# Malpractice Insurance: Definition, Types, Importance

![Malpractice Insurance](https://www.investopedia.com/thmb/kI53Z9o--F-pEAfhTC8fZOUnTrY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/malpractice-insurance_final-2175f546cee84786bcfb014a03ee4a1b.png)

*— Investopedia / Laura Porter*

## What Is Malpractice Insurance?

Malpractice insurance is a type of [professional liability insurance](https://www.investopedia.com/terms/p/professional-liability-insurance.asp) purchased by healthcare professionals. This [insurance coverage](https://www.investopedia.com/terms/i/insurance-coverage.asp) protects healthcare providers against patients who file suits against them under the complaint that they were harmed by the professional's negligence or intentionally harmful treatment decisions. Malpractice insurance also covers the death of a patient.

### Key Takeaways

*   Malpractice insurance is a type of professional liability insurance intended to cover healthcare professionals.
*   Patients can file lawsuits against healthcare professionals seeking damages for medical negligence that resulted in further health problems or death.
*   Studies show that medical negligence is the third leading cause of death in the United States, so more likely than not, a healthcare professional will need malpractice insurance.
*   Malpractice insurance can be obtained through a private insurer, through an employer, or through organizations, such as medical risk retention groups (RRGs).
*   The two basic types of professional liability insurance are claims-made policies or occurrence policies.
*   Legal costs, punitive damages, and medical damages are all covered under malpractice insurance.

## Understanding Malpractice Insurance

Most medical doctors will need malpractice insurance sometime during their professional career, and for good reason. A study by Johns Hopkins University found medical errors to be the third leading cause of death in the United States, behind heart disease and cancer. Medical negligence can happen during diagnosis, during treatment, or as part of the advice given for treatment after an illness. Approximately 250,000 deaths in the U.S. arise from medical errors every year.

According to government data, roughly 10,800 medical malpractice claims were paid in 2022. Nearly one third of physicians report they have been sued at least once in their careers. This underlines the importance of having malpractice insurance for a healthcare professional.

Medical malpractice insurance requirements vary by state. Some states specifically require insurance, while others require a minimum amount of coverage to participate in state programs designed to assist them with claims. 

Medical malpractice insurance premiums are usually based on the physician's specialty and geographic location, not on [claims](https://www.investopedia.com/terms/i/insurance_claim.asp) experience. This means that even if a physician has never been sued, they can end up paying extremely high premiums. The [premiums](https://www.investopedia.com/terms/p/premium.asp) can be high because of such factors as the amount of coverage needed, claims severity, claims frequency, location of practice, and laws in the area.

![Cost Factors for Malpractice Insurance](https://www.investopedia.com/thmb/3_8iUSBlTLev4Ea5XgEvDorCLKQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/malpractice-insurance-final-8fdaa2e3f7fe41ad9107b73e4d857c4e.png)

*— Investopedia / Lara Antal*

## Types of Malpractice Insurance

There are many options for procuring malpractice insurance. In the most basic form, an insurance policy can be purchased for an individual or group by a private insurer. Individual or group policies can also be purchased by a medical [risk retention group](https://www.investopedia.com/terms/r/risk-retention-group-rrg.asp) (RRG). An RRG is a group of medical professionals organized to provide malpractice insurance. Another option for obtaining malpractice insurance is under the coverage plan of an employer, such as a hospital.

Individuals who work in federal health centers do not need to obtain malpractice insurance as federal law provides these workers immunity from civil lawsuits. Insurance can often also be obtained through state and local agencies if the situation deems it necessary.

The two types of policies that a healthcare professional can purchase are a [claims-made policy](https://www.investopedia.com/terms/c/claimsmade-policy.asp) or an [occurrence policy](https://www.investopedia.com/terms/o/occurrence-policy.asp). A claims-made policy only covers claims if the policy was in effect when the treatment occurred and when the lawsuit was made. An occurrence policy covers any claim that was made on a treatment that occurred while the policy was in effect, even if the policy has since expired.

The types of costs covered under a malpractice policy are wide. They include all legal fees, such as lawyer fees, settlement and arbitration costs, medical damages, and punitive damages.

## Proving a Malpractice Lawsuit

In a medical malpractice lawsuit, the plaintiff needs to prove a medical professional violated the general [standard of care of a patient](https://www.investopedia.com/articles/personal-finance/072315/importance-healthcare-risk-management.asp), as defined by the medical community. In order to be successful in a medical malpractice lawsuit, three things generally need to happen:

1.  The plaintiff's attorney must prove there was a breach of medical protocol that resulted in a practitioner choosing a different course of action than a colleague would have taken.
2.  The medical professional cause physical or emotional injury.
3.  There must be sufficient evidence proving the medical professional caused the damage.

> **Article Sources**
>
> 1.  Johns Hopkins Medicine. “[Study Suggests Medical Errors Now Third Leading Cause of Death in the U.S.](https://www.hopkinsmedicine.org/news/media/releases/study_suggests_medical_errors_now_third_leading_cause_of_death_in_the_us)”
>     
> 2.  Health Resources and Services Administration. “[National Practitioner Data Bank](https://www.npdb.hrsa.gov/analysistool/).”
>     
> 3.  American Medical Association. “[Policy Research Perspectives: Medical Liability Claim Frequency Among U.S. Physicians](https://www.ama-assn.org/system/files/policy-research-perspective-medical-liability-claim-frequency.pdf),” Page 2.
>     
> 4.  Insureon. “[State Laws for Medical Malpractice Insurance](https://www.insureon.com/small-business-insurance/medical-malpractice/state-laws).”
>     
> 5.  Health Resources and Services Administration. “[FTCA Frequently Asked Questions](https://bphc.hrsa.gov/initiatives/ftca/faq).”