Pros And Cons To The Different Types Of Medical Liability Insurance

When shopping for medical liability insurance, it can be overwhelming or unclear as to the benefits of each type offered. After investigating the individual companies, you should then get the details of the coverage levels, as well as how involved that particular company would be should a claim be filed. Ideally, the provider selected is very involved and you can rest easy knowing you will be professionally defended. But what is the difference between "claims-made" coverage and "occurrence" policies?

Claims-Made For Medical Liability Insurance Policies

A claims-made medical liability insurance policy is fairly straightforward, in that the company will cover any lawsuits made during the time the policy is in place. Once the binder is not renewed, no cases from that period will be covered by that company. The major pro to this type of policy is how inexpensive the first year's term is. However, each renewal leads to increasingly higher premiums until the mature rate is reached. Simple logic shows that the longer a healthcare professional is practicing, the more likely a claim is to be made.

Another pro to the claims-made type of coverage is the fact that premiums are based off of existing past and future experience and claims history. It's too difficult to base premiums for medical liability insurance of this type on future potential for malpractice. In addition, policy holders also have the option to change the liability coverage of their policy. For many companies, the newer (and possibly higher) liability limit will take effect when a claim is reported, even if a lower limit was in place at the time of the claim.

Policy holders should take care when changing carriers to ensure the prior period covered is still eligible for occurrences during that time. Tail policies are also available, which extends a policy period by a limited time.

Occurrence For Medical Liability Insurance Policies

Occurrence insurance is structured very differently than claims-made policies. With this type of medical liability insurance, claims can be made at ANY point in time, as long as the event occurred during the covered period. Because this implies coverage for a much longer period than for what premiums are paid, the premiums are significantly higher. However, the healthcare professional has the assurance that the covered period of time is covered indefinitely, even if they cancel their policy or change providers.

The major advantage for occurrence policies is the never-ending coverage of lawsuits for events during the covered period. Another advantage is that no tail coverage needs to be purchased upon termination, nor does retroactive coverage. However, bear in mind that premiums are determined not only upon past claim history, but on predicted future claim activity. This can mean that premiums vary greatly from one provider to the next.

Sit down with your broker to determine which of these types of coverages are right for you and your practice. Medical liability insurance should be only one part of a comprehensive protection plan. A quality broker will be able to show you different strategies and combinations of policies to ensure that you have an effective yet affordable package. Brokers often deal with a multitude of healthcare policy types, including HMO reinsurance, medical liability insurance, and cyber liability insurance.