As a therapist, you face challenging situations regularly. You encounter clients who may be suicidal, children who may be being abused, and learn information in confidence that may pose a threat to someone else’s life. Knowing where the line lies that designates when action should be taken isn’t always clear, exposing you to risk. And you’re held to incredibly high standards of behavior. Confidentiality is easy to let slip, or you may inadvertently share advice beyond your scope of practice.
Beyond these challenges, you’re only human, and you’re bound to occasionally make mistakes. And clients may sue for frivolous reasons — they may claim client abandonment, or say that you failed to obtain adequate informed consent. But one of these mistakes could result in a lawsuit with high costs. Protecting yourself as a therapist with malpractice insurance will give you peace of mind and reduce financial risk. But malpractice insurance varies, and it’s not always easy to know what to look for. Let’s explore how to choose the right policy and insurer for your practice.
What Malpractice Insurance Typically Covers
Coverage varies among different policies and different insurers, but malpractice insurance typically covers the following.
- Legal fees and court costs — Pays legal fees and court costs from the start of a claim until the end. Some policies also offer replacement pay to compensate for days in court.
- Legal defense costs before state licensing boards — Covers legal defense costs for going before a regulatory board.
- Professional boards or committees — Compensates for professional services that are provided while serving as a psychologist on a professional board or committee. It includes members of HMOs, educational institutions, formal accreditation, and others.
- Sexual misconduct — Covers defense costs for accusations of sexual misconduct.
- Advertising injury — Provides protection for issues resulting from your advertising, including slander, defamation, libel, false advertising, and copyright infringement.
- Personal injury — Covers against personal injury claims resulting from false arrest, libel, slander, privacy issues, and others.
- Premises liability — Offers coverage for liability issues that occur on the premise of your practice.
Your malpractice insurer is responsible to make sure you’re represented by an attorney who’s knowledgeable of the malpractice laws where you live. They may intervene before a lawsuit is filed by sending letters on your behalf and even devising a strategy to protect your practice. It’s important to note that you’re only covered for the amount of your policy limit and only for suits that fall within the parameters of your policy. So it’s important to do your homework when looking for therapist malpractice insurance.
Claims Made vs. Occurrence Policies
There are two types of malpractice insurance policies: a claims-made policy and an occurrence policy. A claims-made policy covers claims only when the policy is active. An occurrence policy covers any events that happened when the policy was active, regardless of whether the policy is still active at the time of the claim. (So, if an alleged incident happened two years ago and your policy is no longer active, a claims-made policy would not provide coverage, but an occurrence policy would — as long as the policy was active at the time of the incident.)
Some claims-made policies offer an add-on that will cover a time period prior to the policy for an additional cost. Additionally, some will also offer an extended reporting option that covers future claims for prior incidents while the policy was still active to offer protection to therapists who stop practicing or retire.
Factors that Affect Cost
There are a number of factors that can impact the cost of malpractice insurance. Typically, the more that’s covered, the higher the cost, but that’s not the only factor.
The insurer’s assessment of your practice’s risk — Treating clients considered to be higher risk may raise your malpractice costs.
The type of coverage — If you’re seeking a general-liability policy with malpractice protection, it will cost more than malpractice insurance alone, for example.
The amount of coverage — The higher a policy limit and the lower a deductible, the higher the premiums will be. Consider the risk level of your practice to determine how much coverage you should seek.
Your years of experience — Therapists who are just starting out can generally expect to pay more for malpractice insurance than those who have a track record with years of experience.
Whether or not you have been sued or faced a licensing board complaint before — If you have experience with being sued in the past, your premium may reflect that.
The state where you practice — States that have more favorable legal climates may offer lower-cost policies.
It’s best to do an evaluation of your risk factors and your resources to determine what type of coverage and how much you should seek. As you’re evaluating different policies, be sure you understand the coverage provided.
How to Evaluate Providers
Many insurers offer malpractice insurance coverage, so it can be a challenge to decide which company to go with. Start by checking out reviews and talking with peers to find out which companies have a good reputation for both coverage and support. If you’re involved in a lawsuit, you’ll want to be sure the company you choose will offer reliable, timely support that you can have faith in. It’s best to choose a company familiar with mental health therapy and not just one that offers general malpractice insurance.
Next, based on the type of coverage and amount of coverage you need, review policies from a few companies to see what they offer, and compare them to determine which best aligns with your needs. Finally, compare your final list of potential policies on price relative to their coverage, including deductibles and coverage limits, to be sure you are getting a good value for the cost.
Malpractice Insurance Offers Protection for Your Practice
Malpractice insurance is a wise investment to protect yourself and your therapy practice. It reduces your financial risk and ensures you have support when you need it. The peace of mind you’ll gain will be more than worth the cost of your policy.
Ready for a comprehensive practice management system to keep your business on track?