Q. What is the difference between claims-made and occurrence coverage?
A. The primary difference is the trigger for a claim. In an occurrence policy, the trigger is the date of occurrence of the medical incident that resulted in a claim. In a claims-made policy, the trigger is the date the claim is made to the insurance carrier. Click here to see a table that compares the two policy forms.
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Q. Are there different types of claims-made policies?
A. Yes. While there are some variances, with most claims-made policies, a claim is “made” when it is first presented to the insured. This requirement to activate coverage may create a significant challenge because determining the exact time when a claim is “made” is not always simple. Policies often contain a definition of claim and the definition can vary significantly from one contract to another. With one policy, a verbal allegation may be
enough to meet the definition of a claim, while another contract will require a written demand for money or services.
In addition, many policies go further to state the claim must be "first made" and "reported to the carrier", in other words a claim is triggered when the claim is first made and reported to the carrier.
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Q. What type of coverage is best for me?
A. As a general rule, National Medical Professional believes that a claims-made policy is in the best interests of both the insured and the insurer. One advantage of the occurrence policy is that you know exactly what you purchased, and at exactly what price when you obtain the coverage.
Contrast this with the flexibility of a claims-made policy. Here are just a few of the advantages:
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Q. What type of coverage does National Medical Professional offer?
A. National Medical Professional provides a claims-made coverage form. In limited circumstances, we also offer a modified claims-made policy which does not require the purchase of tail coverage.
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Q. How do premiums differ between a claims-made and occurrence policy?
A. The short answer is the cumulative premiums over several years will likely be about the same. Premiums for our claims-made policies develop or "mature" over six years. Substantial savings are achieved as only a percentage of a mature rate is paid during the first five years (see the "step factors" explanation in the next question) as it is less likely that a claim will occur AND be reported in the early years of a policy. In addition, the mature rate for a claims-made policy is usually about 8% less than the standard rate for an occurrence policy.
Of course, the downside of a claims-made policy is the possibility that you will need to purchase an "extended reporting period endorsement", or "tail". Physicians are often contractually obligated by their employer to pay for this tail, and the cost can be as much as 200% of the mature claims-made rate. In many instances this tail need not be purchased, deferring to obtaining prior-acts coverage on a subsequent policy, but in some cases this is not possible.
There are times, such as death, permanent disability, and permanent retirement, that the premiums are waived, and the tail is provided at no additional charge. Your National Medical Professional insurance consultant will work with you and your practice to analyze the best approach.
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Q. What is a "step factor"?
A. The "step factor" is the percentage of the mature rate used in determining premiums in the first five years of our claims-made policy. The premiums "mature" according to the following schedule: Year 1 - 30%; Year 2 - 60%, Year 3 - 85%; Year 4 - 90%; Year 5 - 95%; Year 6 and every subsequent year - 100%. Based on a $10,000 premium, this is $14,000 in premium savings over five years off the mature rate, and another $4,000 on savings off what would normally be charged for an occurrence policy.
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Q. What happens if I cancel my coverage?
A. When you cancel a claims-made policy, coverage will cease on the date of termination. It is essential that you either purchase an extended reporting period endorsement, or obtain prior acts coverage from your new carrier.
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Q. Can I switch to National Medical Professional if I am already have a claims-made policy?
A. Yes. Subject to underwriting rules, National Medical Professional can almost always provide prior acts coverage by adopting the retroactive date on your current policy. Your premium will be commensurate with the maturity of your policy, based on your retroactive date, thereby eliminating the need to purchase a tail from the incumbent carrier.
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Q. What is an "Extended Reporting Period Endorsement"?
A. Commonly known as a "tail", an extended reporting period endorsement extends the period of time in which you can report a claim for a medical incident that occurred after the retroactive date and before the expiration or termination date of your last policy. National Medical Professional's extended reporting period endorsement provides an indefinite tail. This is very important in medical malpractice insurance as claims may go unreported for many years.
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Q. If I terminate my coverage with National Medical Professional, will I be offered a "tail"?
A. Yes. National Medical Professional's policy requires that we offer tail coverage to any insured terminating coverage with us.
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Q. How much does a "tail" cost?
A. The cost of a tail is a percentage of the mature claims-made rate, and varies by length of time between your retroactive date and your termination date. Call your National Medical Professional broker for a quote for tail coverage.
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Q. I am nearing retirement and I'm eligible for a "free" tail from my current carrier. Should I still consider switching to National Medical Professional?
A. Absolutely. The premium savings from National Medical professional may be sufficient to offset the potential cost of a tail.
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Q. Is there ever a time when my "tail" is provided at no charge?
A. Yes. national Medical Professional provides a "free tail" for physicians who permanently retire from the practice of medicine at age 55 or greater, and after 5 years of continuous coverage with National Medical Professional. We even discount the tail for physicians that retire prior to the five (5) year window. In addition, we provide a free tail in the event of death or permanent disability that forces the retirement of an insured, regardless of age or term of coverage.
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Q. What are the common issues associated with terminating a claims-made policy?
A. Remember that most carriers, including National Medical Professional, offer a free tail for "permanent retirement". Many physicians, particularly radiation oncologists, opt to continue working part-time, or provide locum tenens service at the end of their career. We have also seen a resurgence of physicians going to work in the Veterans Administration programs. This does not qualify as retirement.
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Q. Do I need to purchase a tail every year after I terminate my coverage?
A. No. This is a common misconception. A tail is purchased one time, and the premium is fully earned (not refundable) upon payment.
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Q. Can I increase or decrease my limits when I renew my claims-made policy?
A. Yes. This is one of the key advantages of a claims-made and reported policy.
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