What Every Physician Should Know About Claims-Made vs. Occurrence Policies

Understanding Claims-Made vs. Occurrence Malpractice Insurance

When shopping for medical malpractice coverage, physicians need to understand the key differences between claims-made malpractice insurance and occurrence policies. Both options protect against medical negligence claims but differ in how extended reporting tail coverage is provided, impacting costs, policy management and long-term financial planning.

How Claims-Made Malpractice Insurance Works

A claims-made malpractice insurance policy — by far the most common type of medical liability protection — indemnifies a physician only when the alleged malpractice event occurs and its resulting claim is filed while the policy is active. If a claim is filed after the policy has expired or been canceled, coverage does not exist — unless the provider purchased an extended reporting endorsement, typically referred to as a “tail policy.” Tail coverage can be expensive, often costing between 200% and 300% of the policy’s final-year premium.

Claims-made malpractice insurance premiums are significantly more affordable than occurrence coverage during the policy’s initial years. These premiums start low and annually increase to maturity over five to seven years as the physician’s exposure to potential claims increases. This makes claims-made coverage an attractive option for new doctors or those who anticipate changing jobs or malpractice insurance providers.

Doctors must carefully manage their retroactive date when changing claims-made policies to maintain coverage for past medical incidents. If a claim is filed for an incident that occurred before the retroactive date, it won’t be covered, leaving the doctor financially exposed. When switching insurers or policies, doctors should monitor that their original retroactive date carries over to avoid coverage gaps. If leaving a claims-made policy, purchasing tail coverage or obtaining prior-acts (nose) coverage can help maintain protection. Properly managing this date is crucial to ensuring continuous liability coverage.

How Occurrence-Based Malpractice Insurance Works

Occurrence policies provide coverage for any malpractice incident that occurs while the policy is active, regardless of when the claim is filed — even if it’s years later. When an occurrence policy ends, the provider retains indemnification for past events, eliminating the need for tail coverage. While occurrence policies offer long-term peace of mind and simplified policy management, they start with a much higher premium — typically 30% to 50% more than a first-year claims-made policy.

Because of their long-term stability, occurrence policies are often popular with physicians who are planning to retire or don’t want to incur the high cost of tail coverage. Notably, New Mexico requires physicians to maintain occurrence-based coverage to participate in the state’s patient compensation fund.

Which Physician Insurance Option is Best?

Ultimately, the best physician insurance option is contingent on the provider’s career path, financial strategy and cost tolerance. A claims-made policy is excellent for physicians who want a lower initial premium and the flexibility to manage future coverage needs, while an occurrence policy provides lifetime security without the responsibility of purchasing a tail policy later.

Expert Insights: Q&A with Cunningham Group Sales Manager, David Leander

Cunningham Group recently asked its sales manager David Leander how he counsels physicians on the costs and benefits of claims-made vs. occurrence malpractice insurance policies.

Cunningham Group: What do doctors want to know when they ask you about the differences between claims-made and occurrence medical malpractice insurance policies?

David Leander: I think most doctors are usually looking for a clear definition. They’ve done some online research, talked to colleagues or employers, and have a general idea, but they’re not 100% sure. They want someone to break it down in simple terms so they can fully understand the differences.

I like to explain to doctors that occurrence and claims-made policies function the same way in terms of how claims are triggered, what they cover and their policy limits. The difference is how tail — or extended reporting — coverage is handled. With occurrence coverage, the tail is prepaid as part of the annual premium. It’s covered upfront. With claims-made coverage, you pay for the tail coverage later — when you cancel the policy.

Cunningham Group: What do most of your customers choose — claims-made or occurrence coverage?

David Leander: Most doctors choose claims-made policies because most medical malpractice insurers only offer claims-made coverage for several reasons, primarily related to cost control, risk predictability and market dynamics.

Cunningham Group: When you have placed a doctor with occurrence coverage, what made that situation unique?

David Leander: Doctors who choose occurrence coverage typically consider a few key factors. First, cost isn’t a major concern for them. They also tend to be more aware of the tail coverage aspect. They like knowing that the extended reporting coverage is already included in the premium and they won’t face a tail invoice down the road. With claims-made policies, the cost of tail coverage is based on the expiring premium, but since they don’t know exactly when they’ll cancel — whether in one year, five years or 10 years — the potential tail cost can feel abstract and unpredictable.

There are also a lot of fears among physicians about massive tail coverage costs. That uncertainty can be unsettling. When doctors know exactly what they’re paying for, it provides a sense of relief. They like the idea that when they cancel their policy, everything is already covered, and they can just walk away without additional costs.

Cunningham Group: Can you explain how claims-made policies work—how they start at one level, step up over time, and why a tail policy is necessary?

David Leander: Sure. A claims-made policy starts with a lower premium because the insurer isn’t responsible for any prior claims history. You’re starting fresh on day one, and the likelihood of a claim being filed in the first few months is very low. Most malpractice claims take one to two years to develop — from the initial patient complaint to hiring an attorney, gathering documents and eventually filing a lawsuit. That’s why the premium is lower at the start of the policy. But with each renewal, especially the first four, the premium increases. The biggest jumps happen after the first and second renewals because the insurance company is now covering previous years in addition to the new coverage period. More years mean more patients seen, which increases the likelihood of a malpractice claim, leading to higher premiums.

By the fifth year, the premium typically maxes out — this is what’s called the mature rate. If nothing changes in terms of the doctor’s services, hours, locations or providers, the premium should stay the same for years six, seven, eight and beyond.

However, some factors can impact the cost. If a doctor changes their practice in any way, has a malpractice claim, or faces a licensing issue, their premium may increase. Additionally, insurers periodically adjust their rates, sometimes raising them by 5% or more based on specialty. Even if nothing changes on the doctor’s end, their premium may still go up—or, in some cases, down — depending on the company’s pricing decisions.

Cunningham Group: Why do physicians with claims-made coverage need a tail policy?

David Leander: A tail policy extends coverage beyond a claims-made policy’s cancellation date. In most cases, it provides lifetime protection for incidents that occurred while the policy was active, from the retroactive date to the cancellation date. Without tail coverage, if a claim comes in after cancellation, the doctor would be fully responsible for all out-of-pocket costs.

Cunningham Group: Are there any coverage options beyond claims-made and occurrence?

David Leander: Some insurance companies recognize doctors want an occurrence option but might not be able to afford it and have introduced a hybrid product called “claims-made plus.”

With this option, doctors still have a claims-made policy, but they prepay the tail coverage each year. Some insurers are restricted from offering true occurrence coverage — often due to reinsurance restrictions — so this is a workaround they developed. These hybrid policies have become more popular in recent years, and we’re seeing more companies introduce them.

Ultimately, it comes down to affordability. If doctors could all choose occurrence coverage, they probably would. But when you compare a $15,000 occurrence policy to a $3,000 claims-made policy, the cost difference is significant — especially for doctors starting their own practices.

Final Takeaways: Choosing the Right Malpractice Insurance Policy

• Claims-made coverage is cheaper upfront, but requires tail coverage when the policy ends.
• Occurrence coverage costs more initially but includes tail coverage with no surprise expenses later.
• Physicians should compare their long-term needs, specialty risks, and financial plans before selecting a policy.

Need help deciding? Contact our team of malpractice insurance experts for a free quote and see how we can help you save $1000s on your policy!