Medical malpractice insurance is a type of professional liability policy designed specifically for physicians and other medical professionals. Policies cover the costs associated with accusations that a physician’s negligence caused a patient’s injury or death. Medical malpractice insurance costs vary by state and specialty, and premiums vary significantly depending on geography and practitioner but can cost over $100,000 a year.
Through a partnership with Now Insurance, Hiscox sells small business insurance directly to consumers. You can visit Hiscox to start a quote. The application takes only minutes to complete, and you can purchase insurance online.
How Medical Malpractice Insurance Works
Medical malpractice occurs when a doctor, hospital, or other healthcare provider injures a patient through negligence. Typically, a negligent act occurs through an error or omission in diagnosis, treatment, or aftercare. Malpractice insurance is a specialized professional liability policy because claims can include bodily injury and death.
Somewhat surprisingly, only seven states—specifically Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin—require doctors to carry medical malpractice insurance. However, that doesn’t mean a licensing board, hospital, or health insurance network will not require all participating physicians to carry some form of medical malpractice insurance.
Medical malpractice insurance covers accusations of negligence in patient care. Typically, the coverage pays for your legal fees, including lawyer bills, court costs, investigation expenses, and medical damages (settlements). Medical malpractice insurance covers events like:
- Failure to diagnose
- Misdiagnosis
- Unnecessary surgery or treatment
- Surgical errors
- Poor aftercare
- Mistakes in reading lab results
- Failure to order proper testing
- Mistakes in taking patient history
- Premature discharge
Similar to a traditional professional liability policy, medical malpractice insurance policies are written in two different ways:
- Claims-made policy: This must be active when the claim is filed, leading to some complicated coverage enhancements like a retroactive date for when the coverage begins or an extended reporting period.
- Occurrence policy: This provides coverage for losses that happened when the policy was active and the reporting date doesn’t matter.
Because medical malpractice is triggered by the claim and not the occurrence, treatments that occur before or after your policy term are excluded. Malpractice insurance also won’t pay for your defense if you’re accused of criminal activity, financial mismanagement, or sexual misconduct.
Medical malpractice insurance only covers your professional services, so it doesn’t pay for:
- An employee’s work-related injury
- Accusations of harassment, discrimination, or wrongful termination
- A patient’s injury that’s unrelated to medical treatment, such as a slip-and-fall injury
These and other risks are covered by a variety of insurance policies. Read more in our guide to small business insurance.
While both types of liability insurance are important, general liability and medical malpractice insurance cover key areas of difference. Let’s say you are a home health nurse. While working at a patient’s home, you spill some water and neglect to clean it up. Shortly afterward, the patient slips, falls, and injures their back. This type of loss would be a general liability claim.
However, if instead of spilling liquid, you gave the patient the wrong medicine for their condition, making the problem worse. This type of negligence would fall under your malpractice insurance policy.
Medical Malpractice Insurance Costs
When providers calculate premiums for medical malpractice, two of the most important factors are location and specialty. Riskier specialties, such as orthopedic surgery, in states that require coverage and award higher-than-average judgments will see higher premiums.
The costs listed below are taken from the American Medical Association (AMA) policy research on medical malpractice insurance costs from 2012 through 2021. The policies all carried limits of $1 million per occurrence and $3 million aggregate. These figures are shared to illustrate the potential costs per practitioner type and the influence a ZIP code has on costs. For example, premiums in New Jersey are significantly lower than in New York, sometimes by as much as $100,000.
Sample of Medical Malpractice Insurance Costs
Practitioner Type | State | |
|---|---|---|
Internal Medicine | New York | $32,000–$33,800 |
Internal Medicine | Pennsylvania | $24,000–$33,000 |
Internal Medicine | California | $8,200–$10,300 |
General Surgery | New York | $114,000–$154,000 |
General Surgery | Pennsylvania | $80,000–$131,000 |
General Surgery | California | $41,000–$47,000 |
OB-GYN | New York | $165,000–$214,000 |
OB-GYN | Pennsylvania | $119,000–$165,000 |
OB-GYN | California | $49,000 steady over the years |
While the risk associated with your specialty and the location have a significant impact on premium, providers also consider other factors. These include:
- Your claims history: Medical professionals with fewer claims typically pay lower premiums for malpractice insurance.
- Your hours: Long hours mean more patients, increasing your risk of making a mistake.
- The size of your practice: The bigger your practice—in terms of the number of patients and the number of facilities—the higher your costs.
- Policy limits: You can opt for lower limits if state law allows but be careful. This means you will have less coverage and may be underinsured.
- Deductibles: Typically, a higher deductible lowers your medical malpractice costs. This may be a good option for physicians with enough cash reserves to pay more out-of-pocket legal costs.
Medical Malpractice Insurance Deductibles
Deductibles are the amount an insured is required to pay for a claim before their insurance carrier kicks in. This amount is often set by the carrier and typically ranges between $2,500 and $10,000.
For medical malpractice insurance, carriers offer two kinds of deductibles:
- Loss-only deductible: Sometimes called “indemnity-only,” for this type of deductible, the insured only pays a deductible when a judge rules against you or you owe money in a settlement.
- Indemnity and expense deductible: With this type of deductible, if a malpractice claim is received, you will pay the deductible.
Why Medical Malpractice Insurance Matters?
While the deductible amount may seem high or the premium significant, consider the cost of an actual claim. In 2015, the average indemnity payment was $365,503. This figure represents an increase of over 10% from 2006. If the claim went to trial and resulted in a formal award, the cost increased to an average of $1.1 million. While the AMA study is several years old, one thing you can be sure of is that costs have only gone up since it was released.
Unfortunately, the odds are very strong that a medical professional will face a claim or a lawsuit during their career. According to another study by the AMA, 31% of physicians have been sued at least once throughout their careers. Between 2016 and 2018, 65% of claims were either dropped, dismissed, or withdrawn.
One interesting metric shows the inevitability of a claim. The average number of claims per 100 physicians in their careers to date between 2016 and 2022 is 66.
Medical Malpractice Insurance Frequently Asked Questions (FAQs)
Only seven states have minimum malpractice insurance requirements for physicians: Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin. Another six states require malpractice insurance to be eligible for liability reform: Indiana, Nebraska, New Mexico, New York, Pennsylvania, and Wyoming. Carrying malpractice coverage in these states lets physicians participate in programs that help them pay claims.
In the AMA’s study of premiums, OB-GYN physicians paid a higher premium than those in internal medicine. For example, in New York, an OB-GYN may pay $214,000 for coverage, compared to $33,000 for an internal medicine practitioner. Specialists tend to pay more than primary care physicians for medical malpractice insurance because they face a greater risk of being sued.
The HIPAA requires healthcare providers to protect patient information, and attorneys have used it to demonstrate when medical professionals failed to meet professional standards. However, these claims are more commonly covered by cyber liability insurance. Some medical malpractice insurance includes limited cyber coverage.
While each state governs medical malpractice law, claims usually require three general characteristics. First, the medical professional has to have violated a standard of care, which establishes negligence. Next, the patient needs to show they were injured because of the medical professional’s negligence. Finally, the patient has to show their injury resulted in significant damages.
Bottom Line
Regardless of the requirements, the likelihood of a claim being filed and the cost of bringing it to a resolution make medical malpractice insurance a good business decision. Getting insurance manages the risk by paying for your defense.
When considering malpractice insurance companies, be sure to check out the medical malpractice insurance policies offered by Hiscox, in partnership with Now Insurance. Begin an application for allied healthcare professionals by clicking on the link below.
