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Buying Medical Malpractice Insurance: A Physician’s Guide

Buying Medical Malpractice Insurance: A Physician’s Guide

Malpractice insurance is not just a major expense for medical practices, it is a requirement. Selecting malpractice insurance can be a complex endeavor. There's no one-size-fits-all policy, and physicians must be well educated on their malpractice options. What do you need to know to make sure you have the best coverage with the best carrier for your needs? This white paper will provide background and guidance on a topic that is key to maintaining an optimally functioning practice.

Understanding Coverage and Carriers

Put simply, malpractice insurance protects healthcare professionals from claims brought during litigation and more specifically from financial harm and even bankruptcy from such claims. But when signing on with a malpractice insurer, physicians are seeking more than just financial solvency. Upon choosing a malpractice insurer, a physician should feel confident that her carrier will provide solid support when it comes to claims investigation, legal representation if it becomes necessary, and, ultimately, responsibility for the majority of any claims payments. Some carriers also provide other services, such as educational seminars, articles, risk management, and patient safety programs.

Before carefully evaluating and selecting a malpractice insurer, you should first consider how much coverage is necessary. Among the topics for physicians to discuss with their accountant or malpractice provider is the matter of their personal liabilities. If a large verdict, that is one that is higher than the policy limits, is ever rendered against the physician, that doctor's personal assets may be in jeopardy. It's important for physicians to know they have the appropriate level of coverage. The precise amount of coverage doctors choose will depend on state laws, their assets, the affordability of the coverage, and what level they need to feel comfortable.

Malpractice coverage limits typically begin at $1 million, which is the amount an insurer will pay per claim, subject to an overall cap or "aggregate" of $3 million, which represents the total amount the insurer will pay while the policy is active. Limits vary a great deal by state and location.

Once you get a sense of how much coverage you need, the next step is to find a carrier to provide that coverage. The three most common companies are: a stock insurance carrier, a mutual insurance company, and a reciprocal insurance company (also known as an inter-insurance exchange). Let's consider all three:

A stock insurance carrier is owned by stockholders, and therefore its assets can go up and down with the stock market. It is a publicly owned, for-profit, company. Those concerned about the carrier's financial stability may not be fond of this option.

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