Medical malpractice insurance is one of the greatest expenses physicians face during their careers. But knowing what to look for in a policy is a mystery for many physicians, as well as a time-consuming chore that rarely gets the attention it deserves. And buying the wrong type or incorrect amount of insurance-or buying it from the wrong carrier-can be extremely costly. Physicians who take the time to understand how to buy malpractice insurance will not only save money, but ensure that they’ve got the right type and amount of liability coverage.As a primer, here are some basic definitions concerning malpractice coverage that every physician should know.
Annual Aggregate Limit (claims made)
Maximum amount carrier will pay for all claims arising from incidents that occurred and were reported during a given policy year.
Annual Aggregate Limit (occurrence)
Maximum amount carrier will pay for all claims arising from incidents that occurred during a given policy year.
Claims-Made Coverage
The most common type of professional liability coverage, it provides protection for claims that occur and are reported while the policy is in effect (coverage period).
Limit
Maximum amount paid under terms of a policy. Most policies have two limits: a per-claim limit and an annual aggregate limit.
Mature Premium
A step rating system used to set premiums for claims-made policies. The mature premium is the fee a policyholder will pay during the year the policy matures, generally the fifth through seventh year. The first level premium is substantially lower than a mature premium because it is designed for policyholders that are new to practice and therefore have no claims history.
Nose Coverage
Also known as retroactive coverage or prior acts coverage. Supplemental insurance that covers claims from events that occurred before a policy went into effect, but were not reported. The period that is covered is stipulated in the supplemental policy.
Occurrence Insurance
A type of policy under which the insured is covered for any incident that occurs (or occurred) while the policy is (or was) in force, regardless of when the incident is reported or when it becomes a claim. Occurrence insurance for medical liability coverage is rarely offered today because of the difficulty in projecting long-term claims costs.
Tail Coverage
Supplemental insurance that covers incidents that occurred during the "active" period of a claims-made policy but are not brought as claims against an insured party, nor reported to the insurer, by the time the claims-made policy has ended. Tail coverage is purchased from an insured's previous claims-made carrier and is generally 125 percent to 250 percent of the prior year's premium.
