What is Malpractice Insurance?

Malpractice insurance is a must-have item for any healthcare professional living in the 21st century. Healthcare professionals are often seen as the good guys. They help people when they’re in need and at their most vulnerable points. Most people are gracious for the help received. Unfortunately, some are not, especially when a medical error occurs. These individuals typically file lawsuits for their injury or their family members file in the event of a death. This insurance covers lawsuit defense and settlement costs.

Intended Professions

Malpractice insurance is considered professional liability insurance. Most states require medical doctors to purchase this insurance. Policies are also purchased by other health care professionals that include nurses, psychologists, physical therapists, and pharmacists. These individuals have a higher likelihood of being faced with a lawsuit than many other professions. Thus, this insurance provides reassurance for these individuals that in the event they are sued they will have the financial means to survive the ordeal.

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Type of Coverage

Two types of coverage exist for this type of insurance. Claims-made provides coverage for claims that are made while the policyholder is still insured with the insurance company. In this version, the incident and the date the claim was filed must both be while the policy is still active. This is the most common policy type that exists. To avoid the situation where a claim is filed after the policyholder no longer has coverage, an endorsement referred to as tail coverage can be purchased. Although this option costs about three times as much as the premium that is paid every year, it will allow for the insurance company to provide coverage to the previous policyholder for claims that are filed after the policy has ended. The other, less common type of coverage offered, is that which covers any claim that is filed while the policy was in effect. There is no limitation on the date of when someone files a claim. Due to the limitations of the claims-made coverage, it usually has significantly cheaper premiums that occurrence coverage. However, the rates increase annually until the third or fifth year, depending on the specific policy.

Coverage Limits

As with most types of insurance, there is a limit on the amount that will be paid for each occurrence as well as a limit on the amount that will be issued for a single policy period. Policies can be purchased with a single occurrence limit of $100,000 to $300,000. The limit option for the single policy period, which is most commonly one year, is between $1 million and $3 million. It’s of great importance that the correct limits are selected as the healthcare professional would still be responsible for paying the remaining amount resulting from a lawsuit if too low of a coverage limit was selected causing the insurance company to not pay the full amount.

According to the BMJ (British Medical Journal), medical error is the third leading cause of death as of 2016 in the U.S. While this most certainly is not intentional, it apparently still occurs. For this reason, a wise health care professional should always carry malpractice insurance during their career to protect their present and future financial health.

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