Your years of medical training likely showed you the importance of having health insurance, and to start working on patients, you probably needed to invest in a malpractice policy. But if you’re going to branch out and open a private medical practice, that’s not the only coverage you will need.
Here are three of the most common types of insurance coverage overlooked by providers when they move to an independent office and why they’re vital to the health of your practice’s future.
1. Malpractice Tail Coverage
You’re leaving behind your current malpractice policy when you switch career paths. Right now, your coverage is either tied to the facility where you’re employed or run as an independent physician without an established location. Different coverage is necessary when you have a medical practice.
But you can’t move from one to another as easily as you can with other insurance coverage, especially if your existing policy falls into the claims-made category. This is the most common type of malpractice coverage. It handles any claims that occur during the policy period and are reported while the policy is still in force.
What happens when you cancel that policy and open a new one? The old policy is no longer responsible for any claims, even if they occurred when it was in effect.
Covering the Lapse With Tail Insurance
That’s where malpractice tail coverage comes in. This article by Physicians Thrive goes into detail on the topic. But, in summary, it’s liability coverage that fills the gap between your old policy and your new one. Tail policies take care of any claims made that occurred when the previous policy was in effect. Without it, the physician, not the carrier, is liable for those damages.
Tail insurance is a one-time cost, not a monthly or annual premium. It will typically cost about double your annual malpractice policy. For example, if your policy costs you $5,000 per year, you should expect your tail coverage to cost around $10,000, and you won’t ever have to pay for it again.
2. Business Interruption Insurance
Businesses around the world learned the importance of interruption insurance during the pandemic. Those who had policies that specifically included pandemics and contagious illnesses as covered losses weathered the global shutdown better than most others.
This type of coverage helps to offset the loss of income due to a disaster. Typically, this is paid out after a fire, hurricane, tornado, or another natural occurrence. While the facility is closed or being rebuilt, the policy pays a percentage of your agreed-upon income.
However, before you agree to a business interruption policy, be sure to carefully read the list of covered events and look for anything you know you want protection from. For instance, if your practice is in a flood zone, it’s likely excluded from the policy. You may need to add a rider at an extra cost to get the necessary coverage.
3. Cyber Liability Insurance
When you treat a patient, nearly every aspect of that visit is recorded in some form of electronic data. Prescriptions are instantly sent over the internet to pharmacies. Medical notes are transcribed into the patient’s e-file and shared with other doctors and insurance companies.
Since the Health Insurance Portability and Accountability Act of 1996 (better known as HIPAA), medical providers who fail to secure their patients’ health records can receive substantial fines and other penalties.
How can you securely prevent your small or large medical practice from being the target of cybercriminals? The answer is you can’t.
Even with the most up-to-date security system protecting your data, if a cybercriminal wants to breach your walls and has the knowledge to do so, they will. Just ask mega companies like Yahoo, Facebook, LinkedIn, JPMorgan Chase, and even, dare we say it, Microsoft! Yes, the giant operating system that protects most of the world’s electronic firewalls was once hacked by cybercriminals.
Since you can’t guarantee 100% that your practice will be safe from cybercrime, and you can’t move to a completely electronic-free facility, you must have cyber liability insurance. This coverage, also called cybersecurity protection, doesn’t prevent a breach. But it does keep your business from being liable for the high costs involved in one.
If your business is breached, you must pay to have customers notified and cover the costs of monitoring their credit. There will be legal fees involved if a lawsuit occurs and fines at various levels. Your insurance policy handles these expenses up to your policy limits.
If you’re debating the worthiness of the cost of this coverage, consider this statistic. Per recent research, the average cost of a data breach in 2023 hit businesses with $4.45 million in fines, lawsuits, and indirect costs, like damage to their reputations. Compare that to a policy that generally runs about $150 per month.
Conclusion
Starting a medical practice as the next phase in your career as a physician is an incredible step. As you take it, though, don’t forget to protect your endeavor with these three oft-forgotten insurance policies.
