Exploring the Two Forms of Malpractice Insurance

In the healthcare industry, professionals are at risk for legal actions arising from their care. Malpractice insurance offers protection against these risks, helping cover potential legal costs and settlements.

Understanding the two forms of malpractice insurance is critical for helping healthcare providers make an informed decision when choosing coverage. Let’s explore the key aspects of both types of insurance, giving clarity to those needing coverage.

What Is Occurrence-Based Malpractice Insurance?

Occurrence-based malpractice insurance offers protection for any incident that occurs during the policy period, regardless of when a patient files a claim. A provider would have insurance coverage if the event causing the claim happened while the policy was active.

The main advantage of this type of insurance is its long-term security. Healthcare professionals don’t need to maintain the policy after the event occurs to receive coverage. However, occurrence-based insurance typically comes with a higher premium compared to claims-made coverage due to this extended protection.

What Is Claims-Made Malpractice Insurance?

Claims-made malpractice insurance differs from occurrence-based policies in that it only covers claims made under an active policy. In other words, the incident and the claim must take place during the coverage period for a provider to receive protection. If the policy expires, and a patient files a claim for an incident during the policy’s active period, there is no coverage unless you take additional steps.

One of these steps is purchasing tail coverage, which extends protection for claims made after the original policy ends. Claims-made policies typically offer lower initial premiums than occurrence-based policies, making them more affordable upfront. However, healthcare providers must remain diligent about maintaining continuous coverage or securing tail coverage to avoid gaps in protection.

Tail Coverage for Claims-Made Policies

Tail coverage becomes a crucial consideration for those choosing claims-made insurance. This coverage extends the claims period after a healthcare provider’s policy ends.

Without tail coverage, a professional could face significant financial risks if a patient files a claim after their claims-made policy expires. While it does require an additional cost, tail coverage is vital for maintaining necessary protections, especially for those transitioning between jobs or policies.

Comparing Premiums and Costs

Cost is one of the most significant differences between occurrence and claims-made malpractice insurance. Occurrence policies tend to have higher premiums due to their extensive coverage, which remains effective long after the policy ends.

On the other hand, claims-made policies start with lower premiums, but they tend to increase over time, particularly if you add tail coverage or retroactive dates. Healthcare providers must weigh these financial factors against their long-term career plans to determine which form of insurance best suits their needs.

Choosing the Right Coverage

Deciding between occurrence and claims-made malpractice insurance depends on the healthcare provider’s circumstances. Those seeking long-term peace of mind may lean toward occurrence policies, while professionals looking for lower upfront costs might consider claims-made policies with the option to add tail coverage later.

Understanding the two forms of malpractice insurance—occurrence and claims-made—enables healthcare providers to make informed choices that safeguard their careers. Both options offer valuable protection, and choosing the right one depends on personal needs and long-term goals. Contact Baxter & Associates for help finding the best professional liability insurance for healthcare providers.