Professional liability insurance: the difference between claims-made and occurrence coverage, limits of liability, extended reporting period … the list goes on when you’re looking at professional liability insurance, and you may not fully understand what it is that you’re purchasing.
The prospect of purchasing insurance can be daunting, and you don’t always know where to begin, what coverage options to look for or which company to choose.
The one thing you do know is that you’re required to carry professional liability insurance.
Professional liability insurance provides coverage for the professional services you can legally provide as a psychologist. This means that you’ll be covered in the event of a claim or suit that arises as a result of the treatment you provided to a client
In today’s litigious society, you can’t guarantee that you’re immune from a liability claim, no matter how good your intentions as a clinician.
While there are many coverage options included in a professional liability insurance policy, there are just two main options for types of policies: Occurrence Form Coverage and Claims Made Coverage.
An occurrence form policy provides life-time coverage for the period the policy is in effect. This means that you’ll still have coverage for any treatments or incidents that occurred while your occurrence policy was in place, even if you allow the policy to lapse.
For example, if a client you saw while your policy was in place files a complaint with your state licensing board after your policy expiration date, you can still seek coverage under your occurrence policy. The same limits of liability that you had in place during the treatment dates will still apply, and you don’t have to pay an additional fee to ensure that you’ll be covered.
A claims-made policy provides coverage for claims while the policy is in effect. If you want to have coverage for the policy period after the expiration date, you would need to purchase an extended reporting period endorsement or “tail coverage.”
Price is also certainly an important determination when purchasing insurance. Occurrence form policies tend to start at a higher base premium, but the price will stay the same from year to year. A claims-made policy will typically start at a lower premium than an occurrence policy for the first year of coverage. However, the premium will increase each year until you reach the “mature” rate. It’s also important to keep in mind the premium that might be owed for a “tail.”
We know there are many factors that go into selecting professional liability insurance to protect your practice. You’ve worked too hard to go without the appropriate coverage. Before making a decision, there are many factors to consider, and you want to be sure that you’re making the correct choice for your business.
Occurrence policies tend to be recommended by insurance professionals if there is an option, as you’re truly getting coverage for a lifetime, when you purchase an occurrence policy.