Regardless of your area of medicine, one thing all physicians worry about is the possibility of a malpractice suit.
It’s bad enough when mistakes happen and things go wrong with a patient in your care.
Being slapped with a malpractice lawsuit can make the experience even more devastating.
And that’s why malpractice insurance coverage is so important.
But what does it cover? How much does it cost? Why is it so crucial to have malpractice coverage?
Keep reading to learn how much malpractice insurance costs and why it’s so important.
What is Malpractice Insurance?
Malpractice insurance protects physicians when their patients make malpractice claims and file lawsuits against them.
Also referred to as Medical Professional Liability Insurance, it’s a way to protect you when patients suffer bodily injury or harm. Patients can file suits for everything from medication and surgical mistakes to misdiagnoses.
Without it, you could be forced to pay for those damages out of pocket.
What Does Malpractice Insurance Cover?
In the event that a patient sues you, malpractice insurance can help cover a variety of things.
Medical malpractice insurance covers the cost of any medical damages you have to pay to the patient. It covers settlement costs and punitive damages. It even helps to cover your legal fees, defense costs, and the cost of expert witnesses to provide testimony on your behalf.
Without it, you may have to pay for all of those expenses on your own.
But the types of cases for which malpractice insurance can be used are specific:
- Cases related to wrong-site surgery and surgical mistakes
- Cases in which a patient was misdiagnosed
- Medication mistakes
- Childbirth injuries
What Are the Different Types of Malpractice Insurance?
It’s important to understand that not all medical malpractice insurance policies provide the same coverage or benefits.
In fact, there are two major types of malpractice insurance that you can get:
- Occurrence based
Let’s go over those in more detail.
Claims-made and Occurrence-based Malpractice Policies
The critical distinction between the two relates to when you have coverage and when a patient makes a claim.
A claims-made policy covers incidents that occur when your policy is in place.
For example, if your policy covers you from 2020 to 2030, any claim made for any incident during that period will be eligible for coverage.
Both the incident with the patient and the claim made must fall within your coverage period. If the claim is made after your coverage ends, your insurance will not pay for it.
With this type of policy, it’s important not to let your insurance lapse, as a claim could be made outside of your coverage period. In this case, you won’t be covered, even if the incident occurred while the policy was in place.
With a claims-made policy, you may have the option to add malpractice tail coverage. A tail policy typically lasts 5–10 years and protects you if a claim is filed after your coverage has ended.
An occurrence-based policy provides policyholders coverage as long as the policy was in place when the incident occurred. The date the claim is filed is irrelevant.
Factors That Affect Your Rates
Like all types of insurance policies, there are a variety of policy limits that will affect your monthly rates. The most significant factors include your specialty, where you practice, how much coverage you need, and the liability limits you desire.
1. How Your Specialty Affects Malpractice Insurance Rates
Insurance companies look at your specialty to determine your rates and base those rates on how risky your specialty is based on claims history. Having a “risky” specialty means that you have a better chance of being sued.
Physicians with the riskiest specialties include obstetricians, surgeons, and ER doctors. The monthly premiums for physicians in these specialties are much higher than for physicians in other areas of medicine.
The cost of malpractice insurance ranges so much that only about 5% of physicians pay for about 54% of all malpractice penalties. The range in price is based on the specialty risk and location as well as other factors, such as the frequency of claims made against the physician.
2. How Your Location Affects Malpractice Rates
Where you practice is a considerable factor in determining how much you’ll pay in malpractice insurance premiums.
Federal law does not require physicians to have malpractice insurance. But certain states do.
But, even if your state laws don’t mandate it, you’re not necessarily off the hook. The hospital you work for or the health insurance carriers you accept may also require you to have it.
The states that require you to carry a minimum level of coverage include:
- New Jersey
- Rhode Island
The other 42 states either don’t require it at all or don’t set a minimum amount for how much liability coverage you need.
Are you wondering which states have the highest medical malpractice insurance premiums?
Doctors in New York pay the mostPhysicians in Rhode Island, Pennsylvania, and New Jersey round out the top four states for malpractice insurance costs. Doctors in North Dakota pay the least.
A doctor in New York can expect to pay at least five times more than the same doctor in California, Ohio, or Tennessee would pay for the same level of coverage.
3. How Liability Limits Affect Malpractice Rates
Different policies have different caps and limit levels as to how much they will pay out. For example, many standard policies pay a maximum of $1 million per claim, with a limit of 3 claims per year. With a typical policy like this, if your damages are $2 million, your policy will only cover half of it. Other policies may offer you the option to have a higher claim limit with the ability to make fewer claims per year.
Your claims history can affect your liability limits. The more claims you’ve made over the years, the more likely your insurer is to restrict how many claims they’re willing to pay for in the future.
4. Low Coverage Needs Might Mean Lower Malpractice Premiums
Many healthcare providers have some amount of liability insurance through their employers.
If your malpractice risks are low, you may be able to opt for a liability policy with a bit less coverage.
The less coverage you need, the less you’ll pay in monthly premiums.
Related: Make sure that you’re covered for everything. Learn about disability insurance for physicians today.
So How Much Does Medical Malpractice Insurance Cost?
Since there are so many factors involved in determining your insurance rates, we cannot say precisely what it will cost you.
But we can provide you with some statistics and averages to give you a better sense of where your rates may fall.
On average, medical malpractice insurance costs $7,500 per year.
Surgeons tend to pay between $30k and $50k in annual premiums. Other medical professionals typically pay between $4k and $12k per year, depending on their specialty and area of expertise.
Malpractice insurance costs work out to about 3.2% of most physicians’ incomes.
And while malpractice insurance can be a hefty monthly bill for surgeons, obstetricians tend to pay the highest rates of all.
OB/GYNs in Long Island, NY pay as high as $214,999 per year.
So why does it cost so much for these physicians specifically?
For one, OB/GYNS have one of the riskiest specialties. The other main factor is that they practice in New York, the most expensive state in the nation for malpractice coverage.
Tort Reform Laws Have Led to Lower Malpractice Insurance Costs
For the past ten years or so, malpractice insurance premiums have either decreased or remained flat. And that’s partly because more and more states have passed different levels of tort reform.
These laws started being put into place in various states in the early 2000s. Since then, physicians have seen much more stable rates that do not increase year after year.
With tort reform laws, states put a cap on the amount of money that judges can order physicians to pay in a malpractice suit. And with this reform, the cost of malpractice insurance has decreased a bit.
The tort laws vary from state to state, but they serve as a way of limiting how much a jury awards a patient if they win their suit.
In malpractice cases, patients can sue for economic losses, such as lost wages when they couldn’t work due to the injury or negligence alleged. They can also sue for non-economic losses, more commonly referred to as pain and suffering.
Some states have passed rather strict tort laws that cap non-economic damages at $500,000.
As with any policy, your rates are always subject to change. If you increase your medical liability limits or move into a riskier specialty, you can be sure that you’ll pay higher premiums, regardless of the tort laws in your state.
Tort reform laws do not prevent or hinder patients from filing malpractice suits. But they do help eliminate some lawsuits where patients sue for an exorbitant amount of money or seek damages far in excess of their injury or loss.
Why Malpractice Insurance is Worth the Expense
Despite the cost, malpractice insurance is well worth the expense.
If you should have to face a malpractice lawsuit, coverage under insurance is the best safety net you can have.
Malpractice insurance will save you money on legal expenses. Defense attorneys, court fees, and expert witnesses can cost tens of thousands of dollars or more. Insurance can help you cover those expenses so you don’t have to pay for the entire sum out of pocket.
Even if you win your lawsuit or the claim gets dismissed, you can still expect to pay about $22,000 to defend yourself against the claim.
The longer you stay in practice, the more likely you are to get sued. So regardless of the law in your state, it’s best to maintain some level of malpractice insurance throughout your career.
Malpractice insurance is also a way to protect your personal assets.
Whether you lose in trial and have to pay damages or decide to settle a claim out of court, you could be on the hook for hundreds of thousands of dollars or more. By having coverage, you won’t have to deplete your savings or take that money from other assets you’ve worked so hard to acquire over the years.
Your policy may also cover the cost of lost wages.
The more time you have to spend in court, meeting with lawyers, and preparing for your case, the less time you’ll have to work. If your regular income takes a hit because you have to devote time to prepare your defense, your insurance can help cover that loss.
What to Know Before You Sign Up for a Policy
As with all insurance policies, it’s important to compare prices, deductibles, and plans before choosing one. Get quotes from several different providers in your state and compare the benefits and costs of the plan options before signing up.
- Know the ins and outs of your policy by reading it thoroughly before signing.
- Understand the coverage period so you know if it’s claims-made or occurrence-based.
- Check with your employer to see if you already have malpractice coverage through your hospital group — you may be able to get away with a policy that provides a bit less coverage.
Related: Learn more about malpractice insurance options available to you.
The cost of medical malpractice insurance varies depending on your specialty, the state in which you practice, and the amount of coverage you need.
Average annual malpractice insurance premiums range from $4k to $12k, though surgeons in some states pay as high as $50k and OB/GYNS may pay in excess of $200,000.
For the average physician, medical malpractice insurance is well worth the cost and is usually just over 3% of their annual salary. And 3% of your salary is a small price to pay for all of the benefits that having the coverage affords you.
Even though most policies have a cap on the amount they’ll pay, you can use your benefits to pay for damages, settlements, lost wages, and legal fees.
Having malpractice insurance can be expensive, depending on what you do and where you practice. But the cost of not having it is a big risk, and it’s one that no physician in any field should take.
Learn all the ways we can help you protect yourself and your income and contact Physicians Thrive today.
Subscribe to our email newsletter for expert tips about finances, insurance, employment contracts, and more!