With the growing malpractice insurance crisis,
doctors are increasingly looking for ways
to minimize their premiums while maintaining
mandatory and prudent levels of coverage.
In addition, with the departure of many insurance
companies from the industry, many doctors
are finding themselves having to shop for
a new insurance company.
Here are some points to consider when
comparing
professional liability/medical malpractice
coverage:
- Coverage limits - in some states, the state
determines the minimum coverage required
to practice in that state; in the rest, you
are free to go it alone or pick the amount
you feel is right for you. If you are engaged
in a high legal risk specialty or have significant
assets you need to protect, you may want
to investigate higher limits. Policy limits
are defined in terms of maximum payout per
occurrence and total payout.
- Type of policy - determines when and for
when the policy is in force
- occurrence - covers claims made anytime for
incidents occurring while the policy is in
force
- claims made - only covers claims made and
for incidents occurring while the policy
is in force
- tail - covers claims made after the policy
expires for incidents occurring while the
policy was in force
- nose - covers claims made while the policy
is in force but for incidents occurring before
the policy was in force
Generally, "claims made" plus a
"tail" equals "occurrence"
coverage.
- There are primarily three types of relationships
between you and the insurance company:
- purely as a customer - you pay your premium
and you receive your coverage;
in some cases,
you are also required to advance
an equity
payment to help finance the company's
reserves,
and this equity investment may
have no investment
value and may have a lot of conditions
that
prevent its return, such as automatic
forfeiture
if you decide to switch insurers
in the future.
- participation in profit - some companies,
typically smaller ones formed by
doctors,
are "exchanges" or "interchanges"
that operate much like a cooperative
in that
there is a professional manager
but the company
is governed by the members and
the members
share in any profits generated.
- responsibility for losses - some low cost
policies require you to continue
to pay money
to liquidate the insurance company's
debt
in the event of a bankruptcy
- Consent to settle - your right to agree to
a settlement; an important feature as it
allows you protect your reputation and minimize
future insurance costs by nixing the insurance
company's decision to settle
- Financial soundness - even if you are only
a customer of the insurance company, its
future viability is important. If your insurance
company goes bankrupt, you may have to provide
your own defense and pay a significant larger
portion of any settlement. For example, in
New Jersey, the guaranty association that
backs up the insurance companies will only
pay up to $300,000 per claim if the insurer
goes bankrupt. Often times, smaller companies
use "re-insurance" -- essentially
insurance for insurance companies, which
provides them greater protection for losses
by sharing the risk.
- Legal prowess - it is to your advantage to
find a company that is easy to work with
and has a good record defending against suits.
Not only will this keep your insurance costs
down, but it will better protect your reputation
than a company that frequently loses.
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