Tail Insurance for your Medical Malpractice Policy

April 04, 2019

Whether you are trying to insure a small facility like an independent imaging center or a  Medi-Spa, you are an innovative physician working for an institution and you are driven to do something different creative and scientific, so you’ve start your own clinical research organization, or if you are an individual physician working infrequently as an itinerant locum tenens, you’ll need Medical Malpractice Professional Liability Insurance. How claims are handled by your insurance is an important issue to resolve. It’s about two things: the cost of medical malpractice insurance now, and the cost to protect you for the work you do now in the future. This latter concept is widely misunderstood, but easily solved: Tail Insurance.

There are ways to avoid this expensive cost, saving thousands of dollars and freeing up that money to invest or to enjoy.

▪ Tail insurance, if properly structured, creatively researched, and well-implemented is not the bank-breaking inevitability that many have experienced;
▪ There are institutional policies that also bake in the cost of the tail in the premium calculus.

Urgent Care Centers, Emergency Medical Groups, Aesthetic Facilities, Age Management, Medi Spas, and Medical Directors all face the same problems. One of those is often ”How can I decide to work here when the cost to quit is too expensive?”

The reality is that the cost to quit is the cost of tail insurance. Your future protection is as important as your current protection in the medical professional liability world. The Doctors Insurance Agency has worked for 30 years to develop innovative, strategic, and affordable methods of paying your premium on policies that contemplate your cost of tail.

The most difficult policies in which to manage the cost of tail insurance is the individual claims made policy. Even that allows for some strategy if you’re in a position to reduce your number of hours by changing from full- to part-time. After one or two years of a reduced practice schedule, the tail will drop significantly: at least close to half the cost of what it would be prior to the change. Most medical malpractice companies use a formula with a factor of 2 or 2.5 times the last undiscounted annualized premium, so if you lower the base by reducing hours, you lower the resulting consequential cost of tail insurance.

It is important to consider the effect of not purchasing tail on your future insurability, as well as the protection of your assets. Far too often we see young active doctors with practice periods that involve open exposure not protected by a tail policy endorsement. We have been counseling physicians for 30 years. There are methods to spread out the cost, even finance the risk or to go to the market for an independent quote.