Which Insurance Policies Does Your Healthcare Practice Need?

Not sure which insurance policies are required and which are just smart to have? This guide breaks down the essentials for small- to mid-sized healthcare practices.

Operating a healthcare practice is no easy task. In addition to obtaining the required documentation and compliance paperwork to begin seeing patients, practice owners must also consider insurance coverage. But what insurance policies are essential, and which are simply recommended? This article outlines key coverage types to help guide your decision-making.

Professional Liability Insurance

Many states require that clinicians and their practices carry professional liability (or malpractice) insurance. In some states, you may be required to demonstrate proof of coverage to secure contracts with third-party payors or businesses or to maintain your professional license. Obligations vary significantly by state, and also by profession (e.g., physicians, physical therapists, and mental health practitioners). 

There are two main types of professional liability insurance.

Claims-Made Policies

Claims-made policies provide coverage for claims filed during the active policy period. However, claims filed after the policy expires are not typically covered, even if the incident occurred while the policy was in force. These policies are generally less expensive than occurrence-based plans, but often require “tail coverage,” a separate policy extension that covers claims made after the policy has ended. Tail coverage can be costly and may be required by contract or by law.

Occurrence-Based Policies

Occurrence-based policies, on the other hand, cover claims filed against you for incidents that occurred during the active policy period, regardless of when a claim is filed. These policies tend to be more expensive due to their broader protection, but they eliminate the need for tail coverage.

Many professional liability insurers also offer optional add-ons, such as license defense and regulatory board coverage. These policies are not required, but they can be especially valuable for practitioners who have a higher risk of adverse patient interactions that may lead to investigations and professional disciplinary action. Clinicians should assess whether their patient population poses an elevated risk.

Business and Operations Insurance Policies

Healthcare practices with brick-and-mortar locations should consider commercial property insurance and general liability insurance. These policies are typically not required by law, but they are commonly required under commercial lease agreements. 

Practices that provide at-home or mobile care should especially consider general liability insurance as a barrier against liability for injuries and property damage that may occur during their mobile operations.

Small to medium-sized practices may benefit from business owner’s policies, which bundle general liability coverage, commercial property insurance, and business interruption insurance at a lower combined cost than obtaining each policy separately. Business interruption insurance (sometimes referred to as business income insurance) covers lost income following covered events such as vandalism, fires, theft, or certain weather-related disasters. It’s a particularly valuable option in areas prone to extreme weather.