Often times, our clients will ask us which policy form is the better option. And the answer is simple, it depends. Occurrence policy forms are often considered to be the better policy from the standpoint of the insured. There is no scary “tail” or extended reporting period to worry about. Occurrence policies are very neat and clean and wrap up each year quite neatly. On an Occurrence form, you are covered by the carrier you are with when the incident occurred. The simplicity of this makes the occurrence form an ideal policy type for group practices and doctors that may be moving around from practice to practice. However, like all things, there is a down side. On the Occurrence policy you are paying the same premium yearly. You are paying for the chance that a claim will come in that year as well as the potential risk that a claim can come in in the future from that year’s exposure. Thus, making the occurrence malpractice insurance policy form the more expensive option.
Claims-Made policy forms are alternative to the higher priced yet straight-forward Occurrence options. Claims-Made policies are a bit less expensive, especially in the initial years. For example, if a doctor switches from an Occurrence policy over to a Claims-Made policy his premiums will initially drop very significantly from paying 100% of his premium to maybe only 25% in the first year, 40% in the second year, 80% in the 3rd, 90% in the fourth and reaching maturity and maxing out at 95% of the Occurrence premium. The savings is great, but with it comes the looming fear of tail coverage. A tail is the extended reporting period there to protect you once your policy is no longer in force; for example, upon retirement. Do determine if a claims-made policy is the right fir for you, please ask yourself this simple question “Am I certain that I will continue to practice for a minimum of five more years AND until I decide to retire,” if the answer is yes, then Claim-Made can be a great option for you. If you are certain you will continue to practice for a minimum of 5 years then you will earn a free tail so long as you retire from practice and ear your tail. Though we don’t like to talk about these things, it is important we keep in mind that if you were to become disabled or pass away before earning your tail, not to worry, your tail would be supplied at that time.
The best way to determine which policy form is right for you is to speak to your trusted Agent. Discuss your practice and your future plans. By selecting the best policy for you, you will find long term savings and peace of mind.
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