Newly-minted physicians often find that malpractice coverage takes a hefty bite out of annual income. Then, there's all the other coverage.
Physicians who own practices must consider employee benefits, as well as protection of property, equipment, data and earnings. Given the significant costs involved, it follows that systematic research should precede all purchases, whether the product is malpractice or business insurance.
For the most part, using an experienced agent specializing in policies for medical practitioners is the best way to go. Even so, insurance experts have published numerous guidelines and in-depth articles on the subject for those want to learn more. What follows is a primer of sorts, with information culled from scores of government and industry sectors.
Malpractice Insurance: Painful but Necessary
Without adequate protection against lawsuits, medical professionals with small- or mid-size practices might well face financial ruin. Medical malpractice insurance can avert this disaster, covering doctors and other personnel from liability claims related to patient treatment. The three general product categories under the malpractice umbrella are:
- Claims-Made Coverage: These policies cover alleged acts of malpractice that take place and are reported to the provider only while the policy is in effect. Premiums tend to rise annually until peaking at five to seven coverage years. A physician with a clean record may enjoy lower premiums because costs are predicated on history, as well as on current experience. Policy owners also may increase liability limits when the need arises.
Claims-made products cover incidents occurring and reported only during the policy's effective period. When changing providers, a tail policy - a separate purchase from the old carrier - will cover mishaps taking place during the coverage period but that go unreported until after the policy lapses. Retroactive (prior-acts) coverage, which the new carrier can provide, serves the same purpose.
- Occurrence Coverage: This policy type protects the insured against any incident, no matter when it's reported. In turn, liability limits are based on those effective at the time of the event. Premiums ride on future projections, rather than on current experience, which leads to widely varying rates. On the upside, neither retroactive nor tail coverage is necessary when terminating this type of policy.
Business Coverage: Protection is a MUST
With the focus on malpractice insurance, health care entrepreneurs may pay less attention to insurance programs covering business operations. This is not a good idea. Even solo practices involve equipment, patient files and office space - add an employee or two, and other coverage comes into play. Many industry experts deem the following products as critical protection.
- Employment practices liability insurance offers general coverage for employment-related claims (sexual harassment, discrimination, wrongful termination, etc.). According to the Insurance Information Institute, a nonprofit organization with the mission to increase the general public's understanding of insurance issues, premium rates depend on practice type, number of staff and risk factors such as prior law suits.
- A business owner's policy (BOP), preferably one tailored to medical practices, typically covers equipment and property (including electronic data), liability (slips, falls and other accidents) and company vehicles. A number of riders providing for a practice's unique needs are available with most plans, so it's critical to speak with a business insurance specialist before making a final decision. Workers compensation, which provides financial coverage when an employee cannot work due to injuries sustained on the job, also falls under this umbrella; but individual state rules vary insofar as the employer's obligation to offer this benefit to employees.
- The Insurance Information Institute points out that adding business interruption insuranceto a BOP makes a lot of sense. This type of protection covers ongoing costs when a practice cannot function after a loss, as well as making up for lost revenues.
- Life, disability and long-term-care insurance protect assets, income and family members when the insured practice owner cannot work. The range of products in this category is extensive (e.g. whole life, term, universal, annuities), allowing considerable flexibility in selection and premium costs.