Full Guide to Physicians Malpractice Insurance

As a medical professional, it is essential to protect yourself with medical malpractice insurance.
A requirement in some states, malpractice insurance is one of those expenses that physicians dread, yet cannot avoid.

Even if the state in which you hold a license to practice medicine does not require it, there is a good chance the healthcare system you work for does.

Like most other types of insurance, medical malpractice insurance products vary from insurer to insurer.

There are different types of policies, premium levels, and levels of coverage, which can make it a bit tricky to know which policy is the best choice.

From the different types of policies to how much they cost to what they cover, here is our full guide to malpractice insurance for physicians.


Why You Need Medical Malpractice Insurance

Malpractice insurance (or professional liability insurance) is a must-have for every physician — regardless of where you practice or what specialty you work in.
The following seven states require that all physicians have malpractice insurance:

  • Colorado
  • Connecticut
  • Kansas
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Wisconsin

In addition, seven states have state programs to assist physicians with malpractice claims.
These states require that you at least carry a minimum amount of coverage:

  • Indiana
  • Louisiana
  • Nebraska
  • New Mexico
  • New York
  • Pennsylvania
  • Wyoming

But even if you work in a state that doesn’t require it, you’ll be hard-pressed to find an employer that will let you practice without it. Unless you’re self-employed in your own private practice, most physician employers across the country insist that you have malpractice insurance while you’re their employee — and sometimes for even longer.

In the rare instance that malpractice insurance isn’t a requirement, the pros of having it far outweigh the cons.

The only con of having malpractice insurance is the cost of paying for it. This expense is minimal compared to the amount you could be on the hook for if a patient files a suit against you.

Even if you know 100% that you did nothing wrong and will never actually have to pay damages, you will still have to defend yourself against the suit.

Legal defense alone can cost tens of thousands of dollars; in most cases far more than the cost of malpractice coverage.

Further Reading: Malpractice Insurance Options.

The Facts on Malpractice Suits

According to data from the AMA, 34% of physicians will have a medical malpractice lawsuit filed against them during their careers. The longer you practice, the more likely that becomes. Almost half of all physicians over the age of 55 have been sued at least once.

National Practitioner Data Bank 2018 report shows plaintiffs that sued for medical malpractice received over 4 billion dollars, with an average payout of $348,065 per claim.

Of all suits filed, approximately 50% go to trial, though only about 5% result in a jury verdict. In most cases, malpractice claims end in a settlement either before trial or during the trial proceedings.

Even if your suit ends in a jury verdict in your favor, you will still be forced to pay for legal services and defense fees unless you have malpractice insurance to cover those costs for you.


Different Types of Malpractice Insurance

Insurance broker passing contract across desk to physician
A variety of different types of malpractice insurance policies are available for medical providers. If you are in private practice for yourself, it is up to you to choose which type of policy you want. If you work for a hospital, they may require you to carry one or more different types throughout your employment and the following years.

Here are the main types of malpractice insurance and how they differ:

Claims-Made Coverage

With a claims-made policy, your insurer will only cover malpractice claims if the claim is made against you (via a demand or a lawsuit) within your policy period, and the date of the incident alleged was on or after your retroactive date.

For example, say your policy period runs from January 1, 2023 to December 31, 2023 with a retroactive date of January 1, 2021. If a patient files a claim in 2024 for an incident between 2021 and 2023 and you did not renew this policy, your insurance company will NOT pay. As soon as the policy period ends, so does the coverage, regardless of when the patient files the claim.

If you choose this type of policy, you will need to get tail coverage to protect you against claims filed after your policy ends.

Tail Coverage

Tail coverage protects you when you are between jobs, moving from one position to another, or entering retirement.

When your policy ends, adding tail coverage extends the period in which the insurance company will still cover claims. This protects you from claims filed after your policy period ends. In the example noted above, if tail had been purchased, it would cover any claims brought in the future for medical services provided between January 1, 2021 and December 31, 2023.

Occurrence Coverage

The broadest and most protective type of medical malpractice policy is the occurrence policy. With this policy, it does not matter when a medical malpractice lawsuit files, so long as the incident occurred during the policy period.

Occurrence coverage is the most comprehensive choice, but availability of it in the marketplace is limited, with only a few carriers offering it.

While it can be a bit more expensive (and much more expensive in the early years of your coverage), it prevents you from needing to get tail coverage when a claims-made policy ends. It is the best way to protect yourself and offers the flexibility to cancel one policy and get a new policy when you choose.

Because of the cost and limited carrier availability, even though it offers the best protection, it is not as commonly purchased as claims-made coverage.

Claims-Paid Coverage

Claims-paid coverage is one of the least common coverage options, though it is available in many western states. With this coverage, the claim is not recognized until the indemnity pays out or the claim closes. This is not a problem if you do not have any claims and you can easily switch if this is the case.

The downside of this type of coverage is that if you do have a claim made against you, as long as your claim remains open, you will need to maintain coverage with the claims paid insurance carrier. This could mean years of paying premiums that you don’t want to pay until the claim is closed (often 3-4 years) or an even larger tail payment to get out of the policy if needed.

If you choose to cancel or switch insurance carriers before the claim pays out, and you do not pay the even larger tail payment, you run the risk of having to pay the claim out of your personal assets.


How Much Does Malpractice Insurance Cost?

While the average physician spends approximately $7,500 per year in malpractice insurance premiums, several factors affect medical malpractice insurance coverage pricing.

Coverage Amount and Liability Limits

How much coverage you need will directly affect how much you will pay in insurance premiums. The more liability coverage you need, the more you can expect to pay each month.

With the exception of some high-risk specialties, physicians typically spend about 3% of their annual salary on malpractice insurance premiums.

Prior Claims History

If you have had malpractice claims filed against you in the past, insurance companies will treat you as a higher risk.

Physicians with a history of claims against them should expect to pay more than physicians with no claims on their record. If you have a number of claims, you may even be forced into the excess and surplus lines market, leading to dramatically more expensive coverage until you can show better loss history.

Location

Where you work also factors into how much you will pay in insurance premiums.
Some states:

  • Have a higher rate of malpractice lawsuits, which can increase your rates.
  • Are more litigious than others, which can also increase your rates.
  • Have tort reform laws that put a cap on how much juries can award plaintiffs for non-economic damages, such as pain and suffering.

In states with strict tort laws, physician malpractice premiums tend to be lower than in states that do not cap damages.

Which Specialties Pay the Most?

Regardless of your region, claims history, and coverage amounts, healthcare professionals in certain specialties always pay more than others.

Most insurance companies look at both how often physicians are sued in a given specialty, and how expensive those lawsuits are, on average, when they occur, in determining premiums. Some specialties are at greater risk of being sued than others.

According to the Medscape Malpractice Report 2019, surgeons, urologists, otolaryngologists, and OB/GYNs rank get sued most often. Physicians who specialize in surgery and obstetrics are particularly at risk, as negligence and injury resulting from a medical procedure are easy to pinpoint to a physician’s work on a specific day at a particular time.

Specialties where errors can lead quickly to severe injury, long-term lasting effects on the patient or death, like neurosurgery, OB/GYN and emergency medicine, have larger average payouts and therefore are charged higher premiums as well.

It is not uncommon for surgeons to pay between $30,000 and $50,000 per year for coverage. Some OB/GYNs in New York, pay as much as $214,999 per year for coverage.

Claims-Made Maturation Option

One way to bring the cost of malpractice premiums down (at least initially) is to select a claims-made policy with a maturation date. This can save you money in the early years (year one and year two particularly), but over time, after five years it will be the same premium as an occurrence policy.

Claims-made policies with a maturation date are on a step system in which the rates you pay increase over time from year one to year five.

This comes from the idea that you are less likely to face prosecution in your first year of coverage when you have not seen that many patients. By year five, you maximize the total potential time for a potential liability base due to statutes of limitations, and so the premium is then mature and will be the same from there forward.

For each year you hold a claims-made maturation policy, your rates will increase until the fifth year. It can reduce your premiums initially, but it also requires that you get tail coverage when your policy period ends. You save a lot of money as compared to occurrence coverage initially, but then will have to pay for tail if you decide to change jobs and your new employer requires you to tail out.

Claims made coverage is more economical in private practice if you keep your retroactive date over your career, as most claims made carriers offer free retirement tail. Occurrence coverage is often more economical run if you switch and need to tail out coverage, especially if this happens within five to seven years of purchasing coverage.

Keep yourself healthy while navigating your new career. Check out Physician Work-Life Balance: A How-To Guide for New Doctors.


Who Pays for Malpractice Insurance?

If you own your medical practice, you are solely responsible for paying your malpractice insurance; but if you work as an employee of a hospital or healthcare network, your employer may cover the cost for you.

Your employment contract may include details about what type of insurance is necessary and who will pay for it. Always hire a contract review specialist to go over these details (and all other terms) of your employment before signing a contract.

If you’re about to review a new contract or renew an existing one, contact Physicians Thrive now to find a contract review specialist.

Related: Do Contract Reviews Work?


What Does Malpractice Insurance Cover?

Doctor in scrubs crossing arms
Policyholders need to be aware of exactly what their insurance policy will cover and what it won’t.
Malpractice insurance generally covers any claim made against the medical provider where the result was bodily injury based on:

  1. The services provided
  2. A lack of services provided
  3. Medical negligence on the physician’s part

Bodily injuries can result from:

  • Wrong-site surgery
  • Misdiagnosis
  • Surgical errors
  • Medication errors
  • Childbirth-related injuries
  • Various other types of wrongdoing

Besides covering any damages awarded to the patient, malpractice insurance almost always provides legal counsel and covers your defense costs, both preceding and during trial (should your claim go that far). It will also typically give you a sub-limit to defend you in the event of medical board actions, which you should ALWAYS use the provided attorney to assist you in responding to the board’s inquiries.

It is also important to note that some circumstances are not covered under malpractice insurance.

These typically include:

  • Sexual misconduct on the part of the physician
  • Illegal acts
  • Services performed while under the influence of alcohol or drugs

 

When it’s time to fill out and submit your application for malpractice insurance, make sure that your information is 100% accurate. If your insurance provider can prove that you weren’t honest on your application, you will be liable for paying all costs and damages associated with a malpractice claim.

 


What to Know Before You Sign Up for a Policy

With so many insurance options to choose from, it is essential to know what your policy covers (and what it doesn’t cover) before you sign up.

First, make sure you know if you and you alone are responsible for medical malpractice coverage or if your employer will provide some as well. If your employer offers some amount of coverage, you may be able to get away with a policy that provides a bit less coverage.

It is also important to know what type of insurance policy your employer requires. In some cases, you may need tail coverage when you leave, or your employment contract may state that your employer will provide it for you.

Before you sign any policy, read it thoroughly and make sure you are getting the most value for your money. Be sure to compare prices and policy terms from different insurers in order to make the most informed decision.

Looking to buy a malpractice insurance policy? Read our reviews of CM&F insurance and NSO insurance.


Whether you practice medicine along the sunny coast of California, deep in the Alaskan wilderness, or on the northernmost tip of Maine, all healthcare providers need to protect themselves with medical professional liability insurance.

The expense of malpractice insurance is a tiny fraction of the costs you could incur should you ever be liable for malpractice. In medicine, accidents do happen. It is always best to be proactive and protect your assets with top-notch liability insurance coverage.

Ready to find a malpractice insurance provider with competitive rates in your state? Contact Physicians Thrive now.

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