It is important to note that when you start as a new employee or associate, you likely will not have a choice regarding the type of policy you are offered — you will be offered the same type of policy as others within the practice. There are two types of medical malpractice insurance: occurrence and claims-made.
An occurrence policy covers anything that occurs during the period that the policy is in effect, regardless of when the claim is filed. For example, let's say you purchased an occurrence policy in 1995 and kept it until 2000. In 2005, you were sued for an incident that occurred in 1999 when your policy was in effect. That policy will cover you even though the claim was filed after the policy was cancelled.
An advantage of this type of policy is that it requires no extra coverage for an extended reporting endorsement period (commonly known as "tail coverage"). You are covered by your initial premium, no matter when the claim is filed, for anything that occurred during the period that the policy was in effect.
The disadvantage of this type of policy is that the coverage limits may be inadequate years later, when the claim is filed. You cannot increase the limits of your occurrence policy.
A claims-made policy covers you for claims that are filed during the effective period of the policy. These policies are frequently structured in five-year increments because claims do not surface immediately.
An advantage of a claims-made policy is that the first-year premium is lower than that of an occurrence policy. The limits of the policy can be adjusted in accordance with current legal awards and judgments.
The disadvantage of a claims-made policy is that if you drop the policy, you must purchase tail coverage, insuring you retroactively. If you choose not to do so, you have no coverage for incidents that occurred during the life of the policy that are reported after the terms expired.
Payment of tail coverage may be included in your contract because the employer wishes to avoid the financial liability inherent in an adverse judgment.
Compromises are possible — some employers may split the cost of tail coverage with you, potentially on a 50/50 basis. Some may pay for tail coverage in the event of your death, disability, or firing, but will require that you pay your own tail coverage if you quit. An alternative to tail coverage is that a departing physician or future employer may be able to buy nose coverage, including prior acts as part of a new policy.
Malpractice rates vary significantly between specialties and facilities. They tend to be lower in rural/conservative areas and higher in areas with a more dense population.
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