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 (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 2016 Physician Practice Benchmark Survey, 34% of all physicians have had a medical liability lawsuit filed against them and nearly half of doctors aged 55 or older have been sued.

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

The company’s financial strength

One of the most critical aspects of any insurance carrier is their financial stability – you want to feel confident that the insurer you choose will be able to cover any claims you might have, now and in the future. A.M. Best provides Financial Strength and Long-Term Credit ratings of MPL insurance providers to help. Look for ratings of an A or better, and check whether the ratings have been rising, falling or remaining stable. 

The company’s structure

MPL insurance companies are structured in a variety of ways, but individual physicians will typically purchase coverage from either a stock company, in which shareholders own the company and receive profits in the form of dividends, or a mutual company, in which 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 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 those 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 vast 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 include nose coverage for prior acts. Make sure the policy you choose provides the protection you need.

Policy premium

The amount you pay for your insurance will largely be based on your location – states with effective tort reform have lower average premiums than those without – 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 dollars when determining the best value.

How claims are handled

Being faced with a lawsuit is incredibly stressful, and it’s important to know in advance how your insurance company handles the process. 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’ trial outcome statistics as well as their relationships with expert 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 insurance provider and coverage that work best for you.