Written by Sarah Lim, CA Lic# 0M52397
NECESSARY TYPES OF INSURANCE FOR DOCTORS
When it comes to purchasing insurance, physicians tend to focus solely on professional liability insurance. This is understandable considering it applies to the risk that is most worrisome as well as it being the largest premium they will have to pay. There are, however, other kinds of insurance that can be just as crucial to protecting their assets and securing their practice. Physicians may not be aware of this but certain forms of coverage are required by law. Many practices do know what is required or needed until it is too late. Not all practices need every form of coverage but the following is a simplified guide to the most common types of insurance physicians purchase for their practices.
1. Workers’ Compensation
Depending on the state, small businesses that have a certain amount of employees are legally required to provide workers’ compensation coverage. This would cover medical expenses as well as a portion of lost wages for those employees who become ill or injured on the job. This kind of coverage can also cover employee rehabilitation and death benefits and is fairly inexpensive. Estimates for the annual cost is about 28 cents per $100 of payroll.
2. ERISA (Employment Retirement Income Security Act)
The ERISA sets rules and standards for employment benefit plans (401k’s) in private sectors as well as for those who manage and invest their assets. The amount of required coverage is the lesser of $500,000 or 10% of the plan’s assets and it is specific to the practice’s retirement plan. Fund managers are required by ERISA to be covered by a fidelity bond which protects the plan from losses due to fraud or dishonesty. A typical bond lasts 3 years and usually costs less than $500.
3. General Liability
This kind of insurance protects against claims relating to bodily injury or property damage resulting from any operations, premises, and products and is many times required as a condition of leasing by landlords.
4. Commercial Property
A practice that owns its own building would need to obtain commercial property insurance to cover any damage to the building. However, a practice that leases the space could also use commercial property insurance to protect against any loss of medical and office equipment due to theft, fire, water damage caused by broken pipes, etc. Many times, property insurance is bundled with general liability coverage in a business owner’s policy (BOP), which can also broadened to include workers’ compensation, cyber, and other forms of coverage.
Premiums for commercial property insurance vary depending on the size, age, and condition of the building, value of the contents, safety measures, etc. A small practice can expect to pay about $2,000 annually for a commercial property policy.
5. Cyber
Although cyber insurance is relatively new, it’s becoming a necessity for even the smallest practices. Losses and damages arising from stolen, exposed, improperly shared, or even held for ransom patient data are covered under a cyber policy. The range of coverage includes loss and damage from deliberate actions like hacking and ransomware to accidents such as losing a laptop containing unencrypted patient data. Some malpractice policies include cyber coverage but it is usually not enough. A comprehensive cyber policy should include the following:
· Coverage for paper records;
· First-party and third-party coverage – whereas first-party coverage applies to damages suffered by the insured, third-party coverage applies to damages caused to others by the data breach (ex: legal costs from lawsuits filed by affected patients);
· Assistance in paying for regulatory penalties;
· Assistance in hiring IT experts to find and fix the breach;
· Assistance in hiring attorneys to defend patient lawsuits;
· Assistance in paying ransom to free hijacked data
6. Business Interruption
In the event that a fire or natural disaster prevents the practice from operating or bringing in revenue, business interruption coverage will provide lost income.
7. Theft and Employee Misconduct
It is unpleasant to think about but theft and misconduct from an employee does happen. Therefore, any practice that has employees handling money in any form is strongly advised to have them bonded.
8. Employment Practices
This type of coverage provides protection for a practice if it were to get sued for reasons that include discrimination and sexual harassment. This policy not only protects the physician owners, but also protects the staff for claims made against them. An estimated premium for a 10-person practice for a $1 million policy would be about $1500.
9. Disability
There may come a time when a physician or another source of significant revenue becomes disabled and unable to bring in revenue. In times like this, a disability policy will replace that income. For smaller or solo practices, this is especially important because the loss of one physician can threaten the ability for the practice to survive. Note that any disability policy should define “disability” as a physician no longer being able to work as a physician. By this definition, an insurer would be prevented from denying a disability claim if the physician were still able to perform another job that is not physician related.
10. Employee Health
Employee health insurance is not always required by law but it is something that many employees seek as a benefit provided by their employers. This type of coverage provides medical, and disability, and sometimes even life insurance for employees and owners.
11. Commercial Auto
A commercial auto insurance policy protects a practice in case of an accident while using a company or personal vehicle to perform any kind of task that is practice-related. For example, if an employee is making a bank deposit or picking up supplies, and an accident occurs, the practice can be held liable. The best way to avoid needing this type of coverage is to use couriers, taxis, or ride-share services.
12. Umbrella
By having so many different kinds of individual coverages, one may think that umbrella coverage is not necessary but it is actually highly recommended to protect again catastrophic awards that exceed the limits of the other coverages. A typical umbrella policy provides an additional $1 million of coverage for an annual premium of about $500 and can cover a range of claims.
A typical practice does not need every kind of coverage listed above. While worker’s compensation and ERISA are required by law, general liability, employee health, and property are essential to a practice’s ability to operate. The types of coverages a practice needs can be determined by its exposure, tolerance of risk, and the ability to pay. You don’t want to buy so much coverage that your practice becomes “insurance poor” or over-insured.
Trying to shop for so many different kinds of insurance can be tedious and time-consuming. This is why using a broker is highly recommended. California Attending Physicians Insurance Agency can help shop for policies within the various areas of liability insurance. The brokers at CAPIA are knowledgeable and thorough and can help you find the necessary forms of coverage today.
