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For new graduates or those entering independent contractor work, the thought of purchasing medical liability insurance (commonly known as “malpractice insurance”) can be scary. As we know in our profession, one of the best ways to ward off anxiety is to research and be prepared for the unknown. By Lisa Weiss, MD

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For the most part, medical liability insurance will depend on your employment type. If you are part of a large group, then most likely your insurance will be covered by the group or institution. However, if you are independent or part of a small group, then it may be situation dependent. For example, if you are truly independent, then you will most likely have to cover your own policy. Conversely, if you are employed through a locum’s tenens firm, then they may cover it for you.

Let me start off by saying: I am no expert on the topic. However, I have been employed by large groups, small groups and I have had 1099 work. Therefore, I’ve had both types of insurance discussed below. Additionally, I have had to purchase my own malpractice insurance. So, this post is speaking from both a personal perspective along with insight from experts. We will cover the basics and as always, there is much more to this topic. If you need more detailed information, I have listed my resources below.

The two main types of medical liability insurance policies:

1. A claims-made policy covers a claim when it’s filed during the policy period, from the first date of the coverage through the policy period, but not after the policy date end. This type of coverage will require the policy holder to purchase tail coverage afterwards. Tail coverage is liability coverage that extends past the end date of the claims-made policy and protects if a claim is made after the initial policy end date. Tail coverage will cost the policyholder approximately 200% of their final-year premium on the policy (^1,2).
2. An occurrence policy covers any claim arising from an event that happens during the policy period, regardless when the claim is filed. An occurrence policy is a stronger policy as it has tail coverage built into it (^1,2).
   
   

How much malpractice insurance do I need?

Most recommendations on this topic say to follow what others in your specialty and geographic area purchase. Some jobs will require you to purchase certain amount as well. Often in anesthesia, the $1 million per occurrence/$3 million policy aggregate annual coverage limit is popular and is commonly required in independent work. The first number applies to the amount paid per case and the second number is the total amount the insurance company will pay out per year (³).

Of note: An occurrence policy resets annually, while a claims-made policy does not. What does this mean in plain English? Using the $1 million/$3 million example above, this means that the $1 million per claim starts anew each year in an occurrence policy, while in a claims-made policy each $1 million counts towards the $3 million aggregate for the life of the policy (²).

Other helpful tips:

• Save your declarations page that you receive at your policy renewal. The declarations policy will list the details of your policy (¹).
• When searching for a new job, be sure to ask if tail coverage (if the policy is a claims-made policy) will be covered and if not, see if it can be negotiated into contract. This is important (¹)!
• How long do I need a to purchase a tail coverage for a policy? This is something that is best discussed with the insurance advisor and will depend on the state and statute of limitations in that state.
  
  

References:

1. https://www.ama-assn.org/practice-management/sustainability/medical-liability-insurance-what-final-year-residents-should
2. https://www.whitecoatinvestor.com/claims-made-vs-occurrence-malpractice/
3. https://www.whitecoatinvestor.com/medical-malpractice/
   
   
   

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Lisa Weiss, MD practices anesthesiology in Houston, TX. She graduated from the McGovern Medical School at The University of Texas, Houston, in 2013. 

The ASA Committee on Young Physicians is pleased to present this monthly article series on personal finance. These articles are not written by hedge fund managers or real estate tycoons but by practicing physicians. Some have business degrees and some do not – but every contributor is an anesthesiologist who has some guidance to offer the rising generation of attending physicians. It is not the intention of the committee to offer definitive financial advice, but rather some pearls of wisdom to consider while developing a personal fiscal plan.

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