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Choosing the Right Practice Opportunity: Malpractice Insurance

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When evaluating practice opportunities, physicians should place a special emphasis on the type of malpractice insurance that they will have at each opportunity they are considering. There are two types if malpractice insurance, and having the wrong type of insurance could cost a physician thousands of dollars whenever he/she leaves the practice.

The types of malpractice insurance include:

Occurrence-Based Malpractice Coverage

Occurrence-Based Malpractice Coverage protects a physician from any claims that are ever filed on incidents that occur during the coverage term. So if a claim is filed 5 years from now, because of an incident that occurred today, this coverage would protect the physician. Occurrence-Based coverage is more expensive than Claims-Based coverage because of the added level of protection against future claims. Occurrence-Based coverage does not typically require tail coverage at the end of the policy's term.

Claims-Based Malpractice Coverage

Claims Based Malpractice Coverage protects a physician for any claims filed during the term of the insurance policy, but not for claims filed after the coverage date. For example, if a claim was filed next year for a incident that occurred today, this year's claims-based policy would not cover the future claim. Only claims filed during the coverage term would be covered.. The advantage to claims based malpractice coverage is that it is less expensive than Occurrence Based Malpractice Coverage. Physicians with this type of malpractice insurance will probably require tail coverage if they later move to a practice with a different malpractice carrier.

Malpractice Tail Coverage

A malpractice tail is a supplemental malpractice insurance policy that protects a physician from future claims on past occurrences. A tail is typically required if a physician has claims-based coverage, and moves to a practice where he/she is ineligible for malpractice insurance from the previous carrier. Since malpractice insurance carriers are usually limited to covering physicians in the state that they are located in, physicians can likely avoid the tail requirement by staying in their current state. If a physician is certain that he/she will practice in one state for the entire duration of his/her career, then claims-based coverage may make sense as there will be a considerable savings on the premiums. If not, the physician should consider estimated cost for tail coverage when determining which type of malpractice insurance he/she wishes to carry. Tail coverage can be under $10,000 for primary care physicians, but it could be well over $100,000 for highly litigious specialties like surgeons, OB/GYNs or Anesthesiologists.

Some hospitals are willing to pay for an incoming physician's malpractice tail coverage, but only when they are having difficulty filling a position. Attractive opportunities that have several candidates to choose from, will almost never pay for tail coverage.

Physicians should also consider that some practices and hospitals use claims-based malpractice coverage as a retention tool. They understand that a physician will be unlikely to leave if faced with thousands of dollars in penalties.
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