Malpractice Insurance Protects Your Livelihood
(Here’s everything you need to know – and more)
If you offer professional services directly to your clients, you may need malpractice insurance. You could be in the cosmetology business, or construction, or engineering, or accounting, and need malpractice insurance.
This form of coverage is also known as errors and omissions insurance, or professional liability insurance, and it can cover a huge range of professional services that involve physical, financial, or emotional risk to the client. It can protect you from losing your business, home, and savings in a malpractice suit.
If you need a comprehensive malpractice insurance policy, contact an independent agent in the Trusted Choice® network. Your independent agent will work with you to analyze your specific risks and identify coverage gaps in your current policy.
An independent agent has the ability to find a policy that meets your needs and budget constrictions. To get the insurance you need, contact an independent insurance agent.
Malpractice Suit Facts
- 1 in 7 insurance agents face an errors and omissions suit at least once during their career
- 80% of medical malpractice claims include death and serious injury.
- Real estate agents can be sued for claims related to exaggerated features and missed deadlines
- Some CPAs have been sued for small mistakes, or perceived mistakes, on tax returns, which led to IRS penalties for the client
- A dental hygienist can be sued for failing to update a patient’s chart, or accidentally injuring a patient
All of these claims fall under the coverage of a typical malpractice insurance policy. If there is a risk of an errors and omissions suit in your profession, it would be wise to purchase protection as soon as possible.
What Is Malpractice Insurance?
Malpractice insurance is professional liability insurance for a broad range of service providers. A malpractice policy is specialized to deal with the risk of lawsuit due to errors and omissions in your work, such as bad advice, accidental injury, incorrect information, or unintentional misrepresentation.
If a client suffers physical, financial, or emotional harm as a result of something you did or didn’t do during the course of your transaction, that client could choose to file a malpractice claim against you.
Malpractice insurance provides the settlement cost, court fees, and your legal defense, up to the limits of your policy. That way you can keep your business running, and keep your savings account intact.
Won’t My Employer’s Liability Cover Me?
If you offer services in the context of a larger business, such as a salon, or an agency, your employer probably has liability coverage to protect the company. That does not mean your employer has coverage to protect you.
While there might be limited liability coverage for you through the company policy, many service professionals are surprised to find that when they face a lawsuit, their employer is nowhere to be found.
In fact, some employers may actually pass the blame from the business to you as an individual, to save face and save money. Either way, you need protection of your own, to guard your assets and your livelihood.
In addition to financial protection, malpractice insurance can also offer:
- Peace of mind: If you have your own policy, you understand the limitations. You know exactly how much coverage you have, what situations are and are not covered, and whether an incident from years ago will be considered valid. If you rely on your employer coverage, you may be kept in the dark on coverage amounts and exclusions.
- Freedom: The days of working for one employer from graduation to retirement are over. Service professionals are needed in all areas of the country, and the job market is rapidly expanding. If you rely on your employer coverage, it could cause you to miss an opportunity elsewhere. Instead, purchase your own malpractice insurance so you can accept offers as they are made to you.
Doesn’t Malpractice Insurance Make Me a Target?
If a client files a malpractice claim, almost everyone involved in the transaction in question will be named as defendants, until responsibility can be eliminated. Although there can be exceptions, the client is not supposed to be told which professionals are covered and which ones aren’t.
Malpractice insurance companies are not legally allowed to divulge this information. If you’re cleared of responsibility, you cannot be kept in a lawsuit just because you have malpractice insurance. Moreover, the worse situation would be to face the suit without malpractice coverage.
Occurrence Coverage vs. Claims Made Coverage
When you purchase malpractice insurance, you’re buying an insurance policy that will help offset the costs of a client’s claim. Your policy is designed to pay for legal defense, other legal fees, and possibly settlement amounts.
Some malpractice lawsuits can reach into the millions of dollars if you’re found guilty. Even if you’re innocent, the cost of legal defense can be nearly as high, with lawyer fees ranging from $100-500 per hour.
It’s important to distinguish between the types of malpractice insurance, as follows:
- Occurrence policy: This provides coverage for any claim that occurs during a policy period no matter when the claim is reported. For example, you had an occurrence malpractice policy active from January 2004 to December 2008. After 2008, you did not renew your policy. In June 2010, you’re named in a malpractice lawsuit for an incident that occurred in 2007. Even though your policy is over, you’re still covered.
- Claims-made policy: Claims are covered only if they’re filed while a policy is active. Looking at the same example and policy period, if a claim was filed after non-renewal in 2008, it wouldn’t be covered even if it occurred during the actual policy period. If you purchase a claims made policy and need to cancel it for whatever reason, you have the option of purchasing tail coverage, which extends the amount of time a claim can be made. However, for a claim to be covered, it still has to have happened during the active policy period.
- Modified occurrence policy: This type of policy combines aspects of occurrence with aspects of claims-made so that you have the option of unlimited coverage. This policy comes with included tail coverage ranging up to 7 years. Once your additional amount of coverage has expired, you have the option of purchasing unlimited tail coverage.
How Much Is Malpractice Insurance?
Although an occurrence policy offers a permanent benefit, it’s costly. On the other hand, comparable claims made policies with tail coverage have lower malpractice insurance rates, offering nearly a 35% discount in some cases.
There are other factors to consider when searching for affordable malpractice insurance, including:
- Profession: There is a huge variety of careers that need malpractice insurance including nurses, doctors, physical therapists, pharmacists, dentists, and chiropractors. Even other professions like lawyers, other legal fields, financial advisers, and social workers may need malpractice insurance. A doctor may need more coverage than a beautician, but the amount you choose affects your premium, because of varying levels of risk.
- Location: A practicing doctor in Minnesota will pay a fraction of the malpractice insurance cost a California doctor pays. Your local salary averages may reflect insurance prices too, so it’s important to keep things in perspective.
How to Purchase Malpractice Insurance
If you’re just starting your chosen profession, your employer may have information regarding personal malpractice insurance. If you’re starting your own business or working contractually, your state insurance department should have valuable information on where to start your search.
You obviously need a policy that’s tailored to your specific needs, but there are some other things you should look for when purchasing malpractice insurance, including:
- Risk management and claims service: Although it’s not a requirement, an insurance company that offers assistance on how to reduce risk might be committed to keeping premiums relatively low.
- Coverage limits: Again, this depends on where you live, but examining personal risk factors and recent malpractice claims in your state can help you appropriately select the right limit.
- Exclusions: All insurance companies will have exclusions, but it’s important that they don’t eliminate your high-risk areas. Otherwise, insurance wouldn’t be helpful when you needed it the most.
- Defense costs: Look for a policy that will pay attorney fees and other defense costs.
- Licensing board: If a malpractice claim puts your licensing in jeopardy, that’s more money needed to defend your professional reputation. A good insurance policy will cover these fees.
- Financial rating: Check an insurance company’s financial rating to ensure they’re a strong business entity that can truly assist you when you need to use your benefits.