Both occurrence and claims-made policies have their advantages. It's just a matter of choosing the best option for your needs.
by Mike Whitmer in Malpractice Insurance on Friday, July 6, 2018
When I talk to students about decisions they face when buying malpractice insurance, one of the fundamental concepts is which type of policy is best for them.
Follow the links above for more explanation of the two. But the main difference is the need for tail coverage and potential for gaps in your coverage.
When you cancel an occurrence policy, you are still covered for the period of time the policy was in effect. So if the alleged incident OCCURRED while the policy was in place, you have protection.
The claims-made policy requires the alleged incident to occur AND THE CLAIM REPORTED while the policy is in effect. So when you cancel a claims-made policy, if you do nothing else, you are no longer covered for the period of time the policy was in effect.
This is where the tail coverage comes into play. Tail coverage is additional coverage you can buy at the time of cancellation which continues to cover you for any alleged incidents that took place during the policy period. In other words, it covers the tail end of your policy.
Which is right for you?
The claims-made policy starts out cheaper and the premium matures over 5 years. But with new practitioner discounts during your early years of licensure, an occurrence policy could be cheaper for you if you cancel the policy. With claims-made, you have to buy the tail and that could wipe out your savings.
Look into your crystal ball.
Can you say with a fair level of confidence you will not be cancelling your policy for any reason within the first 10 years? If yes, claims-made may be right for you. It will save you some money.
If you have some uncertainty though, the occurrence policy doesn't leave you vulnerable to gaps in coverage and you don't ever have to worry about buying the tail coverage. Claims-made is cheaper as long as you hang on to the policy. If you cancel in your early years, the cost of the tail coverage is going to significantly impact your savings.
Read more about occurrence and claims-made policies, including FAQs and Avoiding Gaps in Coverage.