Buying Medical Malpractice Insurance: What You Need to Know

Whether you’re setting up your own practice or going to work as an independent contractor physician, you’ll need to purchase medical malpractice insurance, also known as medical professional liability or MPL insurance. MPL insurance is designed to provide you with financial protection and legal support in the event of an allegation of negligence or lawsuit, a risk that grows the longer you’re in practice. 

According to the American Medical Association’s 2022 Physician Practice Benchmark Survey, 31% of all physicians have had a medical liability lawsuit filed against them and 47% of doctors aged 55 or older have been sued.

Just as with auto and homeowners insurance, there are a variety of medical malpractice insurance carriers and coverage types to choose from. Here are some of the key points to consider as you weigh your options.

Financial Strength of Malpractice Insurance Companies

One of the most critical aspects of any insurance carrier is their financial stability. You want to feel confident that the medical malpractice insurance insurer you choose will be able to cover any claims you might have, now and in the future. 

AM Best provides financial strength and long-term credit ratings of MPL insurance providers to help in this process. Look for ratings of an A or better, and check whether the ratings have been rising, falling or remaining stable. 

Structure of Mutual and Stock Insurance Companies

Medical malpractice insurance companies are structured in a variety of ways, but individual physicians will typically purchase coverage from two different types of companies:

•  Stock company: shareholders own the company and receive profits 

•  Mutual company: policyholders own the company and receive profits back as dividends

Mutual insurers are focused on long-term ways to satisfy their policyholders, who can influence the company’s direction and product offerings. Whereas stock companies focus on short-term ways to satisfy the stock market. 

Both types of malpractice insurance companies earn income from policy premiums and investments, but stock companies can also raise funds through the sale of stocks.

Policy Type

There are two basic types of MPL coverage: claims-made and occurrence. A claims-made policy covers events that occur and are reported while the policy is in effect. An occurrence policy covers any event that occurred while the policy is in effect, regardless of when it is reported. The majority of MPL policies are claims-made. 

To protect against any claims that could arise after your claims-made policy period ends, you may also need “tail” or “nose” coverage (also known as an extended reporting endorsement). 

Some policies include tail coverage for free once you’ve reached a certain age and have held the policy for a specific amount of time, while others may consist of nose coverage for prior acts. Make sure the policy you choose provides the malpractice insurance coverage you need.

Policy Premium

The amount you pay for your insurance will largely be based on your location, including whether your state has effective tort reform and your specialty. Other factors impacting your rate include your policy limits, policy type and risk history. 

Additionally, some insurers may have higher upfront premiums but offer a potential dividend payment or include additional benefits. Look at everything you get for your premium cost when determining the best value.

How Claims Are Handled

Facing a lawsuit is incredibly stressful, and it’s important to know in advance how your medical malpractice insurance company handles the process. Ask these questions now so you understand how medical malpractice insurance works:

•  Who holds the consent to settle — you or the insurer? 

•  How involved will you be in other key decisions? 

•  How do they determine the merits of the claim? 

•  What sort of support will you receive during the process? 

You may also find it helpful to review the prospective insurers’ medical malpractice trial outcome statistics and their relationships with experienced attorneys.

Once you’ve taken a look at the critical factors above, other areas you may want to research before selecting your MPL insurance carrier include the companies’ risk management programs, educational resources, personal attention level, and commitment to innovation and improvement. 

Together, this information will give you the insight you need to choose the medical malpractice insurance provider and coverage that works best for you.

Choosing the Right Medical Malpractice Insurance

Buying medical malpractice insurance is an important decision that can have long-term implications for your career and financial security. Understanding policy types, coverage options, insurer structure and claims handling can help you make a more informed choice. 

By taking the time to evaluate your options and ask the right questions, you can select medical malpractice insurance coverage that aligns with your practice, risk profile and professional goals.

FAQs About Buying Medical Malpractice Insurance

What should you consider when buying medical malpractice insurance?

When buying medical malpractice insurance, it’s important to evaluate the insurer’s financial strength, company structure, policy type, coverage limits, claims handling approach and available risk management resources. Taking a comprehensive view helps ensure the coverage you select aligns with your practice and risk profile.

What types of medical malpractice insurance are available?

The two primary types of medical malpractice insurance are claims-made and occurrence policies. Claims-made coverage applies when a claim is reported during the policy period, while occurrence coverage applies to incidents that occur during the policy period, regardless of when the claim is reported.

How are medical malpractice insurance claims handled?

Claims handling varies by insurer, but typically includes an evaluation of the claim’s merits, legal defense by experienced attorneys and guidance throughout the process. Understanding who controls settlement decisions and how involved you will be can help set expectations before a claim arises.

What are some tips for choosing a medical malpractice insurer?

When selecting a malpractice insurer, consider factors such as financial stability, experience in your specialty, claims support, risk management programs and the level of personal attention provided. Comparing these elements can help you choose an insurer that meets both your professional and long-term needs.