Occurrence Based Insurance for a Nurse Practitioner Explained
What is occurrence-based malpractice insurance coverage for a nurse practitioner? If you’re a nurse practitioner and you’re out in either private practice, meaning, you’re working for a physician-owned practice, perhaps you own your own practice in a state that allows it, there are going to be two types of insurance that you can utilize. One is called claims-made coverage, and the second is occurrence-based coverage. What is claims-made? Claims-made coverage simply means that a policy has to be in effect when the claim is actually made. You could be with an employer and then the contract would terminate for whatever reason, and then that policy is done. It only covers you for the time when you were there.
So, there would need to be a gap policy also known as tail insurance that covers the gap between when you leave the employer and then the last day somebody can sue you. For most states, that’s two years, and that’s called a statute of limitations. Basically, it’s a limitation on filing a suit against somebody. And for Med Mal claims in most states, it’s two years. And you would need that policy to cover that to your gap so that if you did get sued during that time, you would be covered. Now, as far as tail insurance is concerned, it’s usually about twice what your annual premium is, and your annual premium is just how much the employer pays for you to be insured on a yearly basis. I’d say most NPS, at least their annual premiums are probably around $2,000.
It is specialty-dependent, but let’s just say it’s an FNP, so somewhere between 1500 to 2,500 is a pretty good estimate. Your tail would be twice that if you were responsible to pay for it. So, that’s claims made with tail insurance. Now, this blog is about occurrence-based insurance. An occurrence-based policy simply means a policy has to be in effect when the claim or the malpractice incident occurs. No tail insurance is necessary for an occurrence-based policy. Now, why would someone choose one over the other? Well, it’s the price. An occurrence-based policy is about a third more expensive per year than a claims-made policy, but because you don’t have to pay for tail insurance, it can be a better option for some. And so, think of it this way: if you’re going to be with an employer on a short-term basis, meaning, you start a job and you’re only going to be there for a year or two, maybe you’re an independent contractor and it’s up to you to get the insurance, well, if you had an occurrence-based policy, yes, it’s a third more expensive per year, but you don’t have that two times annual premium tail cost on the end.
And let’s just say you’re going to be there for two years; your underlying policy is $2,000. If it were an occurrence policy, it’s a third more, so let’s just say it’s around 2,700. If you had to pay that for two years, that’s 5,400, and that would be the total amount that you pay for insurance. So, 5,400 for two years. If you had a claims-made policy, it’s 2000, 2000, which is 4,000, but then you’d have to double that for tail cost, which is 8,000, so then it’s 12,000 total versus what we said 5,400. So, you would come out way ahead if you chose an occurrence-based policy if it’s short-term employment. Now, if it’s a longer-term employment or maybe you’re starting your own practice and you plan to be there indefinitely, a claims-made policy might make more sense in the long run.
Most employers do not give the NP the option. You will most likely have the option if you’re working as an independent contractor because you’re the one that has to pay for the policy. There are a few opportunities where they would pay for your annual premium, but those are rare. But for the most part, you do not have the choice of one or the other. And most employers offer claims made and then put the onus for the tail cost on the provider because it’s cheaper for them, it’s a third less per year for them to pay and they don’t have to worry about the tail cost. So, that’s what occurrence-based coverage is. You do not need tail, but it’s a third more expensive.
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