Malpractice insurance is a type of liability insurance ormally purchased by doctors and other health care providers. Generally, it is a requirement for doctors to practice medicine in most states. This type of insurance is also needed to protect doctors from being sued when a mistake is made in which they can be sued. However, the cost of malpractice insurance is cost prohibitive for doctors in many areas.
- Doctors that practice medicine in most states are required to have liability insurance. This requirement is satisfied by purchasing a medial malpractice insurance policy. However, some doctors may opt to go without liability insurance in states, such as Florida, where it is permitted. Even if liability insurance is not required by the state many hospitals require a doctor or physician to have coverage for liability before privileges are granted.
- Malpractice insurance is typically needed to protect against various types of litigation costs. Typical litigation costs include jury awards that can at first seem disproportionate to the severity of an injury that was sustained. However, the amount of a jury award may not actually represent what an insurer actually pays in damages in a case. This is because many large jury awards are often reduced when they are appealed.
- The number of malpractice insurance claims has been on the decline or has stabilized the past few years. However, the dollar amount that is paid for these types of liability claims continue to increase. This leads to increased claims costs for health care providers on average at 6 percent a year. Insurance companies are also seeing costs for liability claims increase as more of these types of claims are being defended in court.
- Medical errors are one of the main reason in which malpractice insurance is necessary. However, many hospitals are no longer being paid by Medicare or some health insurance companies when specific types of medical errors occur. These are known as "never events" or medical errors that should never happen. These types of medical errors account for about one out of every six claims for medical malpractice liability.
- Insurance companies use various factors to set the rates that are used to calculate the premium for a malpractice insurance policy. One factor includes expected claim payments for a particular group or risk classification but these are may not always be accurate. Another factor is that insurers need to account for investment income for the future and administrative costs. Litigation costs also factor into the price of a malpractice liability insurance policy.
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