Insurance, so goes the hoary cliché, is the one product you buy hoping never to use. While no one enjoys foreseeing unforeseeable calamities, if you haven’t reviewed your insurance coverage recently, there is no time like the present.
Dr. Joseph S. Eastern
, but the cost has become prohibitive in many areas, when insurers are willing to write them at all. “Claims made” policies are cheaper and provide the same protection, but only while coverage is in effect. You will need “tail” coverage against belated claims after your policy lapses, but many companies provide free tail coverage if you are retiring. If you are simply switching workplaces (or policies), ask your new insurer about “nose” coverage, for claims involving acts that occurred before the new policy takes effect.
Other alternatives are gaining popularity as the demand for reasonably priced insurance increases. The most common, known as reciprocal exchanges, are very similar to traditional insurers, but require policyholders to make capital contributions in addition to payment of premiums, at least in their early stages. You get your investment back, with interest, when (if) the exchange becomes solvent.
Another option, called a captive, is a company formed by a consortium of medical practices to write their own insurance policies. All participants are shareholders, and all premiums (less administrative expenses) go toward building the security of the captive. Most captives purchase reinsurance to protect against catastrophic losses. If all goes well, individual owners sell their shares at retirement for a profit, which has grown tax-free in the interim.
Those willing to shoulder more risk might consider a risk retention group (RRG), a sort of combination of an exchange and a captive. Again, the owners are the insureds themselves, but all responsibility for management and adequate funding falls on their shoulders, and reinsurance is not usually an option. Most medical malpractice RRGs are licensed in Vermont or South Carolina, because of favorable laws in those states, but can be based in any state that allows them (36 at this writing). RRGs provide profit opportunities not available with traditional insurance, but there is risk: A few large claims could eat up all the profits, or even put owners in a financial hole.
Malpractice insurance requirements will remain fairly static throughout your career, but other insurance needs evolve over time. A good example is life insurance: As retirement savings increase, the need for life insurance decreases – especially expensive “whole life” coverage, which can often be eliminated or converted to cheaper “term” insurance.
Health insurance premiums continue to soar, but the Affordable Care Act might offer a favorable alternative for your office policy. If you are considering that, the Centers for Medicare & Medicaid Services maintains a website summarizing the various options for employers.