How Much Malpractice Insurance do Doctors Need?

By Suzanne Smither , last updated December 25, 2011

It's a tough question, made tougher by changing laws, horror stories about huge jury awards, and the various types of coverage available.

A bewildered physician recently posed this question: "Because of the increase in multimillion-dollar malpractice awards these days, my broker tells me I should have $5 million in insurance coverage. My colleagues tell me I only need the standard $1 million/$3 million policy. They warn me that the more coverage I have, the more plaintiffs’ lawyers will ask for if I’m sued. Who’s right?" New Jersey healthcare attorney Steven Kern replied, "There’s really no easy answer, because no amount of insurance will guarantee complete protection against a runaway jury award. What you should do is analyze your insurance needs based on your specialty, your income, your personal assets, your willingness to take risk, and the cost of the premiums. Your decision may also depend on whether your state medical board or your hospital recommends or requires a minimum amount of coverage, and whether your state has damage caps that limit your risk."

Some MDs Need More Coverage Than Others

A general internist or family practitioner is less likely to incur a large malpractice judgment than an obstetrician, gynecologist or neurosurgeon, Kern observes. If you're in one of the lower-risk groups, "it makes sense to buy the minimum amount of insurance required in your state, especially if you have limited income and few attachable assets," he says. "However, if you’re a high-earning practitioner in a high-risk specialty, with valuable and attachable assets, consider buying as much insurance as you can afford."

Insurance requirements vary from state to state. In Michigan, for example, doctors don't need malpractice insurance to practice medicine, but they probably will need it to acquire hospital privileges.

The Pendulum Swings

Another factor to consider is that the pendulum seems to be swinging away from the "malpractice crisis" that frequently made headlines five to 10 years ago. Pennsylvania attorney Ken Butera reports that from 2002 to 2010, malpractice suits declined 45.5 percent in his state, and 70 percent in Philadelphia. He attributes this to tighter filing requirements for would-be plaintiffs as well as juries' increasing tendency to decide in favor of doctors.

Choosing the Right Policy

Before you purchase malpractice insurance, find out as much as you can about coverage limits and different types of coverage. A $1 million/$5 million limit covers you for up to $1 million on any one claim, and up to five claims totaling $5 million in any one year. Ask yourself whether a "claims-made" or an "occurrence" policy is the better fit. The "claims-made" type, which covers only claims made against you during the term of the policy, has premiums based on your actual experience. But you must continue the policy to ensure coverage for future claims arising from past actions. An "occurrence" policy covers you for alleged negligence while the policy was in effect, no matter when the claim is made. Occurrence policies can cost more and be harder to obtain.

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