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. Channeling

    Channeling is a commercial insurance policy, which insures employees ...
  2. Chaplain Malpractice Insurance

    Chaplain malpractice insurance is liability insurance that provides ...
  3. Professional Liability Insurance

    Professional liability insurance protects professionals, such ...
  4. Medical Underwriting

    Medical underwriting is the process of assessing the risk associated ...
  5. Case Management

    Case Management is the planning, processing and monitoring the ...
  6. IRS Publication 502: Medical And ...

    A document published by the Internal Revenue Service detailing ...
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

    How To Avoid Medical Debt

    Find out what you can do to avoid a financial meltdown when there's a medical emergency.
  3. Insurance

    When Health Insurance Doesn’t Cover the Bills

    Health insurance doesn't pay enough to help the millions of consumers who are drowning in medical debt. Find other options to soften the blow.
  4. Insurance

    Investing In Medical Equipment Companies

    Learn the basics about medical equipment companies and how investing in them can benefit growth and value investors alike.
  5. Insurance

    Get Sale Prices On Healthcare With Discount Plans

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

    Why People with Good Health Insurance Go into Medical Debt

    A significant – but little-discussed – problem is that people are going into serious medical debt even with good health insurance. Here's why.
  7. 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.
  8. 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.
  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

    20 Ways To Save On Medical Bills

    Handy tips to cut the cost of hospital bills, co-pays, prescription drugs and more.
RELATED FAQS
  1. What are insurance sector companies usual profit margins?

    Understand what the average profit margin for a company that serves in the insurance sector and what factors can affect the ... Read Answer >>
Trading Center