Starting a medical practice is an exciting milestone in a physician’s career. While this is a great accomplishment, having medical malpractice insurance is very important to protect what you worked so hard for. Your practice, employees and you may be subjected to claims of negligence and lawsuits. Although this insurance is not required to have in Michigan, the vast majority of physicians starting out opt into getting it for their practice and themselves.
Without sufficient coverage, a practice can not only be sued as a whole but individual physicians can be named as well. If the amount of damages in the lawsuit exceeds your coverage (or you have no coverage at all) your assets like your home, bank account, and investments could be at risk.
Types of Medical Malpractice Insurance (occurrence-based vs claims made)
When choosing medical malpractice insurance, physicians usually have two main options: occurrence-based policies and claims-made policies.
Occurrence-Based Policies
Occurrence-based malpractice insurance covers an incident that happens during the policy period, no matter when the claim is filed. For example, if an incident occurs while the policy is active, but the claim is made several years later—even after the policy has expired—you’re still covered.
The biggest advantage of an occurrence-based policy is that during the time period in which the policy is in place, you don’t need to worry about purchasing additional coverage. However, there may be higher premiums. The insurance company takes on the risk of future claims filed after the policy period ends, which is why occurrence-based policies can cost more than claims-made options.
Claims-Made Policies
Claims-made medical malpractice insurance covers claims that are reported while the policy is active. It doesn’t matter when the incident occurred, as long as the claim is made while your policy is active you’ll be covered. The main benefit of claims-made policies is their affordability. These policies generally have lower premiums at the start, making them good for physicians just beginning their practice.
How Coverage Limits Work
Medical malpractice policies typically present limits in a format like this: $X per claim / $Y per policy period.
- Per Claim Limit: This is the maximum amount your insurer will pay for a single claim. For example, if your policy has a per-claim limit of $1,000,000, the insurer will cover up to $1 million in damages, legal fees, and related costs for a single malpractice case.
- Annual Limit: This is the total amount the insurer will pay for all claims filed within a policy year. If your limit is $3,000,000, the insurance will cover up to $3 million for all claims combined during that year.
Tail Policies
When physicians decide to retire or transition out of their medical practice, it’s still important for them to have coverage. That’s where tail policies come in. These specialized insurance policies provide extended coverage for claims that might arise from incidents that occurred while a physician was practicing but are reported after their malpractice insurance has expired, particularly for claims made policies
What Are Tail Policies?
A tail policy extends the reporting period of a claims-made malpractice insurance policy. This is important because medical malpractice claims don’t always surface immediately—some take years to happen due to delayed symptoms or late discovery of issues.
Tail Policy Options
Tail policies vary in cost and duration, offering flexibility based on your needs:
- Unlimited Tail Policies: These provide indefinite coverage, ensuring you’re protected no matter when a claim arises. This is a popular choice for physicians retiring permanently.
- Fixed-Term Tail Policies: Some insurers offer tail policies for a set period, such as five or ten years. While more affordable than unlimited options, these may not cover claims that surface after the term expires.
Medical Malpractice Insurance for New Practices
Whether you’re a new physician or you’ve been practicing for years, the decision to open your own practice is a big and exciting one. Having medical malpractice insurance is very important to protect your practice, your time, and your hard work. At E & Y Insurance Agency our agents can help you get medical malpractice insurance that works for you and your practice. Call our office today at (248) 362-1313.
