Claims-Made vs. Occurrence Policy: What’s the Difference?

When it comes to malpractice insurance, healthcare professionals have two primary options: claims-made vs. occurrence policy. Each type has distinct features that affect how claims are handled and the overall insurance cost.

Grasping these differences will help you choose a policy that suits your practice’s needs and budget. Below are the details of each policy type to help you find the right fit for your situation.

What Is a Claims-Made Policy?

A claims-made policy covers incidents only if both the incident and the claim happen while the policy is active. This policy usually starts at a lower cost and gradually increases until it matures, typically around the fifth to seventh year. The main benefit of a claims-made policy is its early affordability, which makes it appealing to new practitioners or those aiming to manage expenses.

What Is an Occurrence Policy?

An occurrence policy covers incidents during the policy period, no matter when you file the claim. This means if something occurs while the policy is active, the insurer at that time will handle the claim, even if it’s filed years later. 

While occurrence policies usually cost more upfront, they provide long-term assurance by covering claims for past incidents without needing ongoing coverage.

Claims-Made vs. Occurrence Policy: How Do They Differ?

The main difference between claims-made vs. occurrence insurance is how claims are handled. With an occurrence policy, the insurer takes care of the claim at the time of the incident, even if you file it years later. This means you’re covered for any incidents that happen during the policy period.

On the other hand, a claims-made policy requires the current insurer to manage the claim, no matter when the incident happened. This difference can affect both the cost and complexity of handling claims. A veteran medical malpractice insurance agent explains the difference between claims-made and occurrence coverage as it relates to a physician’s malpractice insurance coverage.

Claims-Made vs. Occurrence Insurance: When to Consider Which One

Choosing between a claims-made and an occurrence insurance needs careful thought about your practice’s specific needs and situation. Here are some important factors to consider when selecting the right policy type:

• Financial Situation: Look at your current budget and future financial plans. An occurrence policy costs more upfront but provides long-term stability by covering claims for past incidents without needing ongoing coverage. If your practice can handle the higher initial cost, this option might give you peace of mind.
• Long-term Plans: Think about your career path and future goals. An occurrence policy might be beneficial if you plan to stay in the same practice or location for a long time because it offers comprehensive coverage. However, a claims-made policy could provide more flexibility if you expect changes in your practice or location.
• Risk Tolerance: Consider how comfortable you are with potential risks. An occurrence policy removes worries about future claims since it covers incidents during the policy period. On the other hand, a claims-made policy needs careful handling of coverage changes and tail coverage to maintain protection.
• Coverage Needs: Decide how much protection you need. An occurrence policy is ideal if you want continuous coverage for past incidents. A claims-made policy might be more suitable if you focus on lower starting costs and can handle coverage changes.
• Tail Coverage Considerations: If you opt for a claims-made policy, plan for the possible need for tail coverage. This extends protection for incidents reported after the policy ends. Keep in mind that this extra coverage can affect your total insurance costs and should be part of your decision-making process.

Claims-Made vs. Occurrence Insurance: How to Transition

Switching from a claims-made to an occurrence policy, or vice versa, needs careful planning. It’s important to understand tail coverage, which protects against claims reported after a claims-made policy ends. Talking to a knowledgeable insurance agent can help you navigate these changes smoothly.

Steps to Transition:

1. Check Your Current Policy: Review your coverage and identify any gaps or needs. Ensure it matches your practice’s current requirements and risk levels.
2. Learn About Tail Coverage: Decide if you need tail coverage to protect against claims after your policy ends. Know how it impacts your insurance costs and future security.
3. Talk to an Insurance Agent: Seek advice from a knowledgeable medical malpractice insurance agent to find the best options. They can explain policy features and help customize coverage for you.
4. Compare Costs and Benefits: Consider switching policies’ financial impact and benefits. Look at both short-term savings and long-term protection to decide wisely.
5. Plan the Switch: Schedule the change to ensure continuous coverage without gaps. Work with your insurer to prevent any lapses that might leave you unprotected.
6. Complete the Change: Fill out the paperwork and confirm the new policy details with your insurer. Make sure all terms and conditions meet your needs and expectations.

What to Ask Your Insurance Agent

When talking about malpractice insurance with your agent, asking the right questions helps you find the best coverage for your needs. Consider these key questions:

• What are the pros and cons of claims-made vs. occurrence policies for my practice?
• How does tail coverage work, and when might I need it?
• What are the cost differences between these policy types over time?
• How can I ensure I have continuous coverage during a policy switch?
• Are there any additional endorsements or riders that could benefit my practice?

Secure Your Practice with the Right Medical Malpractice Insurance

When choosing a claims-made or occurrence policy, make sure it fits your financial goals and risk management plan. Our team is ready to help you find the right policy that aligns with your needs and ensures peace of mind as you focus on your practice. Get a quote today for malpractice insurance to explore your options and secure the coverage that best safeguards your professional future.