Choosing the right malpractice policy type impacts both immediate costs and long-term protection for healthcare professionals. In this article, providers can learn the difference between Occurrence and Claims-made policies to make a more informed decision about coverage.
There are two main policy types when it comes to medical malpractice insurance: Occurrence and Claims-made. Each option has unique benefits, and it’s important to know their differences. This way, you can choose the best protection for your career and retirement.
This article will help you understand the major features of each coverage type and what to consider when buying or renewing your medical malpractice insurance policy.
The major differences between the two coverage types are how long they protect you and how much they cost.
You’re covered by your policy from when the treatment occurred.
Claims-made only protects you the year you have the policy, similar to health insurance.
There are a few factors to consider when evaluating the cost of your policy. Premiums are initially higher for an Occurrence policy. But since tail coverage for a Claims-made policy can be a significant expense — sometimes twice the cost of your annual premium — you might actually save money with an Occurrence policy.
To compare costs over your whole career, you should get quotes for both Occurrence and Claims-made coverage. Read our article on the cost of malpractice insurance to learn more about your insurance cost.
The limits of your policy really matter, because they determine how much your liability insurance carrier may pay in the event of a claim. The policy limits are the maximum amount an insurer is willing to pay for claims filed against you.
What they are: The policy limits are the maximum amount your insurance carrier will pay for claims filed against you. Policy limits are written as two, side-by-side numbers:
The total amount your insurer will pay for each claim filed against you in one policy period.
The total amount your insurer will pay if you get multiple claims filed against you in one policy period.
How you should evaluate them: Make sure your policy limits are high enough to protect you throughout your whole career. To decide what limits are right for you, you should talk to your agent or insurance carrier.
What is it: If a claim is filed against you, the consent provision in your malpractice policy determines if your insurance carrier has the power to decide to settle your case (pay the demand).
How you should evaluate it: Make sure that the consent provision gives you the ability to refuse to settle, and doesn’t have hidden exceptions that take away your say in the decision. If others can decide when to settle a case, they may do so even if it’s against your best interest.
What is it: If you choose a Claims-made policy, you should be aware that you’ll need to get tail coverage after you stop practicing, which extends your protection.
How you should evaluate it: Tail coverage can be very expensive, and many insurers claim to offer free tail coverage. But read the fine print! Some insurers only provide free tail coverage upon death or disability, or there may be age restrictions on when you can retire.
What is it: As an added benefit, insurers often include additional coverage as part of your policy. This may include cyber liability, HIPAA coverage, audit coverage, billing errors coverage, administrative hearing coverage, and more.
How you should evaluate it: You should look closely at these additional coverages to make sure your practice is appropriately protected. If you’re unsure, you may want to talk to your agent or carrier about custom solutions.
This is why policies are called what they are. For Claims-made, you’re covered by the policy limits that are in place when the claim is made (brought against you). So, if someone files a claim against you now for an incident that happened in 2018, you will need to have a current Claims-made policy in order to have coverage.
For Occurrence, your policy from when the incident occurred covers you. So, if you had an Occurrence policy in 2018 (which never expires), and someone files a claim against you now for an incident that happened that year, the policy limits from 2018 will cover you.
Choosing between Occurrence or Claims-made might seem like an unnecessary complication. Either way, you have the same policy limits to protect you, right? Not exactly. You’ll see a big difference if more than one medical malpractice claim is filed against you in a single year.
Say a claim is filed against you for something that happened this year and another claim is filed against you for something that happened in 2018. With Claims-made, only your current policy limits would cover you for both of these claims.
However, with Occurrence, since policy limits never expire, both your current policy limits and your 2018 policy limits would kick in to protect you. Your current limits would cover the current year’s claim, and your 2018 limits would cover the 2018 claim. So, with Occurrence, you have greater coverage for incidents the longer you have that policy type.
Occurrence coverage has lots of benefits: it’s less complicated than Claims-made coverage (no need to think about tail), and it protects you for a longer amount of time. However, not every insurer can offer Occurrence policies, since they carry greater financial risk for the insurer.
Simply put, the insurance company may not know its actual exposure under an Occurrence policy for many years. With Claims-made coverage, if no claims have been made against the policy by the end of the policy period, the insurer can count the premium as profit (net of expenses, of course) and move on to the next year.
You’ll want to find a company that offers you both Occurrence and Claims-made, so you have the flexibility to choose or even switch coverage types. MedPro Group gives you access to both, and we can help you choose the best option for you.
With a Claims-made policy, your protection ends at the end of the policy term. That means that if someone files a claim against you after you’ve retired or during a leave of absence, you will have no protection, even if you were covered when the incident happened.
For that reason, most people with Claims-made policies need to secure tail coverage to cover the “tail” of liability left behind them after their policy ends. This is sometimes called an “extended reporting period” and tail insurance should give you coverage from the very first day of your policy (retroactive date) into retirement. Tail coverage typically protects you until death but only gives you one set of limits to defend against future claims. Tail is not necessary for an Occurrence policy, since the coverage never expires.
Many insurance companies offer free tail coverage, which could make a Claims-made policy cheaper than an Occurrence policy. If this seems too good to be true, that’s because it may be.
A lot of the time, insurers only provide tail coverage for free with these stipulations:
Make sure you read the fine print before buying a Claims-made policy, so you don’t end up paying for tail coverage out of pocket.
We’ve put together a short table so you can see the key differences between the two malpractice insurance coverage types. This should help you decide the best coverage type for you.
| Feature | Occurrence | Claims-made |
|---|---|---|
| Coverage Period | Covers incidents that occur during the policy period, regardless of when the claim is filed. | Covers claims that are made while the policy is active. |
| Tail Coverage | Not needed. Coverage extends indefinitely for incidents during the policy period. | Typically needed after the policy ends to cover future claims for past incidents. |
| Initial Cost | Generally higher premiums initially. | Generally lower premiums initially. |
| Long-Term Cost | Potentially lower overall cost when factoring in the cost of tail coverage for Claims-made. | Potentially higher overall cost due to the expense of tail coverage. |
| Policy Limits | Policy limits in place at the time of the incident apply. | Policy limits in place at the time the claim is made apply. |
| Multiple Claims | Separate policy limits may apply for claims arising from different policy years. | Current policy limits typically apply to all claims made during the policy year. |
MedPro Group has always been committed to doing what’s best for healthcare providers. That’s why we offer both Occurrence and Claims-made coverage options. We’re the only carrier on the market with the financial strength and long-term stability to continuously offer both policy types.
Contact us today to get a free quote or learn more.