The Claims-Made Professional Liability Policy…Saves YOU Money!

First, we want to recognize the behavioral health and social work professions as genuinely noble, founded on service, integrity, and clinical expertise. The profession can often be stressful and very dangerous. The nation is grateful for what you do—AND SO ARE WE! Thank you!

Here is the Big Take-Away!

Beware of insurance administrators, agents, and carriers that say they sell “lifetime coverage.” That is a marketing gimmick. They used to sell you an Occurrence Professional Liability policy with a higher premium to make more commission money from the transaction.

A Preferra Claims-Made, Professional Liability Policy, is virtually identical to a Preferra Occurrence Professional Liability Policy regarding limits and coverage features.  The difference is that the Claims-Made Policy premium begins at a meager amount, such as $65 for year one. The annual premium steps up each year, usually over six years, and then levels off to a yearly premium that equals the Occurrence Professional Liability policy premium. The low premium of a Claims-Made Professional Liability policy in the early years helps the insured (YOU) cope with expense control and yet still provides YOU with the same total level of coverage.

Here’s why some insurance agents, administrators, and carriers refuse to offer a Claims-Made Professional Liability policy: MONEY! Insurance administrators and agents only want to sell insurance policies with high premiums, so they earn more commission money from each transaction. Many also charge you a $20 or more policy transaction fee yearly! Preferra charges no policy transaction fees, and Preferra offers both types of professional liability policies from which YOU can choose.

So why does the insurance carrier, Preferra, provide the Claims-Made policy premium discount? Preferra delivers a significant, discounted premium for the same coverage as an Occurrence policy in the early years. One reason is that Preferra is more humanistic. YOUR welfare is more important to Preferra than charging you more money.

The insurance regulators and actuaries require an offer of a small optional make-up premium payment on the back end of a terminated policy if the insured decides to terminate the Claims-Made Professional Liability policy. This make-up premium is called a “Tail Cover” or “Extended Reporting Period,” covering the insured, YOU, for claims reported on a terminated Claims-Made policy. However, the incident that caused the claim originated when the policy was in force.  You are not required to buy a “Tail Cover.” It is YOUR decision.

Let’s take a look at this. Peer-reviewed claims research and Preferra’s claims experience show that claims are reported within 24 months of the incident. The most frequent claims, such as licensing board complaints, subpoenas for records, depositions, and trial testimony, are reported relatively early, usually within one to three months after the incident. More severe claims such as divorce-related litigation, sexual misconduct, and wrongful death negligence cases are less frequent, and when they arise, they are reported within 12 to 24 months.  (Except for Preferra, most carriers exclude sexual misconduct and divorce litigation coverage).

YOU can buy a Claims-Made Professional Liability policy at a meager premium from Preferra with full coverage. When YOU decide to terminate the policy, YOU can choose to buy an inexpensive Preferra “Tail Cover” with a single small premium payment that will cover all claims from incidents that occurred while your Preferra Professional Liability policy was in force, depending on how long that YOU want the “Tail Cover” to exist.  The “Tail Cover” premium for Preferra is a small fraction of your savings from the first six years of the Preferra Claims-Made Professional Liability policy.  If YOU consider buying a “Tail Cover,” analyze YOUR practice cases for the past three years to determine YOUR estimated likelihood of an incident type and it being reported.  Depending on your practice risks, YOU may not need to buy a “Tail Cover” at all.

So why is Preferra telling ME this?

Because Preferra policyholders (YOU) own Preferra, your welfare is more important than Preferra making extra money from YOU!

That is also why Preferra pays a cash dividend to its policyholders.

Some people prefer an Occurrence Professional Liability policy so they do not have to consider buying a “Tail Cover.”  The decision is up to YOU.  Remember that some states are lengthening or removing specific statutes of limitations that may impact culpability.  However, this only comes into play if a claim exists in the first place and may not be an issue.

In closing, regarding covered perils, sub-limits, and all coverage, such as $1MM per occurrence/$3MM in the aggregate, the Preferra Claims-Made and Occurrence Professional Liability policy contracts are virtually identical.  The difference between a Claims-Made policy and an Occurrence policy is the aspect of “lifetime coverage,” the first six years or so of the deeply discounted annual premiums, and an optional “Tail Cover” premium. The choice is YOURS.