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Why Malpractice Insurance Is Critical For Your Medical Business
February 22, 2020

Why Malpractice Insurance Is Critical For Your Medical Business

When you earned your medical degree, you swore an oath to “first do no harm” to your patients. However, even if you’ve taken that promise seriously, mistakes happen. When medical mistakes occur, there’s a chance your patient could decide to sue you. That’s why all doctors need to pay for malpractice insurance.

This type of insurance will protect you if a patient claims that they were injured during the course of medical treatment. Medical malpractice insurance is critical for physicians, dentists, nurses, anesthesiologists, and anyone who works in the medical profession.

What is Medical Malpractice Insurance?

If you’re a doctor or some type of healthcare provider, you’ve likely heard of medical malpractice insurance before. Medical malpractice is a type of liability insurance for physicians and healthcare providers.

It falls under the umbrella of errors and omissions (E&O) coverage, which protects businesses and professionals from claims of negligence. It’s also sometimes referred to as medical professional liability insurance.

Medical malpractice insurance will protect you from financial and legal responsibility if one of your patients claims they were injured during treatment. For that reason, most states require healthcare professionals to purchase medical malpractice insurance coverage.

Why Is Malpractice Insurance Important?

Doctors perform a necessary service for their patients, and this service comes with a certain level of risk. No doctor or healthcare provider likes to imagine that one of their patients could be harmed during the course of medical treatment.

However, the reality is that even the best doctors make mistakes, and even a small mistake could have long-lasting implications for your personal life and career. This is because when errors occur, that patient could decide to file a lawsuit against you.

According to the American Medical Association (AMA), 34 percent of all doctors have been sued at least once. In addition, nearly half of all physicians aged 55 or older have been the target of a lawsuit.

Without insurance, even one medical malpractice lawsuit could bankrupt your practice and everything you’ve worked for.

Professional liability insurance will protect your practice as well as your personal assets. It’ll cover all of your legal costs, regardless of whether you win or lose the case in trial. Also, it’ll compensate you for any lost wages due to an ongoing court case.

Ultimately, the biggest reason to purchase medical malpractice insurance is for peace of mind. You can focus on doing your best for your patients without worrying about any unintended financial or legal ramifications.

Options Available for Malpractice Insurance Purchases

The two most common types of malpractice insurance are occurrence and claims made policies. Occurrence policies provide complete coverage during the policy’s term, no matter when the claim is filed.

This policy guarantees coverage over both the life of the patient and the physician. For that reason, it’s the preferred type of coverage for most physicians. However, it’s not available in every state, so you might have to take out a claims made policy instead.

Claims made policies provide coverage for claims that occur and are filed when the policy is in effect. Therefore, the coverage largely depends on the timing of when the claim is made.

This type of policy has some obvious disadvantages since you can’t anticipate when a patient might decide to take legal action against you. Claims made policies have to be renewed on an annual basis.

If you choose to purchase this type of coverage, it’s a good idea to buy some type of tail insurance as well. This will ensure that you’re protected even after your coverage expires.

What’s Covered?

Here is an overview of typical malpractice coverage:

  • Misdiagnosis
  • Delayed diagnosis
  • Medication errors
  • Childbirth-related injuries
  • Surgical errors
  • Errors in administering anesthesia
  • Attorney fees
  • Court costs
  • Fees and damages
  • Costs associated with settling prior to trial
  • Judgments awarded to a former patient

You may want to consider purchasing an additional policy to cover cyber liability. This will protect your practice in the event that a patient’s confidential medical records are exposed during a cyber breach.

What Isn’t Covered

Here’s a brief list of the incidents that won’t be covered by medical malpractice insurance:

  • Illegal actions by the physician
  • Sexual misconduct
  • Inappropriate alterations of medical records

The Critical Nature Of This Insurance Can’t Be Understated

If you’re a physician or a medical professional, it’s likely that, at some point, you’ll be the victim of a lawsuit. That’s why it’s crucially important that you purchase malpractice insurance.

According to the AMA, the majority of all medical liability lawsuits are dropped or dismissed. But even still, the average claim still resulted in over $30,000 worth of legal fees. And in the rare case that the claim did go to trial, 88 percent resulted in favor of the defendant.

By purchasing medical malpractice insurance, you’re safeguarding your practice and your financial future. To get started, you can work directly with an insurance agent or speak to your employee about acquiring coverage through the company they use.

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Frequently Asked Questions

What is medical malpractice insurance, and why do I need it?

Malpractice insurance is a type of errors and omissions coverage. It’ll protect you if a patient decides to sue you over the outcome of their medical treatment.

Medical malpractice insurance will cover your legal fees and any resulting judgments against you. However, there may be some exclusions, so you’ll want to read your policy carefully to ensure you understand all the nuances.

Why is malpractice insurance important?

Even the best doctors make mistakes, so it’s important to protect yourself. According to the AMA, 34 percent of all doctors will be the target of a lawsuit at some point. Plus, if you work in a high-risk specialty like obstetrics or surgery, your odds of being hit with a lawsuit are even higher.

Even if a lawsuit doesn’t make it to trial, the resulting legal fees can be staggering. The average legal costs to deal with a lawsuit are $30,000.

Are certain health care professionals more at risk than others?

Yes, different specialties face higher levels of risk. In particular, obstetrician-gynecologists and surgeons face the highest level of risk. About 63 percent of obstetrician-gynecologists and surgeons have been sued.

52 percent of emergency room physicians have been sued, and 38 percent of radiologists have been sued. Overall, pediatricians and psychiatrists face the lowest level of risk. 16 percent of psychiatrists have been sued, while 18 percent of pediatricians have been sued.

When you break these numbers down further, this does vary based on several factors, including age and gender. For instance, female physicians are less likely to be sued than male physicians.

How much is malpractice insurance?

The cost of medical malpractice insurance will vary depending on your specialty and where you live. The cost has stabilized over the years, but most physicians still agree that malpractice insurance is one of their biggest yearly costs.

The following specialties are considered to be higher risk, and will likely result in higher premiums:

  • Obstetricians
  • Neurosurgeons
  • Emergency room doctors
  • Cardiovascular surgeons
  • General surgeons
  • Orthopedic surgeons
  • Plastic surgeons

According to the AMA, physicians in high-risk specialties can expect to pay roughly $150,000 in medical malpractice insurance costs. Also, if you live in a state that puts caps on damages or has a high incidence of malpractice suits, this will influence how much you pay for premiums as well.

Is there anything else I should consider when considering medical malpractice insurance companies?

It’s always a good idea to check and see if your insurance will cover cyber breaches as well. If your practice is hit with a data breach, you’re responsible for any confidential patient information that’s exposed. If not, you may want to consider purchasing an additional policy to cover potential data breaches.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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