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Medical Malpractice Insurance: Who Needs It, Coverage, Costs

With more than 195,000 deaths in the US each year due to negligence, the number of lawsuits related to medical negligence has been increasing. In fact, more than 65% doctors above 55 years old say that they have been sued at least once. It is important for doctors and physicians to have medical malpractice insurance. Medical malpractice insurance is actually required in many states, including Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin. In other states where it is not required by the state laws, it may still be required at the the hospitals or the clinics where you work. We cover all aspects of the medical malpractice insurance in this article.

Medical malpractice insurance: The basics

Medical malpractice insurance is sometimes referred to as medical liability insurance or just malpractice insurance. It’s a type of professional liability coverage that protects physicians and other medical professionals, including dentists and nurses, from financial liability caused by professional mistakes (malpractice) that result in bodily harm to patients or death. It pays legal and settlement costs when patients or their families sue medical professionals or practices for malpractice, whether they’re found guilty or not.

Medical malpractice: The definition of medical harm

A medical professional liability insurance policy covers harm to patients that occurs because a physician or other medical professional makes an error while providing healthcare services. The definition of harm is quite broad and can include things like pain and mental anguish. Your legal costs are covered even when a patient believes you caused them harm, but you’re found to be not responsible for the injury or were not negligent in providing medical services to them. 

What does medical malpractice insurance cover?

Medical malpractice insurance policies normally cover a broad range of expenses associated with defending and settling malpractice suits, such as attorney fees, court costs, arbitration, settlement costs, and medical expenses, along with punitive and compensatory damages.

Medical malpractice usually does not cover liability that arises from criminal activities, cyber threats, injuries related to workplace accidents, or sexual misconduct. 

It’s critical to completely understand what your medical malpractice insurance policy covers and what it doesn’t to make sure you have adequate protection against the risks you face. It’s also important that you know the amount of coverage for each incident (usually referred to as an occurrence) and all claims that may be made against you in a given one year policy period. 

Some states require minimum levels of coverage for each claim and the total of all of the claims that may be made during a given year. It’s important to discuss the potential need for additional coverage above the minimums with a professional malpractice insurance consultant or institutional risk manager to ensure that your personal assets are protected if you’re sued. 

What are the medical malpractice insurance premiums for?

Most of the malpractice premium dollars collected by insurers go toward legal defense costs and cost containment expenses. Relatively little goes toward patient care and settlement costs. That’s because the process of discovering, proving and defending against legal negligence in healthcare situations is complex and time consuming. 

Medical liability insurance companies spend large amounts of money investigating and defending legal claims where there is an adverse patient outcome that is not caused by medical malpractice. In those cases all the money goes toward legal-related costs and none to the patient.

Claims-made vs. occurrence in medical malpractice insurance: How are they different?

There are two basic kinds of malpractice insurance: claims-made and occurrence:

Claims-made medical malpractice insurance:

With this type of coverage, the malpractice policy that’s in effect when a claim is made pays legal and settlement expenses no matter when the medical incident occurred. For example, if an incident happened in 2019 and a medical professional is sued in 2022, the malpractice insurance in effect in 2022 pays legal and settlement costs related to the suit.

Many claims-made policies allow you to purchase a “tail” which offers continued coverage for a defined time, often five years, in case you’re sued for malpractice after your claims-made policy expires or you cancel it (oftentimes because you’re moving on to a new job or retire). If your policy does not come with a tail option, you may be able to purchase tail coverage from another provider. The price of tail insurance is typically a one time assessment that is a multiplier of an annual malpractice insurance premium, typically 1.5 to 2 times the cost.

Occurrence medical malpractice insurance:

With this type of coverage, the medical malpractice insurance that was in effect when the incident happened pays costs no matter when the healthcare practitioner is sued. Going back to the previous example, if the event happened in 2019 and the lawsuit is initiated in 2022, the insurance policy from 2019 would cover costs. 

How do I purchase medical malpractice coverage?

Malpractice coverage is usually purchased through traditional insurance companies or medical risk retention groups, which are mutual organizations made up of healthcare professionals that are organized to offer malpractice insurance. They are often sponsored by state medical societies.

One other medical malpractice insurance option: Some large medical systems are self-insured. A medical liability trust fund is created. The funds in it are used to pay for malpractice defense and settlement costs against their healthcare workers. 

Individual and group malpractice coverage plans are available for independent or small healthcare practices. For many physicians and other medical professionals, malpractice insurance is often offered as part of a group plan purchased by the hospital or health system they work for. 

Who needs medical malpractice insurance?

Medical liability insurance is required in most states and virtually every healthcare organization or system requires the coverage for healthcare professionals to practice in them. Below are the list of healthcare professionals that usually need medical malpractice insurance and our recommendations of the best companies for each specialty:

ProfessionRelevant articles 
DoctorsThe 5 Best Providers of Medical Malpractice Insurance
Physician AssistantsThe 5 Best Providers of Malpractice Insurance for Physician Assistants
Nurse Practitioners The 5 Best Malpractice Insurance Companies for Nurse Practitioners
Nursing Students The 5 Best Malpractice Insurance Companies for Nursing Students
OptometristsTop 5 Providers of Optometry Malpractice Insurance
DentistsTop 5 Providers of Dental Malpractice Insurance
Dental hygienistsThe 4 Best Malpractice Insurance Companies for Dental Hygienists
Psychologists and counselors Top 4 Providers of Malpractice Insurance for Psychologists and Counselors
Chiropractors 4 Best Choices for Cheap Chiropractic Malpractice Insurance
Physical therapists The 6 Best Malpractice Insurance Providers for Physical Therapists

How much medical malpractice insurance do I need?

At a minimum, you need to secure the amount and type of insurance required by your state and employer. In the 8 states where medical malpractice insurance is required, Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin, the states also require the minimum coverages. They are very different by states, so make sure to check with your state requirements.

Your employer also requires minimum coverage of the medical malpractice insurance. This is sometimes the same as the state’s requirements, but usually higher.

However, that’s typically nowhere near enough for most medical practitioners. Many physicians and other healthcare workers have significant assets that need to be protected. If you don’t have enough malpractice insurance coverage, a disgruntled patient or their family could come after your home, car, investments, and other things.

If you have significant assets to protect, you should meet with an insurance agent with malpractice experience, insurance company representative or institutional risk manager to discuss your financial situation and malpractice insurance needs.

The standard coverage for medical malpractice insurance is $1M/$3M. This means that the maximum the policy can pay out for one claim, or an occurrence, is $1M and in aggregate for a year is $3M.

How much does medical malpractice insurance cost?

The cost of medical malpractice coverage varies. It’s dependent on many factors, including type of practice, size of the operation, years of experience, claims history, location, and other factors.

Below is the average cost of medical malpractice insurance cost for different healthcare specialty from a 2019 study, which is the most recent year data is available. 

  • Registered Nurse: as little as $100 a year for a $1M/$6M policy 
  • Certified Nurse Midwife: as low as $5,000 to $6,000 a year
  • Psychiatrists: $5,000
  • Family medicine: $10,000
  • Internal medicine: $14,000
  • Anesthesiology: $15,000
  • Radiology: $21,000
  • Specialized surgery: $34,000
  • Ob/gyn: $46,000

The best way to make certain you’re paying a fair price for your malpractice coverage is to get quotes from multiple providers. That way, you can compare coverages and costs to find the best combination for you. 

If you have any doubts about your malpractice coverage or other business insurance, speak with an experienced agent or company representative.

>>MORE: How Much does Medical Malpractice Insurance Cost for Different Specialties?

Medical Malpractice Insurance in New Jersey: Requirements, Coverage, & Costs

New Jersey is one of seven states that requires physicians to carry at least a minimum amount of malpractice insurance. New Jersey is also has the third highest medical malpractice insurance premiums, second only to Pennsylvania and New York. 

Doctors in New Jersey are required to carry at least $1M/$3M in insurance, but higher coverage amounts are suggested if you have a high-risk specialty. 

What you’ll pay depends on what your specialty is, ranging from a low of $8,835 per year for occupational medicine, to $83,202 a year for Ob/Gyn practitioners. 

Medical Malpractice Insurance in Pennsylvania: Requirements, Coverage, & Costs

Pennsylvania has the second highest medical malpractice insurance rates, second only to New York. 

Because of the high rates, PA introduced the Medical Care Availability and Reduction of Error Fund (MCARE), which requires that health care providers to carry liability insurance, if at least 50% of their patients are from PA. You can see what you will pay here. Policies must cover $500,000 per occurrence and $1.5M per claim, and after that, MCARE will cover any losses over that, up to $1M.

Rates vary depending on specialty. Doctors who practice Ob/Gyn will pay about $72,511 a year, whereas anesthesiologists pay about $16,000 a year. Be sure to compare quotes from several companies to get the cheapest one for you. Working with a digital broker like CoverWallet or PolicySweet is a good option to compare several online quotes conveniently.

Medical Malpractice Insurance in Maryland: Requirements, Coverage, & Costs

Maryland does not require physicians or other healthcare workers to carry medical malpractice insurance, but that doesn’t mean you shouldn’t have it. In addition, certain hospitals in Maryland will require doctors with privileges there to have insurance, and some health insurance plans may require physicians to carry it. 

Rates vary, but orthopedic surgeons can expect to pay about $35,000 for malpractice insurance, and family doctors pay somewhere between $6,000 and $9,000 a year. In general, physicians who do surgery pay more than those who don’t. 

Medical Malpractice Insurance in South Carolina: Requirements, Coverage, & Costs

Compared to some other states, medical malpractice insurance in South Carolina is reasonably priced. There are a large number of companies in South Carolina that provide medical malpractice insurance, and this creates a competitive marketplace. 

South Carolina has been reforming medical liability since the passing of the South Carolina Medical Malpractice Patient Compensation Fund in 1976. This charges physicians a membership fee and requires them to have at least $200,000/$600,000 in insurance. Control has been passed to the newly created South Carolina Medical Malpractice Association, which was established in 2019. What this tries to do is pool the risk of malpractice lawsuits and minimize the possibility of a jackpot settlement by claimants. Noneconomic damages are capped at $350,000. 

Another bright note for physicians in South Carolina is that there are only 18.8 malpractice suits per 100,000 residents, which is pretty moderate.

The specialties with the highest malpractice insurance rates are OB/GYN ($52,298 a year) and the lowest is psychiatry at about $6,570 a year.  

Medical Malpractice Insurance in Ohio: Requirements, Coverage, & Costs

Doctors and other healthcare providers are not required to carry medical malpractice insurance in Ohio. However, some hospitals may require doctors working at their facilities to carry it, and it’s always a good idea in any case. 

In 2004 Ohio passed Tort reforms that placed caps on the amount of noneconomic and punitive damages someone could collect, which is good news if you’re a doctor. This makes rates for insurance reasonable compared to some states. 

An OB/GYN will pay about $68,749 a year (OB/GYN’s pay the highest rates in almost every state) and psychiatrists pay about $10,727. Since psychiatrists don’t perform surgery, they enjoy lower insurance rates. 

Medical Malpractice Insurance in Texas: Requirements, Coverage, & Costs

Texas doesn’t require physicians or any other healthcare worker to carry medical malpractice insurance. For a while, Texas had very high rates of medical malpractice lawsuits filed. Thanks to tort reform in 2003 that placed caps on lawsuits at $250,000 and one in 2011 that stated the loser in frivolous lawsuits would pay all court costs, there are both lower payouts and fewer lawsuits. 

However, medical malpractice insurance is still a smart idea. Because Texas does have low liability limits, you can get away with a smaller policy, such as $200,000/$600,000 or even $100,000/$300,000, which is what some facilities in South Texas require their doctors to have. 

For a $200,000/$600,000 policy, OB/GYN’s pay about $26,947 a year, and someone practicing general surgery will pay about $23,000. 

Medical Malpractice Insurance in Michigan: Requirements, Coverage, & Costs

Michigan doesn’t require physicians and other healthcare providers to carry malpractice insurance, but it’s certainly a good idea. Some hospitals and medical groups may require it, but even if they don’t, lawsuits are still remarkably common. 

The good news is that non-economic damages are capped at $280,000, although there are exceptions. Another bit of good news for Michigan doctors is that there are many providers of medical malpractice insurance, and competition allows for competitive rates. 

Rates vary according to specialty, with OB/GYN’s paying the most at $89,533 a year. A general surgeon might pay $66,958, and a psychiatrist $12,110 a year. 

Medical Malpractice Insurance in Colorado: Requirements, Coverage, & Costs

Colorado requires all doctors to have medical malpractice insurance, regardless of specialty. Furthermore, they want you to have at least a minimum of $1M/$3M, although higher risk specialties should have more. There is a cap of $250,000 for non-economic damages, thanks to Tort reform. 

Rates for physicians in Colorado vary by specialty, with Emergency Medicine doctors paying about $22,751 and anesthesiologists paying about $14,334. 

Medical Malpractice Insurance in California: Requirements, Coverage & Costs

You are not required to have medical malpractice insurance in California, although it would be good idea. California tort reform capped non-economic damages at $250,000, but there are no limits on the amount of lost wages a person can sue for. Given that California has some of the highest per capita income rates in the nation, this could be very bad news for uninsured doctors. 

Furthermore, there is some rumblings about increasing the amount of non-economic damages, since this tort reform was passed in 1975, and the equivalent in today’s dollars would be $753,000. California Proposition 46 sought to increase the cap on non-economic damages to $1.1M, but it was defeated in 2014. However, an increase is likely to pass sooner or later. 

Rates in California vary by specialty, with Ob/gyns paying about $42,127 a year and ophthalmologists who don’t perform surgery paying about $6,400 a year. 

Medical Malpractice Insurance in Florida: Requirements, Coverage, & Costs

The Florida Comprehensive Medical Malpractice Reform Act of 2003 sought to limit frivolous lawsuits, promote settlements and reduce the cost of medical malpractice insurance. This act also imposed statutes of limitations of two years after the incident, or two years after the injury from the occurrence was discovered. Florida had capped non-economic damages at $500,000, but then in 2015 they overturned it, declaring caps unconstitutional.  

Florida requires doctors to carry at least $100,000 in medical malpractice insurance, but it allows you to skip it if you must meet these conditions:

  • Post bond
  • Establish an escrow account
  • Obtain an irrevocable letter or credit
  • Put up a sign informing patients they don’t have malpractice insurance. 

Given that there are longer caps on damages, Florida medical malpractice insurance lawsuits are increasing

Obstetricians can expect to pay about $150,000 in annual premiums for malpractice insurance, and someone practicing internal medicine in Miami can expect to pay about $47,700. 

What other coverages do I need to enhance my medical malpractice insurance?

In addition to medical liability claims, medical practices also face potential claims associated with other medical related risks such as cyber liability and regulatory requirements including compliance with the Health Insurance Portability and Accountability Act (HIPAA). Some medical malpractice policies may cover those types of exposures. If not, you can purchase other coverage for these things.

Protecting medical practice’s business property

In addition to protecting against malpractice related issues, it’s a good idea for medical practitioners to take steps to protect their business property and cover the other risks they face.

Most medical practices typically purchase a Business Owners Policy (BOP). A BOP includes three essential business coverages in a single policy and makes it easy to add additional insurance that you may need. Learn more at the best BOP insurance companies.

The three core coverages are:

  • General liability insurance covers you and your practice if someone is injured on your property for non-medical reasons. Example: A patient slips and falls in your hallway and breaks a leg. General liability insurance would pay for their medical care. Learn more at the best general liability insurance companies
  • Business property insurance protects your medical office space, whether you rent or own it. The coverage will pay for repairs from damage caused by things like fire or weather events. It will also pay for damage to or theft of office equipment including computers, testing and sterilization equipment, tools and instruments — everything you need to keep your practice up and running. Learn more at the best commercial property insurance companies
  • Business income insurance will pay lost income if you cannot open your practice and serve patients because of a reason covered by your business property insurance, such as fire damage or theft of medical equipment. Learn more at the best business income interruption insurance companies

What other insurance coverages do I need for medical practice’s employees?

Workers’ compensation insurance will pay for medical care, disability benefits and lost wages if an employee is injured or becomes ill for work related reasons. It can also pay funeral costs if someone dies because of an on the job incident. A common example of this for people working in medical offices are needle prick accidents. This is when medical personnel stick themselves with a needle after it’s used on a patient. A solid workers’ compensation policy will pay for testing the employee and cover medical care if they become ill because of the needle prick. Learn more at the best workers comp insurance companies

What other coverages do medical practices get?

Some common ones include: 

  • Employment practices liability insurance. This covers you if an employee or contractor sues you or your practice for discrimination or sexual harassment.
  • Cyber insurance. Medical offices store a lot of confidential — and valuable — patient and employee data on their computers and servers. This insurance will pay costs related to a data hack or theft — or a ransomware attack. Learn more at the best data breach insurance companies and the best cyber insurance companies.
  • Lost records coverage. This will pay to replace or restore patient or employee files or records that get damaged, are lost, or stolen.
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