What is Tail Insurance for a Nurse Practitioner? | Malpractice Insurance

Anytime a nurse practitioner is employed, they need professional liability insurance, also known as malpractice insurance. Depending on the policy type, they may need tail coverage. Let’s first break down the different types of policies for a nurse practitioner. Usually, there are two types of main policies for liability insurance. One is called occurrence-based then the other is called claims-made. In an occurrence-based insurance policy, a policy must be in effect when the malpractice occurs. This means tail coverage is unnecessary for occurrence-based insurance.

Which Malpractice Insurance Coverage Needs Tail?

Now, why would someone go with occurrence over claims-made insurance? Well, it’s a math equation, but occurrence coverage generally costs about a third more than claims-made coverage. And I find most employers, some smaller owned physician practices, depending upon what state you are. Maybe a smaller nurse practitioner owned practice if it’s an employer. Normally they’ll have a claims-made insurance policy, and then they’ll pay for the underlying premium. So how much they pay to insure the nurse practitioner per year. Still, they may put the cost of the tail policy upon the nurse practitioner when the contract terminates. 

Going back to occurrence-based insurance. You do not need tail coverage for that. So, when you do need tail policy is if there’s a claims-made policy. Which means a policy must be in effect when the claim is actually made. Think of the scenario where an NP leaves an employer. There will be a window from the last patient they see for that employer until the last day that patient can sue the nurse practitioner. 

Purpose of Tail Malpractice Coverage

The statute limitation is how long a person must sue someone for malpractice. Normally, in most states it’s two years from when you either knew or should have known that the malpractice occurred. There are some exceptions for minors when they become adults. But a general rule of thumb is two years. In that scenario, the NP would need a policy covering that gap between when they leave. And the last day someone can sue them. That’s called tail coverage, also known as extended reporting coverage. It’s more likely that if the NP is with a smaller group, they’ll have to pay for the tail. Whereas if they’re with the hospital, hospital network, or a large corporate-owned practice, the tail costs will usually go to either hospital or corporation.

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Tail Cost

So, how much does it cost? Well, tail insurance coverage is around twice what your annual premium is. Most nurse practitioners’ annual premium falls between 1500 to 2250 per year. Let’s say, it’s 1500 a year annual premium. You multiply it by two, and the tail cost will be around $3,000. Now, this is a one-time payment. You do not need to pay every year that you have a tail policy. And then, there are also different lengths for tail coverage. It could just be a short two-year window.  Or you could have it indefinitely, it could be for five years, eight years, it just depends. And then the longer the tail, the more expensive it is. 

But as I said before, usually it’s going to be on average twice. But anywhere from 150%, all the way up to 300%. Suppose you’re a nurse practitioner and you’re negotiating an employment contract. This certainly could be something you could look at as far as who pays for the tail costs. I mean, it’s not prohibitively expensive for a nurse practitioner. However, it still is going to be thousands of dollars that you’ll have to pay. For NPs jumping around, you don’t want to have to pay two or $3,000 everytime you leave a job. This certainly is something you can negotiate with the employer.

Ways for Your Employer to Buy Tail Coverage

If they’re unwilling to pay for the entire cost. We’ve found success in asking the employer if they would then forgive a portion of it on an annual basis. For instance, we would say to the employer, okay, for every year that the nurse practitioner is employed, you’ll forgive 25% of the tail cost. Or cover 25% of the tail cost. Let’s say, the nurse practitioner has been there for two years, they leave. Then basically, they would split 50, 50 the cost of the tail with the employer. And if they were to stay there for four years and leave, they wouldn’t have to pay for tail policy.

Prior Acts Coverage 

Another way of having a tail paid for is having your new employer pay for your old tail. That’s called nose coverage. Some employers will do that. It’s almost like a signing bonus in some way that they’ll pay for your old tail. That’s another way of getting out of it. And then lastly, another way of getting out of it is, many times if you stay with the same insurance company. Let’s say you stay in the same state. Maybe there’s one big insurance company that does a lot of the nurse practitioner coverage. 

If you move from one private physician-owned practice to another, using the same malpractice insurance company. Then that new company would roll over your old policy into a new one. And then you wouldn’t have to pay for a tail. Obviously, in that scenario, it’s impossible to know. However, you’re going to go next if they use the same insurance company, but one you think about. So, that’s tail coverage for a nurse practitioner. I’d say high up on the list of things people care about when I’m reviewing a contract with them. But it is important to know the basics.

Other Blogs of Interest

• What Should be in a Nurse Practitioner Contract Termination Letter?
• What Nurse Practitioner Expenses Should an Employer Pay For?
• Claims Made Insurance for a Nurse Practitioner Explained

Tail Insurance Cost for a Nurse Practitioner

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, which 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. If they terminate their employment, there is 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 said before, 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 what your annual premium is. 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, 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 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, which 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 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’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.

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.