Cancelling Your Medical Malpractice Claims-Made Policy?

READ THIS! YOUR FUTURE SELF WILL THANK YOU!

So, you’re thinking about cancelling your medical malpractice claims-made insurance policy. Maybe you’re closing your med spa, switching to a new insurer, or just trying to save money. Whatever the reason, STOP and read this first. Cancelling a claims-made policy isn’t as simple as walking away—there’s a lot at stake, and you need to protect yourself from potential financial disaster. Let’s break it down in plain terms.

What is a Claims-Made Policy Anyway?

A claims-made policy is a type of insurance that covers you for claims reported while the policy is active. That means:

• If a patient files a claim during your policy’s coverage period for something that happened while you were insured, you’re covered.
• BUT… if your policy isn’t active when the claim is made (even if the incident happened years ago), you’re NOT covered. Yikes!

Why Tail Coverage Matters

Extended Reporting Period (ERP), also known as, Tail coverage, steps in to save the day when you cancel your claims-made policy. It lets you report claims for incidents that happened while your policy was active but are filed after it’s cancelled.

Here’s why you might need it:

• Medical malpractice claims often come YEARS after the treatment occurred. Think about a patient discovering a complication months or years later.
• Without tail coverage, you’ll be on the hook for any claims filed after cancellation. And trust me, lawsuits can cost big bucks—we’re talking hundreds of thousands or even millions of dollars.

Things to Consider Before Cancelling

Before you cancel your claims-made policy, use this handy checklist to make sure you’re fully protected:

1. What’s Your Retroactive Date?
   1. The retroactive date is the starting point of your coverage. It’s like the day your insurance started protecting you. If you cancel your policy without tail coverage, you’ll lose coverage for any incidents that happened after the retroactive date.
2. Do You Have Pending Claims or Incidents?
   1. Have you had any complaints, lawsuits, or patient issues recently? If yes, these might turn into claims later.
   2. Make sure you report any known incidents before cancelling your policy.
3. Will a New Policy Cover Your Past?
   1. If you’re switching insurers, ask if the new policy includes retroactive coverage for your old policy period. If it doesn’t, you’ll need tail coverage from your current insurer.
4. Can You Afford Tail Coverage?
   1. Tail coverage isn’t cheap—it can cost 1–2 times your annual premium (or more). But think of it as peace of mind.
   2. Compare the cost of tail coverage to the potential cost of a lawsuit. Tail coverage is a bargain in comparison!
5. What About Your Team?
   1. If you’re a med spa owner or practice manager, your policy might also cover your employees, like nurses or nurse practitioners. Cancelling without tail coverage could leave them exposed too.
6. How Long Do You Need Protection?
   1. Most tail coverage lasts 1–3 years, but some insurers offer longer or even indefinite tail options. Choose what makes sense for your practice.
7. Are You Closing or Retiring?
   1. If you’re shutting down your practice or retiring, tail coverage is even more important. Claims can pop up long after you’re out of the game.

The Bottom Line

Cancelling a claims-made policy without tail coverage is like leaving your front door wide open when you go on vacation—you’re inviting trouble. Malpractice claims can hit years after the treatment, and without coverage, you’ll be left handling legal fees and settlements on your own.

Here’s the good news: with a little planning and the right coverage, you can cancel your policy and still protect yourself. Talk to your insurance broker or carrier, weigh your options, and make an informed decision.

Your future self will thank you.