Claims-Made vs. Occurrence: Which Medical Malpractice Insurance is Right for You?

It’s easy for medical professionals to feel overwhelmed by the jargon and conflicting advice surrounding malpractice insurance. In particular, there’s confusion and misinformation regarding the terms “claims-made” and “occurrence.” Which policy language will best meet your needs?

Both claims-made and occurrence coverage have their pros and cons. While some may swear by one over the other, they’re relatively equal. Depending on your role and future plans, one form may be more beneficial to you than the other. A practice owner has different insurance needs than an independent contractor working at multiple locations.

The key to wading through the varying opinions on claims-made versus occurrence is understanding how each form works. Consider factors such as your practice type, career stage, and risk tolerance. Choose the one that best aligns with your specific needs so you can stay protected from malpractice claims.

Here’s a brief overview of the two forms, which highlights the benefits and risks of each, so you can determine the best fit for your situation.

What is Occurrence Form Coverage?

Occurrence form coverage is professional liability insurance that triggers coverage based on the “incident date.”

Example: Suppose a physician provides treatment in May 2024, and the patient files a lawsuit in 2026. The physician would file the claim against the occurrence policy that was in force in May 2024.

Who Benefits from an Occurrence Insurance Policy?

An occurrence policy tends to be attractive for the following groups:

Medical professionals in transition: Occurrence policies can be beneficial for those uncertain about their future career paths. For instance, if you’re an associate in a private practice but considering a move to a hospital network or starting your own practice, an occurrence policy provides flexibility. It allows you to cancel your coverage easily when your circumstances change and protects you throughout your career journey.
Part-time medical professionals: If you’re employed by a hospital but also work part-time at another facility, an occurrence policy can be invaluable. While your employer’s coverage may not extend to your part-time work, an occurrence policy can provide the necessary protection for these additional hours.

Pros of Occurrence Form Coverage

Medical professionals choose occurrence form coverage for the following reasons:

Easy to understand: With an occurrence policy, you’re automatically covered for any claims arising from incidents that occurred during the policy period, regardless of when the claim is filed.
Continuous coverage: Unlike claims-made policies, which may require purchasing tail coverage to maintain protection after the policy expires, occurrence policies ensure ongoing coverage.
Permanent coverage tied to the original company: Though more expensive, the policy will always be there to defend a claim, regardless of when it is filed (until the policy limits are exhausted).

Though occurrence form policies are more expensive, many medical professionals find the peace of mind, simplicity, and flexibility worth the extra cost.

Though occurrence form policies are more expensive, many dental professionals find the peace of mind, simplicity, and flexibility are worth the extra cost.

Drawbacks of Occurrence Form Coverage

Anyone considering occurrence coverage needs to understand the policy’s potential drawbacks:

More expensive: The premium is typically higher compared to claims-made policies.
Dependence on insurer solvency: Occurrence coverage is only permanent if the insurer remains solvent. If the company goes bankrupt, the policy becomes essentially worthless.
Permanent tie to insurer: If you switch insurance companies, any new claims related to the prior policy period must be handled by the previous insurer, even if you no longer have confidence in their service.

What is Claims-Made Form Coverage?

A claims-made form is a professional liability policy that triggers coverage based on the “claim reporting date.”

Example: A physician had a claims-made policy for calendar year 2023 but decided to change insurance companies on January 1, 2024. In May 2024, a patient files a malpractice lawsuit for a 2023 procedure. The physician would file the claim against the claims-made policy that is in force in May 2024 — the currently active policy — if that policy includes tail coverage.

Tail coverage supplements claims-made policies and protects you from allegations of malpractice related to incidents that occurred in prior years but did not come to light until later. The tail forms automatically as policy terms renew and accrue.

Who Benefits from a Claims-Made Policy?

Claims-made policies are often recommended for practice owners due to their long-term cost-effectiveness and flexibility. If you’re not planning on making big changes in your career or location, a claims-made policy may be right for you.

By maintaining the same policy over time, practice owners can benefit from potential savings on premiums.

Pros of Claims-Made Coverage

Medical professionals choose claims-made coverage for the following reasons:

Less expensive: The premium is typically lower, which helps manage costs.
Portability: Claims-made coverage can be transferred from one insurance company to another.
Transferable tail coverage: The tail is portable from one insurance company to another, eliminating real costs associated with the transfer.
Changes to coverage limits are retroactive: If coverage limits increase, any claim made after the increase is subject to the higher limits, even if the event occurred prior.

Drawbacks of Claims-Made Coverage

Risk of losing tail coverage: If the policyholder lets the policy lapse due to non-payment, tail coverage is permanently lost.
Complexity: Understanding retroactive dates, tail coverage, and other provisions can be challenging and may lead to misunderstandings about coverage.

Note: Cancellation is unlikely to happen without your knowledge. In addition to sending a bill, all insurance companies are required to send a “notice of cancellation” letter by certified mail before canceling a policy. If you delegate insurance premium payments to an office manager or someone else, mark your calendar to double-check the payment status before each renewal date.

Making the Right Choice: Claims-Made or Occurrence

So, which is better: claims-made or occurrence? It depends on your situation. If you’re a seasoned physician or long-term practice owner with a clear career path, a claims-made policy might be the way to go. It’s generally less expensive in the long run and offers flexibility. If you’re still in transition, an occurrence policy can provide peace of mind with its continuous coverage and simplified approach.

The bottom line: Don’t just opt for whatever insurance your colleague has. Consult with an experienced insurance advisor who can evaluate your specific needs and recommend the best coverage for your unique situation.

Understanding the differences between claims-made and occurrence policies is the first step toward making informed decisions that will protect your medical license and practice for years to come.

Want to learn more?

Connect with the Risk Strategies ICNJ Team at info@icnj.com.