How Much Does Tail Insurance Cost for a Nurse Practitioner?
How much does tail insurance cost for a nurse practitioner? First, we need to talk about what types of malpractice insurance are available, and then when you have a certain type, do you need tail insurance? First, the setting is important. If an NP is employed by a hospital or hospital network, usually, at least nowadays, they’re self-insured, which means tail insurance generally is not necessary. If they do have a claims-made policy, then tail insurance is necessary. However, if you’re employed by a hospital or hospital network, it is very rare that a nurse practitioner would have to pay for their own tail. When they would have to pay for their own tail is in a kind of private practice setting.
If they’re employed by a smaller physician-owned group, or in some states if they have their own practice. In that case, two types of insurance are the most common. One is called an occurrence-based and one is claims made. Now, with an occurrence-based policy, the malpractice incident only must occur while a policy is in effect and meaning tail insurance is unnecessary. As far as claims made insurance goes, a policy must be in effect when the claim is made. And so, tail insurance is necessary for a claims-made policy. Just to kind of break down claims made, let’s say, a nurse practitioner is employed with a private physician-owned practice. If they terminate their employment, there still is a gap from when a patient knows the last day that the nurse practitioner provided care for the practice.
Usually, there’s a two-year statute of limitations in most states. And in that case, the patient can sue after the nurse practitioner no longer works for that practice. Therefore, a policy must be in effect that kind of covers that gap in between when they leave and then the last day, they can be sued by somebody. As I said before, in most states, it’s two years from when the patient either knew or should have known of the malpractice incident. There are also some minor exceptions for minors when they become adults, that type of thing. But for the most part, two years is kind of a good rule of thumb. In the employment contract, if the nurse practitioner has a claims-made policy, it’s going to state who pays for tail insurance. If it’s a private practice, I’d say it’s often, the NP would be responsible for it.
As I said before, if they’re in a hospital or hospital network, more times than not, the hospital is going to cover it. If the nurse practitioner is responsible to pay for tail, it must be purchased generally prior or right around the date of termination with the employer. And a good rule of thumb is it’s about twice what your annual premium is. Your annual premium is simply how much the employer must pay to insure you each year. If you had to pay for tail insurance, it normally is around twice what your annual premium is, and it’s a one-time payment. You don’t have to pay it every year. It’s all paid upfront and your tail is covered for as long as whatever the length of the tail policy you bought was. Tail insurance can have longer tails than others.
I mean, you could get theoretically one year tail, two-year tail, or an infinite tail. For most people, five years is kind of a good safe amount. If you had a two-year tail, but then something happened in year four or five, you are no longer insured, and it would be an issue. Now, how much does malpractice insurance cost for most NPs? Usually, it’s somewhere between 1500 to 2,500. So, let’s just say it’s $2,000. Then your tail cost would be around 4,000. Not like an enormous amount of money, but certainly something you may want to negotiate prior to signing the employment agreement. A couple of things to think about: one, if an, if it states that you must pay for tail, you can always ask the employer to pay for it. That’s one way of doing it.
If they’re unwilling to pay the entire amount, sometimes we’re successful in kind of tiering it. Let’s say, you have a three-year term for your contract. You could say one-third of the tail costs will be taken over by the employer for each year they’re there. So, by the time the three years is over, the employer pays the entire cost of tail insurance. Another way of getting out of having to pay for it would be if your new employer pays for your old tail. That’s called nose insurance. Or, if you stay with the same insurance company, normally, they will just roll over your policy wherever your new employer is, and you wouldn’t have to pay for tail insurance. This is something you can negotiate in the contract. Now, some employers are just simply unwilling to change any terms in the agreement, or maybe unwilling to change this term. And then, if that’s the scenario, you must make the decision of whether it’s a deal-breaker for you or not. So, that’s how much tail insurance costs, usually around twice what your annual premium is. You certainly want to find out what your annual premium is prior to signing the agreement. And that way you can forecast what your tail insurance cost will be.
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