Frequently Asked Questions

What are Claims Made and Occurrence Policies?

There are two basic policy forms offered by medical malpractice insurance companies, claims made and occurrence.

Occurrence coverage is the most desirable form of coverage, but it is not available in all states. An occurrence policy is complete when you purchase it and on cancellation continues to provide coverage for future claims based on conduct that took place during that policy term. The limits that are available to pay a claim are the limits that were in place during that policy term that the service was rendered. Premiums for this product are level except to the extent that a company may increase or decrease premiums over time.

Claims made policies provide coverage only so long as the insured continues to pay premiums for the initial policy and any subsequent renewals. If one is insured by a claims made policy for five years and stops paying premiums, coverage ceases for any cases that the company did not accept during the policy term. To lock in coverage forever under this policy form, an insured must purchase an Extended Reporting Endorsement (called a "tail"). This endorsement allows an insured to continue to report claims after the policy is cancelled. Tail premiums usually range from 100% to 500% of the mature premium (see below) and the premium is usually due as a single payment shortly after cancellation of a policy.

However, one can move between claims made insurers without purchasing a tail. If a professional desires to change insurance companies, often the new insurer will take over the predecessor insurance company's responsibilities by writing its policy retroactively over the previous insurer. It picks up the retroactive date, the first date of coverage, offered by the previous insurer and charges a premium based on the number of previous years of coverage needed. Claims made policies have premiums that increase annually usually over a period of five years; the fifth-year premium is referred to as the "mature premium." When writing retroactive coverage, the new insurer's premium usually does not exceed its mature premium for this specialty.

Many medical malpractice insurance companies offer a free tail if an insured dies, is totally disabled or retires from practice after five years of coverage with that company at a minimum age of 55. If this feature is not included in your policy, you ultimately need to purchase a tail to maintain indefinite coverage after you stop working. Moving from one claims made insurer to another may be difficult for health care professionals relocating to a new state because many malpractice insurers are regional and do not want to assume retroactive coverage out of its geographic area.

(For more on claims made vs. occurrence coverage, see our blog entry "Claims Made Vs. Occurrence Medical Malpractice Insurance Policies" on our blog www.MedMalInsuranceBlog.com)

As with any overview, this insurance information is general and intended to help you make informed decisions. The actual policies available in your state may contain features not discussed above. An insurance policy is a contract between you and an insurance company. You should read and understand any policy that you purchase. If you have any questions, have the company or insurance broker or agent take as much time as you need to explain policy terms to your satisfaction.

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