What is Malpractice Insurance?

Thang Truong
Thang Truong
Updated on:

Malpractice insurance is a type of professional liability insurance, usually used for healthcare workers. Healthcare workers literally have the lives of their patients in their hands, and malpractice insurance protects them if they make any mistakes that results in harm to a patient. According to WebMD, 250,000 people die from medical errors every year, and millions more suffer irreparable harm. As a healthcare worker, obviously you try to help patients, but sometimes mistakes do happen. 

Why do I Need Malpractice Insurance?

Some healthcare workers believe that if they work in a hospital or a clinic, their employer’s insurance will protect them from lawsuits. However, your employer’s insurance is to protect them, not you. Many healthcare workers find this out only too late, when they’re named in a lawsuit and the employer throws them under the bus. 

It’s never a bad idea to obtain your own malpractice insurance if you work in healthcare. However, medical professionals who work under the government can probably forgo malpractice insurance, as the federal government insures them against liability claims. 

Check out other articles to learn more about the malpractice insurance for specific healthcare professionals:

What Does Malpractice Insurance Cover?

Malpractice insurance should cover:

  • Wrong site surgery
  • Medication errors
  • Misdiagnosis
  • Surgical errors
  • Childbirth injuries

However, malpractice insurance will not cover:

  • Illegal acts
  • Discrimination
  • Sexual misconduct

If someone brings you to court, the costs of the legal fees, court costs, lawyer’s fees and settlement fees add up to quite a lot of money to pay out of pocket. Malpractice insurance can prevent that from happening to you. 

>>MORE: What is Tail Coverage in Malpractice Insurance?

Claims-made vs. Occurrence 

There are two types of malpractice insurance available: claims-made and occurrence. Claims-made is less expensive, but it only covers you for claims that are made while the insurance is in force. Occurrence policies cover you for any claim that occurred while you had the insurance. 

If that sounds confusing, let’s consider an example. Stan is a nurse on a psychiatric unit. He purchased insurance from July 1, 2019 to July 1, 2020. A patient named Sue accuses Stan of giving her the wrong medication. This incident occurred on May 1, 2020, but Sue doesn’t get around to filing a lawsuit until October 6, 2020. If Stan had claims-made insurance, he would not be covered because he didn’t have insurance at the time the claim was filed. If he had occurrence based insurance, he would be all set. 

>>MORE: Professional Liability vs. Malpractice vs. E&O Insurance: How Are They Different?

How Much is Malpractice Insurance?

The cost of malpractice insurance can range from just $100 a year for nurses to up to $50,000 a year for surgeons. Surgeons are the most likely to be sued for mistakes, with these specialties having the highest risk:

  • Neurosurgeons
  • Thoracic-cardiovascular surgeons
  • General surgeons
  • Orthopedic surgeons
  • Plastic surgery

To win a malpractice suit, you need to prove the healthcare professional violated the standards of care for a patient. The majority of U.S. physicians (55%) are sued for malpractice at least once, and half of those are sued more than once. However, most healthcare professionals can expect to go their entire career without being sued. However, that’s never a guarantee, so for just a few hundred dollars a year you can protect yourself.

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at realtor.com, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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