Hey! I'm Robbie, the founder of Roots Financial Planning, a fee-only, fiduciary advisor located in San Antonio, TX working virtually with dentists across the United States. When I'm not helping dentists live their best life, you can find me making pizza, swimming, or skiing.
Malpractice insurance (sometimes called professional liability) is an essential piece of a dentist’s insurance puzzle. Unlike other forms of insurance, malpractice insurance is required in order for you to perform your job as a dentist. Malpractice claims are more common than you might think, so it is important to be prepared. Malpractice insurance is in place to help mitigate the risk of a patient filing a claim against you for potential negligence. The insurance will help cover costs to defend yourself so that you won’t be held personally liable for the claim.
When do you need to get malpractice insurance?
Since malpractice insurance is required, it is recommended that you acquire coverage as soon as you have a job lined up after graduation. It is possible to backdate the policy in the event that you forget to sign up before you start working.
What is covered by malpractice insurance?
You will be covered when performing the duties of a general dentist based on the definition provided by your state. If you perform procedures of a specialty on a regular basis, this will need to be added to your policy.
If you were to be caught in a malpractice claim, your insurance would cover the cost of defending/settling the claim, damages (if liable), and punitive damages.
What options do you need to consider in your malpractice policy?
Claims-Made or Occurrence
This is likely the most important option to consider within your policy. It dictates whether you will be covered for a claim based on when an incident occurred and when a claim was filed. If you have a claims-made policy, you will be covered if a policy is active at the time an incident occurs and at the time the claim is reported. If you have an occurrence policy, you will be covered for any incident that occurs while a policy is active, regardless of when a claim is reported.
Because of these two definitions, I like to think of an occurrence policy as “set it and forget it.” Once you have the policy, you never have to worry about gaps in coverage. Nor do you have to worry about coverage before or after a policy period ends. With a claims-made policy, you might have to purchase prior acts coverage or extended reporting coverage (sometimes called tail coverage) to cover you for periods before and after a policy has ended, respectively.
Since occurrence can be more valuable with its ease of implementation, the premiums are generally a tad higher. Though, it is not an extraordinary increase in most places.
Consent to Settle Clause
Consent to settle means that an insurance company must get written approval from the dentist to settle the claim. This is what you want in your policy so that you have the ultimate decision on what happens. The insurance company may recommend that you settle the claim to avoid further costs and time in court.
You will also want to avoid a hammer clause in your policy. If you were to refuse to settle at the recommendation of the insurance company, you could end up liable for any additional costs in excess of what the insurance company asked you to settle for.
How much will you pay for a malpractice policy?
Malpractice insurance premiums are highly dependent on location, procedure mix, and office structure. If you practice in a large city, your premiums are likely to be higher than someone practicing in a small city. If you are doing more complex cases outside the scope of general dentistry, then your premiums will likely be higher. Lastly, if you work for a DSO instead of a private practice, your premiums will likely be higher.
When shopping for the best rates, it is fruitless to compare with peers who are not in the same area and performing similar procedures.
How much malpractice insurance should you purchase?
Typical limits on a policy will be $1 million and $3 million. A $1 million limit for each individual claim and a $3 million aggregate limit per year. If you practice in a claim heavy area, an insurance agent may recommend higher limits, though that is far less common.
Luckily, malpractice insurance is not the most complicated insurance policy you’ll have to setup as a dentist. The main decision point will likely be whether you want a claims-made or occurrence policy. Once you have that figured out, interview a few providers that serve your state to determine if the premiums are comparable. With any luck, you will never have to face a claim, but are prepared for the worst.