Buying ‘tail’ insurance

Buying ‘tail’ insurance

During a physician’s period of employment, the malpractice liabilities are generally covered by a “claims-made” or “occurrence-based” insurance, the former being cheaper than the latter. Occurrence based insurance is costlier because it provides seamless coverage to a physician even when he leaves a practice and joins another. In such cases, the professional negligence is covered by the current insurance carrier even if the claim was filed when the physician had another carrier.

The need for tail coverage, also known as an extended reporting period endorsement, arises when a physician chooses to exit from an employer practice that provides claims based professional liability insurance. This is because a claims-based policy does not protect a physician from malpractice damages arising out of cases that occurred while he was employed but are litigated at a time after that employment has been terminated.

Tail insurance can be paid for by either party – the physician or the employer. Although it makes sense that the physician should be responsible for purchasing his own tail insurance, sometimes the employers also bear a substantial part of the cost as a benefit to the employee. In cases when it is hard to recruit new physicians, some employers may offer to pay the entire cost of the insurance.

If you must buy the tail insurance yourself, it is advisable to spread out the payments. One must also time the resignation from current employment such that an extra premium for the same year can be avoided. This is why it is best to make the move at the end of a year. On the other hand, if you switch your insurance carriers in the beginning or middle of a year for which you have already paid the premium, you are immediately faced with another.

Furthermore, as far as the indispensability of tail insurance is concerned – there is no second choice even if its cost seems prohibitive. If you still choose to opt out of buying tail insurance even when you know you need it, you should be prepared for the payment of medical malpractice claims that might arise in the future. The only safe, though expensive, way to safeguard yourself from such claims is to purchase adequate tail insurance. An important thing to keep in mind is that if you’re switching from one practice to another in the same state without change in your professional liability insurance carrier, then you will be provided seamless coverage and do not need to purchase a tail separately.

Salus Resource Group

Salus Resource Group - Salus Resource Group is a collection of business owners and professionals that serve physicians and dentists across various disciplines.