solo provider, you get to pick the policy you want and YOU’RE in the driver’s seat.
So, should you pick Occurrence or Claims-Made?
Here are some reasons why you might want to pick an Occurrence policy:
You might want to pick an Occurrence policy if you’ve been burned by tail insurance before and you never want to mess with it again. Since Occurrence policies stand on their own, they don’t need tail insurance.
Second, you might want to pick an Occurrence policy if you would rather pay a consistent rate year over year, instead of experiencing the steady up tick of rate increases that come with a Claims-Made policy in the first 5 years. Many doctors find it easier to budget for their practice with Occurrence policies because the rates are more stable (although higher).
Third, you might want to pick an Occurrence policy if you want maximum value for your premium dollar. Because Occurrence limits are retained year over year, the accumulated amount of coverage over the long-haul is significantly higher than the coverage that you will have with a Claims-Made policy.
Ok, now let’s switch to the Claims-Made policy. Here are some reasons why you might want to pick a Claims-Made policy if you’re a self-employed provider:
First, you might want to pick a Claims-Made policy if you need the most affordable coverage option as you start your practice. Many self-employed providers are looking for a lower initial premium, since they have so many other expenses as they get their practice up and running for the first time. Claims-Made offers a lower initial price, which is very appealing to start-ups.
Second, you might want to pick a Claims-Made policy if you’re forced to – meaning, you either can’t find an Occurrence policy, or you’re coming from a previous Claims-Made policy and need to carry your prior acts forward from another job. Claims-Made coverage is portable – meaning you can continue it from one carrier to the next in the event that you either switch jobs or want to pick a new insurance carrier. If you’re already on a Claims-Made policy and need to continue coverage in your new self-employed role, you’ll want to stay on Claims-Made to avoid having to buy tail insurance right away.
Third, you might want to pick a Claims-Made policy if this is your forever job. For many self-employed providers, starting your own practice is a lifelong dream and is something that they plan on doing for their entire career. Although no one can predict the future, if you see yourself doing this job until retirement, then a Claims-Made policy may be the right fit for you because nearly ALL malpractice insurance carriers give doctors a FREE tail when they reach retirement. So not only can you save some money with a lower initial investment on premium, but you can also skirt the issue of having to buy a tail by keeping the coverage active until you officially retire from the practice of medicine.
So, what do WE see most often when working with self-employed providers? The numbers might surprise you.
I’d guess that 90% of self-employed providers that we work with select Claims-Made as their coverage and 10% choose Occurrence? Why is that?
The main reason why self-employed providers pick Claims-Made is because they need a lower initial cost to get their malpractice coverage started. And, maybe more importantly… they get to call their own shots. They don’t have the fear of leaving a practice or getting fired from a group and then having to pay a huge tail premium. Since most self-employed doctors see themselves working independently for the long-haul, they look forward to that free retirement tail and simply let the coverage continue each year that they practice.
But at the end of the day, the choice is YOURS! And we’re happy to help you compare coverage options and find the policy that’s the perfect fit for you.