As a healthcare professional, obtaining sufficient malpractice insurance coverage is essential for safeguarding your career and protecting against potential liability risks. When exploring your options, you may encounter two primary types of malpractice insurance: claims-made and occurrence-based. Understanding the differences between these two coverage models is crucial in making an informed decision. You may not get much choice, because your employer may extend whatever insurance they have to you. So, you need to understand what it covers and what it doesn’t. My goal here is to demystify claims-made and occurrence-based malpractice insurance to help you determine the most suitable coverage for your professional needs.
Claims-Made Insurance Defined
Claims-made insurance covers claims filed during the policy term. It is typically more affordable initially but requires active coverage at the time the claim is made. This means that coverage must be continuously maintained or extended through the purchase of additional coverage, such as a “tail” or “extended reporting period” (ERP) coverage, upon policy expiration or termination. Claims-made policies protect against claims made and reported while the policy is in effect.
Occurrence-Based Insurance Defined
Occurrence-based insurance covers claims arising from incidents that occur during the policy period, regardless of when the claim is filed. Once an occurrence policy is in effect, it provides coverage indefinitely for any claims arising from incidents that occurred during the policy period. This means that there is no need for tail coverage once the policy is terminated or expired, as long as the incident occurred during the coverage period. Occurrence policies provide long-term coverage and may not require additional costs down the line.
Understanding Retroactive Dates and Prior Acts Coverage
Claims-made policies consider a retroactive date, which is the specific date from which coverage begins for incidents that occur prior to the policy’s inception. Retroactive dates ensure that coverage applies only to claims arising from incidents that occur after that specific date. Prior acts coverage, on the other hand, extends the retroactive date to cover incidents that occurred before obtaining the current policy. Understanding these concepts is important when considering claims-made coverage.
Pricing Considerations
Claims-made policies often have lower initial premiums, making them more affordable. However, premiums can increase over time and may require purchasing tail coverage or ERP coverage when switching insurers or leaving a practice. Occurrence-based policies generally have higher initial premiums, but they offer long-term coverage without the need for additional tail coverage costs.
Tail Coverage and Extended Reporting Periods
Tail coverage or extended reporting period (ERP) coverage is crucial for claims-made policyholders who are switching insurers or leaving a practice. Tail coverage provides extended coverage for claims that arise from incidents that occurred during the policy period but are reported after the policy expires or is canceled. Understanding the availability, cost, and duration of tail coverage or ERP is essential when considering claims-made policies. In another article, we will explore “Tail” and “Nose” coverages in more detail.
Assessing Your Professional Needs
Consider your professional circumstances, long-term goals, and risk tolerance when choosing between claims-made and occurrence-based coverage. Assess factors such as the stability of your practice, potential changes in employment, and the nature of your work to determine the coverage model that best aligns with your needs and financial capabilities.
Always Seek Professional Advice
Navigating the complexities of malpractice insurance can be challenging. Consulting with a reputable insurance professional, an attorney experienced in healthcare law, or your professional associations can provide invaluable guidance. They can review your specific situation, help you understand the nuances between claims-made and occurrence-based insurance, and guide you toward the most appropriate coverage option.
Choosing the right malpractice insurance coverage is essential for healthcare professionals seeking financial security and liability protection. Understanding the differences between claims-made and occurrence-based insurance is crucial in making an informed decision. Consider your practice’s stability, long-term goals, and risk tolerance to determine which coverage model best suits your needs. Seek advice from insurance and legal professionals to ensure you make an informed decision that aligns with your professional circumstances and provides comprehensive protection throughout your career. If you have questions, give Newton’s Law a call or send us a message today.