DEFINITION of 'Malpractice Insurance'

A type of professional liability insurance purchased by health care professionals (and sometimes by other types of professionals, such as lawyers). This insurance coverage protects health care providers against patients who sue them under the claim that they were harmed by the physician's negligent or intentionally harmful treatment decisions.

BREAKING DOWN 'Malpractice Insurance'

Premiums are usually based on the physician's specialty and geographic location but not on claims experience. This means that even if a physician has never been sued, he or she can end up paying extremely high premiums. The premiums can become high because of factors such as amount of coverage needed, claims severity, claims frequency, location of practice and laws in the area.

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