Claims vs. Occurrence Medical Malpractice Insurance Explained
Gallagher Healthcare :: Industry InsightsBy Gallagher Healthcare | 12/15/2016
If you’re considering different medical malpractice insurance options, you might wonder about occurrence vs. claims made malpractice insurance. It can be a complex comparison to understand, but it’s vital to become familiar with it so you can make the best choice when it comes to purchasing an insurance policy. Here is a quick guide to understanding the differences between these types of policies.
What Are the Differences Between Claims Made Vs. Occurrence Malpractice Insurance?
Claims made vs. occurrence policies are often misunderstood. They are the two basic types of policies that insurance carriers offer:
- Claims made insurance policies cover you as long as you pay your premiums and your renewals. If you have this type of insurance for five years and stop paying your premiums, you will not be covered for any claims against you that the carrier did not accept during the term of your policy. You’ll need to buy a tail policy, also known as an extended reporting endorsement, if you cancel the traditional policy. Premiums typically start low and increase over time.
- An occurrence policy is what most physicians prefer. Unfortunately, it’s not available in every state. This type of policy immediately goes into effect when you buy it. When you cancel, it will continue to cover you for claims made against you during the term of the policy. Premiums will typically remain the same throughout the term.
One consideration you will need to consider is what will happen if your occurrence policy carrier goes out of business years after you purchase your policy. If this happens, you and other clients will not have coverage. You may wish to speak to an expert to formulate a plan and to discuss the benefits of different insurance coverage in order to find the right insurance for your needs.
If you have a claims made policy and want to change carriers, you might not need to purchase a tail. In many instances, the new insurance provider will write your new policy retroactive to the previous one. Claims made policies usually increase over a five-year period. Some providers will provide free tail insurance if you die, become disabled, or you retire after five years of coverage (as long as you are at least 55 years old). If you do not have this feature in your policy, you’ll need to buy tail coverage to make sure you’re covered after you retire.
Back in the Day
Decades ago, physicians didn’t have the chance to compare claims made vs. occurrence malpractice insurance because there was no such thing as claims made insurance. All policies were occurrence policies and were written for a term of only one year. They covered all malpractice claims made during that one-year term. Even if a physician was no longer with that insurance carrier, his or her policy would still cover any claims made during that certain year.
In the 1970s, juries started awarding much larger claims than before. Insurance companies quickly became tired of paying claims that were made long after physicians changed carriers. The premiums they charged didn’t come close to covering the losses they were experiencing. St. Paul Insurance, the largest physicians’ liability insurance provider in the country at the time, went out of the business entirely.
Know What You’re Buying
There are several advantages and disadvantages to both types of policies, so it’s important that you speak with a professional advisor to comparing occurrence vs. claims made malpractice insurance. If you opt for a claims made policy, for example, you’ll have to buy additional coverage should you ever leave your practice.
An advisor with Gallagher Healthcare can walk you through the often-confusing area of claims made vs. occurrence malpractice insurance, so that you are completely confident and comfortable with your final decision. Please contact us to learn more about how we can help.