In a claims-paid policy, the insurer only provides coverage for claims that are paid during the policy period. This type of coverage is rare; it is only offered by a limited number of insurance providers in a limited number of states.
However, claims-paid policies are usually cheaper than claims-made insurance policies, but more restrictive than them as well. With this type of coverage, it doesn't matter when the claim was filed or when the event in question occurred, both of which are important with claims-made insurance.
Often, this type of insurance appeals to trusts, such as large hospital systems and administrations, rather than small private practices or individual doctors.
In order to understand claims-paid insurance, here's an example. A claim filed in October 2018 against a doctor isn't paid until November 2019. If the doctor has a claims-paid policy with their insurance company, the insurance company is only liable for this claim if said doctor is still insured by them when the policy is paid. It doesn't matter when the incident happened or when the claim was made.
Limits for claims-paid insurance vary based on:
However, claims-paid limits do not restore each year as occurrence policies do. Limits are placed when the policy is negotiated and purchased, known as restrictive triggers. Under these triggers, a claim is not activated until payment is required.
There can be difficulties switching policies or insurers, too. Physicians shifting coverage from a claims-paid policy to a claims-made one should purchase nose coverage from their new provider to ensure comprehensive coverage without gaps.
It is important to note that claims-paid policies can leave physicians in a tough spot if they want to cancel their coverage. The insured cannot cancel their malpractice policies while a claim is pending unless they're willing to pay claims out of pocket.
Premiums vary widely based on state and urban or rural location. Claims-paid is much less expensive than claims-made, but is more restrictive.
Also, for claims-paid insurance, premiums reflect past and future claim payouts. For example, if you have a high number of high claim payouts in 1 year, and are expected to have more settled during the next year, you will have a higher premium. Because of this, claims-paid insurance is particularly beneficial for low-risk physicians.
Claims-paid malpractice insurance, a policy that kicks in whenever claim payouts are received, can be very inexpensive. However, it can also be very restrictive with its limits and not good for high-risk doctors.
For more information, contact Capson now.