Tail Insurance Cost for a Nurse Practitioner | Malpractice Liability Rates

How much does tail policy cost for a nurse practitioner? First, we need to talk about what types of malpractice insurance, also known as liability insurance, are available. And then when you have a certain type, do you need tail coverage? First, the setting is important. If an NP is employed by a hospital or hospital network, at least nowadays, they’re self-insured. This means tail policy is generally unnecessary. If they do have a claims-made policy, then tail policy is necessary. However, if a hospital or hospital network employs you, a nurse practitioner would rarely have to pay for their tail. When they would have to pay for their tail is in a kind of private practice setting.

2 Types of Malpractice Insurance 

If they’re employed by a smaller physician-owned group, or in some states if they have their practice. In that case, two types of malpractice insurance are the most common. One is called occurrence-based and one is claims-made. Now, with an occurrence-based policy, the malpractice incident must only occur while a policy is in effect. It means tail policy is unnecessary. As far as claims-made insurance goes, a policy must be in effect when someone makes a claim. And so, tail policy is necessary for a claims-made policy. To break down claims-made, let’s say, a nurse practitioner is employed with a private physician-owned practice. Suppose they terminate their employment.There’s still a gap from when a patient knows the last day 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 covers that gap between when they leave. And then on the last day somebody can sue them. 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 a good rule of thumb. In the employment contract, if the nurse practitioner has a claims-made policy, it will state who pays for tail policy. If it’s a private practice, I’d say it’s often. The NP would be responsible for it. 

Cost to Buy Tail Coverage

As I mentioned, if they’re in a hospital or hospital network, the hospital will cover it more often than not. If the nurse practitioner is responsible for paying for the tail, it must be purchased generally before or right around the employer’s termination date. And a good rule of thumb is it’s about twice your annual premium. Your annual premium is how much the employer must pay to insure you yearly. If you had to pay for tail coverage, it normally is around twice your annual premium. 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 policy can have longer tails than others.

I mean, you could theoretically get a one-year tail, two-year tail, or an infinite tail. For most people, five years is an excellent safe amount. If you had a two-year tail, but something happened in year four or five, you are no longer insured. That 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 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 before signing the employment agreement.

Ways You Can Get Out of Paying It

A couple of things to think about. If it states that you must pay for the 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 tiering it. Let’s say, you have a three-year term for your contract. You could say the employer will take over one-third of the tail costs each year. So, by the time the three years are over, the employer pays the entire cost of tail coverage. 

Another way of getting out of paying 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’ll roll over your policy wherever your new employer is. And you wouldn’t have to pay for tail coverage. This is something you can negotiate in the contract. Some employers are unwilling to change any terms in the agreement or maybe unwilling to change this term. 

And then, if that’s the scenario, you must decide whether it’s a deal-breaker for you or not. So, that’s how much tail coverage costs. Usually around twice what your annual premium is. You certainly want to determine your annual premium before signing the agreement. And that way, you can forecast what your tail coverage cost will be.

Other Blogs of Interest

• How a Nurse Practitioner Should Negotiate a Contract
• Occurrence-Based Insurance for a Nurse Practitioner Explained
• Tail Insurance for a Nurse Practitioner Explained
• Major Court Case Brings Nurse Practitioner Malpractice Insurance Into the Limelight

How Does Tail Insurance Work?

How does tail insurance work? You’ll need medical malpractice insurance while practicing if you are a high-level healthcare professional like physicians, NPs, PAs, and dentists. And then, depending upon what type of coverage you have, you may need tail insurance. I will break down the common types of malpractice insurance and when tail insurance is necessary. And the details of when it needs to be paid, for how long, how much it costs, etc. The two most common malpractice insurance types in private practice are occurrence-based and claims-made policies.

When Do You Need Tail Insurance?

An occurrence-based policy simply means a policy must be in effect when the malpractice incident occurs. And in that scenario, tail insurance is not necessary. Under claims-made insurance policies, a policy must be in effect when the claim is made. If a provider leaves, there’s a gap between their last day at work and the day somebody can sue them. It’s called the statute of limitations. For most states, it’s two years. 

There are some exceptions, but in general, two years is a good rule of thumb in this situation. Let’s say for this case, it’s two years. Suppose you leave the employer. There’ll be a two-year gap where someone can still sue you for what you did for that employer. And so, in that scenario, you need a policy that covers that gap, known as tail insurance in the industry. If you have a claims-made policy, you need tail insurance. If you have an occurrence-based policy, you don’t.

Who Should Purchase Tail Coverage?

If you have a claims-made policy, the employment contract will dictate who pays the underlying premium. Ninety-nine out of a hundred times, it will be the employer if you’re an employee and not an independent contractor. And then the employment agreement will also cover who pays for tail insurance. Now, this can vary significantly from contract to contract. If you’re working for a private physician-owned practice, it’s more likely they will be responsible for paying for tail insurance. 

A physician-owned practice would rarely pay for tail insurance. I’d say maybe 75% versus 25%. So, 75% must pay for their tail insurance. In the contract, it’s going to state, alright, the physician is responsible for paying tail insurance. Let’s kind of break down the details of that. The tail policy will need to be in place before the end of the employment relationship. So, let’s say the physician gave notice, and there’s a 60-day without-cause termination. They will have to get that policy secured before the end of those 60 days when they leave.

Average Tail Coverage Cost

Tail insurance generally costs about twice what your annual premium is. This varies based upon specialty. So, if maybe your primary care, it could be around 5,000 to 6,000. Whereas if you’re an OB-GYN, it could be 40,000 or 50,000 yearly. A good rule of thumb is twice the annual premium, which you will have to pay for tail insurance. It’s a one-time cost. You’re not going to have to pay it every year. But you’ll have to pay all the money upfront to purchase the tail before the end of the employment relationship.

How Long is the Duration of a Tail Insurance?

Now, how long does tail insurance last? Well, it depends on what type of policy you bought. You can purchase one-year tail insurance, two-year tail insurance, five-year tail insurance, and unlimited tail insurance.In my opinion, it seems shortsighted to purchase short tail insurance. Why would people do that? Well, it’s just a cost. Now, I said two times is the average. But it can usually range from 1.5 times up to 3 times the annual premium. That is, based on how long the tail insurance is. And then also, how long you’ve been with the employer and that type of thing.

Determining how long you should get should be easy. It should be unlimited tail insurance; it should go on forever. You don’t want a scenario where you are not covered when a claim is made. And that could be financially crippling for a healthcare provider if they’re ultimately found guilty or must reach a settlement. 

Add Tail Coverage to Negotiations With Your New Employer

Now, you can negotiate who pays for tail insurance coverage in the employment agreement. If you go to the employer and say, I’d like you to purchase my tail insurance, they may say no. One strategy we’ve been successful with is asking the employer to forgive a portion of the tail insurance cost. Based upon how long the provider has been with the employer. For instance, let’s say the physician has a three-year initial term. They complete the three years. Negotiating with the employer is one way of getting out of having to pay for tail insurance.

Another would be if your new employer pays for your old tail insurance, that’s called nose insurance. Or this doesn’t work if you’re working in the hospital network. If you’re with a private-owned practice and leave for another one within that state, they use the same insurance carrier. Generally, the insurance carrier will roll over your old policy into your new one. You won’t have to purchase tail insurance.

Now, there’s no way you’re going to know, okay, in my next job when I leave this one, whether they have the same insurance or not, but that’s another way of getting out of having to pay for tail coverage. So, that’s how tail insurance works. It just covers the gap between when you leave an employer then the last day somebody can sue you. It’s around twice the annual premium. And then you can negotiate who is ultimately responsible for covering the expenses associated with it.

How is Tail Insurance Calculated?

How is tail insurance calculated? What is tail insurance? Under what kind of malpractice policy do you need it? And then how much does it cost? There are two common types of malpractice policies for healthcare providers. You have occurrence-based and claims-made. In a claims-made policy, you need tail insurance, and if it’s an occurrence policy, you do not. 

Two Common Types of Malpractice Insurance Coverage

Let’s talk about the differences between the two malpractice insurance. For an occurrence-based policy, a policy must be in effect when the malpractice incident occurs. There is no need for tail insurance in that scenario, and I’ll explain why.

In a claims-made policy, a policy must be in effect when the claim is made. And so, for an employee who terminates a relationship with an employer, there will be a period where somebody can sue them. In most states, it’s two years. It’s called the statute of limitations. And in this scenario, let’s say a physician leaves the practice, they’re no longer an employee, and they have a claims-made policy, and that policy is done.

Well, they need an additional policy called tail insurance that covers the gap between when they leave the employer and then the last day they can be sued by an individual. There are some exceptions in some states when a minor becomes an adult and a few other scenarios, but let’s just use two years as a common amount here. The employment contract will state that the employer will pay for the underlying policy, assuming you’re not an independent contractor.

Who Will Buy Tail Coverage?

And then, it will also state who is responsible for tail insurance. Now, if you’re in private practice, like a smaller physician-owned group, they will likely have a claims-made policy. And it’s also very likely they will make the provider pay for tail insurance when the contract ends. If it’s an occurrence-based policy, you’re good; you don’t have to worry about tail insurance when the contract ends.

Why Would Someone Get One Over the Other? 

An occurrence-based policy is around one-third more expensive per year than claims-made. So, if it is a smaller physician-owned practice, they usually use claims-made, so they pay a third less annually for the premium because they’re going to be the ones paying for it. And then two, they’ll usually put the tail insurance cost on the provider. So, they not only pay less per year for the premium, but they also don’t have to pay for tail insurance, and it’s just cheaper for them. That’s why 9 out of 10 private practice owners use claims-made coverage. Some use occurrence-based, but it’s rare. 

If you have a claims-made policy, and it is determined in the employment agreement that you are responsible for paying for tail insurance, let’s break that down. It will state that you must purchase a tail insurance policy prior to your last day of employment with the employer. Usually, it’ll also state how long the tail insurance policy must be. 

How is Tail Insurance Calculated?

Different factors are considered to calculate Tail Malpractice Insurance. There are different lengths of tail insurance. You could have one year, two-year, five-year, or infinite, and then with each one of those, it’s a little bit more expensive. A good rule of thumb in calculating tail insurance costs is about twice your annual premium. Let’s just say you’re a family practice physician. On average, your annual premium, so how much it costs to insure you each year, will probably be about $6,000. And so, if you had to pay double that, the tail insurance calculation would be $12,000.

Now, that’s a one-time payment. You do not have to pay it annually. You give it all at once, and then you’re covered for how long the tail insurance is. If it’s up to you how long the tail lasts, it makes sense to get an indefinite tail insurance policy. You are rolling the dice if you have a one-year tail insurance, but the statute of limitations is longer than a year because you’re uncovered for that period. And if you do not have malpractice insurance, they could come after you, potentially. And that could be catastrophic for a professional. If it’s only a couple thousand dollars more, it’s just simply worth it to get the longest tail insurance policy that you can. That way, it’s just one last thing you have to worry about.

How Do You Get the Employer to Pay for Tail Insurance?

Well, one, just simply asks them when you’re negotiating. I’d like you to cover the tail expenses. They may say no. If they do, you could come back at them, and we’ve had some success saying, alright, well, you’re not going to pay for all of it. What if we do it like forgiveness over the initial term?

What I mean by that is, let’s say you signed a three-year contract, you would say, alright, for every year that I complete for you, one-third of the cost of tail malpractice coverage will be covered by you. So, after three years, when I’ve completed the initial term, if I leave any period of time after that, you’re going to be responsible for paying for tail insurance. You could also have your new employer pay for your tail insurance. That’s called nose coverage. And then the last way of not having to pay for it would be if you stay with the same insurance company with your new position. They’ll generally just roll over your old policy into a new one. In that way, you don’t have to pay for tail coverage. So, that’s a little primer on how tail insurance is calculated.

Claims Made Insurance for a Nurse Practitioner Explained

What is claims-made insurance for a nurse practitioner? If you’re an NP and you are either employed with a private practice or maybe you have your own practice. If you’re in a state where that’s allowed, you will need malpractice insurance. And there are two common types of malpractice insurance for NPs. One is called claims-made coverage, and the other is called occurrence-based coverage. Now, you will be covered if you work for a hospital or hospital network. They’ll have a claims-made policy that they’ll pay for, along with the tail liability coverage. Or maybe they are self-insured. So, this is more directed to people in private practice or with a physician-owned group.

Alright, claims-made means a policy has to be in effect when someone makes a claim. Suppose you terminate your relationship with an employer. There will still be a gap between the last patient you see and the last day they can sue you. And so, your policy ends when the contract with the employer terminates. And in most states, there’s a two-year statute of limitations. That just means how long somebody has to sue someone for something. For most states, two years is the average amount for a medical malpractice claim. And since the original policy ends when you leave the employer, you need a gap policy. And that’s called tail coverage. A good rule of thumb is that tail liability coverage is around twice your annual premium.

See Who’ll Pay for Your Practitioner Malpractice Insurance

Now, the employment contract will dictate who pays for tail coverage if you have a claims-made policy. So, you need to investigate the contract. First, you need to see, will they pay for your underlying annual premium? Your annual premium is just how much it costs to insure you annually. They absolutely should pay for that. If you have an employer, they need to pay for that. Now, as far as tail coverage goes, it’s hit or miss who pays for it. But you need to look into the language of the contract. Then see, alright, if we have a claims-made policy, and the contract terminates, who’s responsible for paying for tail coverage? Tail is a one-time payment. You don’t need to pay for it yearly. And then it can cover different amounts of time.

It’s up to the person purchasing the tail. It could be a year, three years, or indefinite. It would make the most sense to get an indefinite policy. The price between a two-year plan and an indefinite plan is not that much of a difference. And there are some exceptions to two years for someone to sue you for malpractice. For instance, one minor has become an adult and a few other exceptions. But it just makes sense if you’re covered indefinitely, you don’t have to worry about it. The other type of insurance is occurrence-based coverage. This means a policy has to be in effect when the malpractice occurs. And in that scenario, you do not need tail coverage. So, claims-made is the only policy where you would need tail coverage.

Average Quote for Nurse Practitioners 

Now, what’s the average cost for an NP for malpractice insurance? Well, I’d say 2000 per year is a normal annual premium. It will change somewhat based upon the specialty, but let’s say you’re an FNP. Probably 2000 is like a good average amount. It also will be state-dependent. Some states have stricter caps on medical malpractice claims. Therefore, their coverage will be cheaper, like Texas, for instance. If you had the choice between a claims-made and an occurrence-based policy, it would depend upon who’s paying for it. If the employer will be paying for it and don’t care what kind of policy you get. Getting an occurrence-based policy is a no-brainer. If you’re going to pay for it, you need to figure out and do a math equation. Alright, how long do I plan to be with the employer?

Which Professional Liability Insurance is Better?

Occurrence-based coverage is about a third more expensive than a claims-made policy. Let’s say you’ll be with an employer for one year. You’re like, alright, I’m only staying a year then we’re moving. Getting an occurrence policy is absolutely the way to go. Because you’re only paying a third more for the underlying policy with no tail coverage. Whereas with the tail policy, although it’s a third less, the tail cost will be twice that annual premium. And so, you don’t save significantly if it’s short-term employment and you have an occurrence-based policy. That’s the difference between claims-made and occurrence-based. If you’re an NP in your own practice, what kind of policy you will get is up to you. Most people just set out to have their own practice, and plan to do it long-term. If that’s the case, a claims-made policy might make more sense.

Last consideration, there are a few ways of getting out of paying for tail coverage. One is you negotiate with the employer in advance so that they pay for it, that’s obvious. Two, your new employer can pay your old tail, and that’s called nose coverage. And that’s one way of getting out of it. And then three, if you stay with the same insurance company you currently have, they will, or at least generally, roll over your old policy into your new one. You wouldn’t have to purchase tail coverage. Now, there’s no way you’ll know when you start one job that it will have the same insurance provider. But that is one way of getting out of having to pay for it.

Should a Nurse Practitioner Choose Claims Made or Occurrence?

Should a registered nurse practitioner choose claims-made or occurrence-based malpractice insurance? Suppose you’re working for a hospital or hospital network. In that case, they’re always going to pay for your underlying premium. So how much they pay for you annually. But it’s also very likely that they will pay for any insurance needed after the employment has terminated. Most of the big networks are now self-insured. Some may offer a claims-made policy, but they’ll almost always pay for the tail. The only time that you’d have to choose between an occurrence-based policy or a claims-made one. Is if you’re out on your own in a state that allows it. Or perhaps you’re in a private practice working with a physician.

How Occurrence-Based Differs from Claims-Made

What are the differences between the two insurance plans? Let’s take occurrence-based coverage first. An occurrence-based insurance policy means that a policy has to be in effect when the malpractice occurs. So, it doesn’t matter when a claim is filed, you’re covered no matter what if you have an occurrence-based policy. No tail coverage is necessary. For a claims-made insurance policy, a policy has to be in effect when the claim is actually made. It’s possible someone could file a claim against you after you terminate the employment. So, you need a gap policy, also known as tail coverage. That covers the gap between when you leave an employer and the last day somebody can sue you. It’s called the statute of limitations. In most states, it’s two years. There are a few exceptions, but let’s just take two years as a 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 coverage. Now, let’s talk about cost. Tail is generally around twice what your annual premium is. 

Whatever you pay yearly, multiply those times two, and that’s a good estimate of your tail costs. It’s a one-time payment, you don’t have to pay for it every year. But you can choose different policies with different lengths that cover a different amount of time. You could get a tail lasting for two years, three years, or indefinitely, and then the price would change slightly. Obviously the longer, the more expensive it’s going to be. It doesn’t make sense to get a policy not covering the full statute of limitations in whatever state you’re in. You could potentially be personally liable if you get sued and you’re not covered.

Consider This Before You Buy Tail Coverage

You always want a backstop if you’re sued for any incident with any employer. And you want to ensure you have a long enough tail to cover you. As I said before, occurrence-based insurance doesn’t need tail coverage. 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. 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, if you had a $3,000 annual premium for a claims-made insurance policy, your tail would be $6,000. Whereas with an occurrence-based policy, it would be nothing. So, you must figure out how long you’ll be with an employer to determine which policy is best for you.

Nurse Practitioners and Claims-Made

An NP usually 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 the tail or not. Now, that’s something you can negotiate in your employment agreement. You need to look at the policy regarding nurse practitioner malpractice insurance. You need to see what type of coverage they have. Who it’s with, how much it costs per year, and who pays for tail coverage. You need to figure out four things before signing any 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.
Always having the employer having to buy tail coverage and being the one that foots the bill is more favorable than not. So, that’s the difference between the two policies. What is better for you or another depends on the situation.