Should a Nurse Practitioner Choose Claims Made or Occurrence?
Should a nurse practitioner choose claims made or occurrence-based malpractice insurance? If you’re working for a hospital or hospital network, they’re always going to pay for your underlying premium, so how much they pay for you on an annual basis, but it’s also very likely that they’re going to pay for any kind of insurance needed after the employment has terminated. Most of the big networks are now self-insured. Some of them may offer a claims-made policy, but they’ll almost always pay for tail. The only time or at least the most likely time that you’d have to make a choice between an occurrence-based policy, or a claims-made policy is if you’re either out on your own in a state that allows it, or perhaps you’re in a private practice working with the physician.
What are the differences between the two? Let’s take occurrence-based coverage first. An occurrence-based policy simply means that a policy has to be in effect when the malpractice occurs. So, it doesn’t matter when a claim is filed, you are covered no matter what if you have an occurrence-based policy. No tail insurance is necessary. For a claims-made policy, a policy has to be in effect when the claim is actually made. It’s possible a claim could be filed against you after the employment is terminated. So, you need a gap policy or also known as tail insurance, that covers the gap between when you leave an employer and then the last day somebody can sue you. It’s called the statute of limitations and in most states, it’s two years. There are a few exceptions, but let’s just take two years as a kind of guiding principle here.
And so, you would have to get an additional policy that covers that gap. And that’s, as I said before, called tail insurance. Now, let’s talk about cost. Tail is generally around twice what your annual premium is. Whatever that you pay on an annual basis, multiply those times two, and that’s a good estimate of what your tail costs will be. It’s a one-time payment, you don’t have to pay for it every year, but you can choose different policies that are different lengths that cover a different amount of time. You could get a tail that lasts for two years, three years, five years, indefinitely, and then the price would change a little bit based upon, obviously the longer, the more expensive it’s going to be. It does not make any sense to get a policy that doesn’t cover the full statute of limitations in whatever state you’re in. If you get sued and you’re not covered, then you could potentially be personally liable.
So, you always want to have backstop if you’re going to be sued for any kind of incident with any employer. And you want to make sure you have a long enough tail to cover you. Occurrence-based, as I said before, doesn’t need tail insurance, but it costs a little bit more per year. It’s about a third more expensive. Let’s say you were paying 3000 a year for your insurance. Well, if you had an occurrence-based policy, it’d be $4,000. So, not a huge price difference between the two, but in the end, it can be huge because as I said before, if you had a $3,000 annual premium for a claims-made policy, your tail would be $6,000. Whereas with an occurrence-based policy, it would be nothing. So, you really need to figure out how long you’re going to be with an employer to determine which policy is best for you.
Now, an NP normally is not given the option if you’re going to work for a physician-owned practice. They’re going to dictate what type of policy you get. And then they’re also going to dictate whether you must pay for tail or not. Now, that’s something you can negotiate in your employment agreement. You need to look at the policy about professional liability insurance. You need to see what type of coverage they have, who it’s with, how much it costs per year, and then who pays for tail insurance. Those are four things you absolutely need to figure out before signing any kind of contract. It’s not prohibitively expensive for an NP. I mean, let’s say you’re an FNP, it’s usually somewhere between 1500 to 2,500 a year. So, the tail cost would be somewhere between like 3,000 to 5,000. And it’s a one-time cost, as I said before. But still, $5,000 is not an insignificant amount of money.
And so, always having the employer being the one that foots the bill is obviously more favorable than not. So, that’s the difference between the two policies, whether what is better for you, or another just depends upon the situation.
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