When it comes to insurance, especially malpractice insurance, there are many aspects of the policy that the insured individual should be familiar with. One of the most important components of any insurance policy is the deductible.
Malpractice insurance deductibles are different than the typical deductibles found in other policies, such as those for home or car owners. Below, we’ll explain everything you need to know about malpractice insurance deductibles, from how they’re structured to the options available.
What Is an Insurance Deductible?
First, consider the basics of deductibles and insurance policies. Deductibles are common parts of many insurance policies, whether healthcare, homeowner’s, or auto insurance. An insurance deductible is the specified amount an insured pays toward their insured loss.
The deductible is a lump sum the insured pays the insurer if the policy and coverage are activated. To use the example of auto insurance, if the insured has a $500 deductible insurance policy and gets in an accident that causes damages in the amount of $5,000, the insured would be responsible for paying the $500 before the repairs can be made or reimbursed for $4,500 for the repairs minus the deductible.
Does Every Malpractice Insurance Policy Carry a Deductible?
While deductibles are standard on most homeowner’s and auto insurance policies, they’re not typical with malpractice and professional liability policies. Since malpractice insurance differs from other types of insurance and covers different costs, most policies don’t include a deductible.
Many policies will carry a deductible option, but it’s not mandatory unless the individual is joining a group malpractice insurance policy where the deductible is required. Those seeking individual malpractice insurance policies will likely have the option of having a deductible. And while the deductible may be a substantial lump sum, a higher deductible could mean lower premiums, so it is worth considering.
How Are Malpractice Insurance Deductibles Different?
Malpractice insurance is already quite different from other forms of insurance regarding deductibles, but they’re also structured differently. While deductibles for most insurance policies, like auto and home coverage, must be paid immediately to activate policy coverage, malpractice deductibles are slightly different.
Individuals looking for malpractice insurance have two options regarding deductibles—indemnity-only or indemnity and expense. Both deductible types are fairly common, but they do have distinct characteristics.
An indemnity-only deductible, otherwise known as loss-only, is a deductible that is only required when the insurance provider pays an indemnity. An indemnity is compensation for damages or losses agreed upon in a settlement or levied on the defendant by the court.
If there is no indemnity, where the claim is either dismissed or resolved in favor of the insured defendant, then the insured wouldn’t have to pay the deductible at all. An indemnity-only deductible is only required when a settlement is agreed to or the lawsuit is resolved.
Consent-to-Settlement Clause & Deductibles
Those with an indemnity-only deductible should also consider a consent-to-settlement clause in their insurance policy. A consent-to-settlement clause is a provision that requires the insurer to seek the insured’s approval before settling a claim. While this clause is common in many policies, it’s not standard and shouldn’t be assumed by the insured.
Those with an indemnity-only deductible would naturally want to consent to a settlement, as that’s when the indemnity-only deductible would activate and they’d have to pay a large sum. Without the clause, there’s an incentive for the insurer to agree on a settlement to resolve the claim and activate the indemnity-only deductible.
Indemnity & Expense Deductibles
The other type of deductible in malpractice insurance is indemnity and expense. While the deductible covers the indemnity—should any be paid—it also covers other expenses, like court and legal fees.
It doesn’t matter if an indemnity has been reached yet; most indemnity and expense deductibles are required immediately once the claim is filed. The indemnity and expense deductible is typically more common than an indemnity-only deductible if the policy has any deductible at all.
Which Malpractice Deductible Is Best for Me?
Choosing which deductible is best for you and your insurance policy will primarily come down to your preferences. Each deductible type has its advantages, as an indemnity-only deductible is paid only when the claim is resolved and may not be paid at all if the claim is dismissed or resolved in favor of the defendant.
However, indemnity-only deductibles are typically higher than indemnity and expense deductibles, which must be paid immediately to cover legal costs like lawyer and court fees. One type of deductible may also yield a lower policy premium, so you should carefully weigh each deductible’s pros and cons before deciding.
How Much Should I Pay for My Malpractice Insurance Deductible?
One of the most common questions that many searching for new malpractice insurance policies ask is how much they should pay for a deductible. The price of a malpractice policy deductible depends on numerous factors, including the individual’s risk factor. Some medical professions have inherently higher risk factors and are more likely to have higher premiums or deductibles for coverage.
Some malpractice deductibles are as low as $1,000, while some are as high as $25,000 or more. Keep in mind, a higher deductible typically means a lower premium and vice versa. Those shopping for a new malpractice policy should decide if they’re more financially capable of paying a higher monthly premium or greater lump sum for their coverage.
How Do I Find Suitable Malpractice Insurance?
If you’re ready to find a malpractice insurance policy that best fits you, Baxter & Associates can help. Baxter & Associates provides professional liability insurance for many medical professions, from CRNA medical malpractice insurance to group insurance policies for healthcare facilities.
Some examples of the medical professions we serve as malpractice insurance brokers include:
- Dental professionals
- Nurse practitioners
- Physician assistants and more
As a national insurance broker with decades of experience, we’ll help connect you with a policy that’s ideally tailored to your situation, whether you know exactly what you want or if need help finding the right policy. Contact our helpful staff at Baxter & Associates, and we’ll ensure that you’re sufficiently covered in the case of a medical malpractice claim.