Did you know there’s a day of the year when you’re supposed to review your insurance policies? Yes, June 28 of every year since 2010 is set aside as National Insurance Awareness Day.
It’s wise to take this time to ensure your health and financial wellness policies are still relevant to your needs. But it’s even better to know what your insurance includes and excludes before you take the policy out, especially when dealing with malpractice insurance.
You’re at risk of a lawsuit when you begin treating patients. This risk never disappears, even after you set aside your tools and move on to greener careers or life pastures. A claim against you can show up any time after the service was rendered, with a statute of limitations that depends on your state and the damage done.
It’s understandable why this type of insurance is so vital to your career and finances. With the protection of those two things in mind, here are three of the most common (and costly) mistakes you should avoid when buying your next malpractice insurance coverage.
1. Not Researching the Carrier’s Stability
Bankers, Fidelity, Western Pacific, Lincoln Memorial … what do these names have in common? They’re all examples of once-great insurance companies that have, at one point, gone insolvent.
Some insurers can “rehabilitate” and return from the edge of bankruptcy, getting healthy once again. But others are long gone, taking their policyholder’s money and any ability to pay claims against the insured with them.
These sad-but-true horror stories are why you must research a potential insurer before taking out a policy with them, even if you’ve heard of the company name. For instance, CM&F Group, Inc. Malpractice, a popular insurer, works with MedPro Group and Lloyd’s of London. The group has high ratings across all legitimate consumer bureaus and financial services, including an A+ with the Better Business Bureau and an AA+ rating with the S&P.
These ratings tell you how solid an insurance carrier’s financial stability is and how likely they are to have the funds to cover your claims. Always buy policies from a financially sound company. If you find a Risk Retention Group (RRG) without a rating, dig further and look for their parent or sponsor company’s rating.
2. Choosing the Wrong Occurrence Coverage
Another crucial mistake is often made when the insured does not understand (or pay attention to) the terminology in a policy. In medical malpractice insurance, this is most commonly attributed to the type of occurrence.
You can buy coverage for occurrences or claims-made. There’s a hefty distinction between the two.
Occurrence coverage gives you protection for actions that took place during the covered policy period. Regardless of whether you still carry that same coverage years later, if a patient files a claim after the policy has ended, the insurer will protect you.
As an example, if Patient A files a claim against you on October 2, 2025, for an incident that occurred on March 9, 2023, the insurer you had on March 9, 2023, is who will extend your coverage. There’s no need for tail coverage (extended reporting endorsement policies) with an occurrence policy.
On the other hand, claims-made coverage only handles claims when they are first filed against you. In this type of coverage, the scenario with Patient A would be covered by the insurer you had on October 2, 2025. If you have no coverage at that time, you are personally responsible for the claim. Most doctors will take out tail coverage when they cancel policies for this reason.
Claims-made insurance is usually less expensive than any occurrence policies because the typical malpractice lawsuit is filed two or three years after treatment. The risk of a claim being filed is lower during the first few years of practice. Policies mature as the doctor treats more cases over the years, which is why malpractice insurance continues to get more expensive instead of less.
3. Wrong Scope of Practice
Sometimes, claims will be denied by an insurer because the scope of practice was not clearly defined. If the carrier’s terms consider the insured to be practicing outside of their “scope,” they won’t cover the damages.
An example of this would be in the situation of nurse practitioners. Different states have their own rules for NPs, and not all of them enforce the full scope of practice. If an NP is sued for prescribing the wrong medication without physician oversight, and it was not clarified in the policy that the NP was practicing independently, the insurer may have grounds to deny the claim.
Conclusion
There are some things that are easy to shrug off and say, “Mistakes happen.” Buying the wrong medical malpractice policy is not one of those things. Before you give your money to a company for a useless policy, verify that you’ve avoided these three costly and common mistakes.
