What is 'Malpractice Insurance'

Malpractice insurance is a type of 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'

A study by the Massachusetts General Hospital Department of Medicine concluded that most medical doctors will need malpractice insurance sometime during their professional career – and for good reason. Medical negligence is the third leading cause of death in the United States, and it can happen during diagnosis, during treatment or as part of advice given for treatment after an illness. Between 80,000 and 100,000 deaths in the US every year are caused by diagnosis errors, and 195,000 patients die in hospitals each year due to preventable mistakes. 

In the US alone, 15,000 to 19,000 medical malpractice suits are filed every year, and $38 billion was paid out between 1986 and 2010 for misdiagnosis of a patient. However, 80 percent of medical malpractice cases end with no payouts at all. In a medical malpractice lawsuit, the plaintiff needs to prove a medical professional violated the general standard of care of a patient, as defined by the medical community. In order to be successful in a medical malpractice lawsuit, three things generally need to happen:

  1. The plaintiff's attorney must prove there was a breach of medical protocol that resulted in a practitioner choosing a different course of action than a colleague would have taken.
  2. The medical professional causes physical or emotional injury.
  3. There must be sufficient evidence proving the medical professional caused the damage.

States require that medical professionals have current malpractice coverage to work in hospitals and other medical facilities. Medical malpractice insurance premiums are usually based on the physician's specialty and geographic location, 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 such factors as amount of coverage needed, claims severity, claims frequency, location of practice and laws in the area. Only about 5 percent of physicians are responsible for about 54 percent of medical malpractice penalties. Medical malpractice premiums tend to rise, on average, about 0.5 percent annually.

Lawyers are also required to carry malpractice insurance to cover any real or perceived failure to render professional services.

 

RELATED TERMS
  1. Allied Healthcare Professional ...

    Professional liability insurance that provides coverage for medical ...
  2. Indemnity Insurance

    Indemnity insurance is a contractual agreement in which one party ...
  3. Medical Underwriting

    Medical underwriting is the process of assessing the risk associated ...
  4. Health Insurance

    Health insurance is a type of insurance coverage that pays for ...
  5. Liability Insurance

    Any type of insurance policy that protects an individual or business ...
  6. Medical Expenses

    Medical expenses are any costs incurred in the prevention or ...
Related Articles
  1. Insurance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  2. Insurance

    Do This If Health Insurance Doesn’t Cover Your Bills

    Health insurance doesn't pay enough to help the millions of consumers who are drowning in medical debt. Are there any other options to soften the blow?
  3. Insurance

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  4. Insights

    Why Is Health Care So Expensive In The Us?

    The U.S. is the world leader in only one area of health care: costs. Why is it so hard to rein in these expenses?
  5. Insurance

    Insurance Do's and Don'ts for Young Doctors

    These are the insurance do's and don'ts for young medical professionals.
  6. Insurance

    Get Sale Prices On Healthcare With Discount Plans

    Medical discount plans can help the uninsured or underinsured afford better healthcare.
  7. Personal Finance

    The Millennial Guide to Medical Debt

    In America, it doesn’t take much to generate significant medical debt, even when you're young.
  8. Insurance

    7 Industries Benefiting From Obamacare

    Though the medical industry fears government intrusion, certain sectors in healthcare will benefit from Obamacare in the long run.
  9. Retirement

    3 Big Medical Costs and How to Protect Against Them

    Without a plan, an unexpected injury or chronic disease will cost you.
  10. Insurance

    What to Expect When Applying for Life Insurance

    Before jumping into a life insurance policy, learn what decisions you have to make and what you can do to reduce your premiums before you apply.
RELATED FAQS
  1. Why is my insurance premium so high/low?

    Insurance premiums can be affected by many factors including: type and amount of risk size of deductible amount of coverage ... Read Answer >>
Hot Definitions
  1. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  2. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  3. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  4. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  5. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  6. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
Trading Center