As a psychotherapist, you encounter challenging situations daily. Patients are often under substantial stress when they see you. They may harbor suicidal thoughts or be victims of abuse. Effectively treating these patients can take time and be intense. During therapy, you’ll learn confidential information about patients and have to rely on your training and experience to find the right path forward to help patients.
Therapists face high standards because the cost of failure is high. Because of the personal nature of your treatments, you’re exposed to risk even if you do everything right.
In this guide, we’ll explain the benefits of professional liability insurance for therapists, what it covers, what impacts the cost, and how to choose the right professional liability insurance for your needs.
What Is Professional Liability Insurance for Therapists?
“Professional liability insurance coverage is crucial to helping therapists and counselors manage the risks associated with their practice, and in protecting both their financial interests and their professional licenses,” said Kirsten Soto, senior associate with Selman Breitman in Los Angeles.
Professional liability insurance is sometimes referred to as “malpractice insurance” and usually offers coverage for:
- Professional negligence
- Failure to abide by ethical guidelines (such as improper patient-provider relationships)
- Failure to follow appropriate guidelines regarding transition of care
- Violations of the Health Insurance Portability and Accountability Act (HIPAA)
- Disciplinary proceedings initiated by a professional licensure board
By contrast, a general business owner’s policy typically covers the kinds of injuries, property damage, or other claims that could happen almost anywhere. But it will not cover legal claims arising out of errors and omissions while providing a professional service.
What Does Therapist Professional Liability Insurance Cover?
Professional liability insurance typically covers lawsuits and court costs, defense in case of actions by state licensing boards, and other expenses associated with dealing with these types of claims.
While different policies from different providers might not cover everything listed here or may contain limitations, here are some of the things professional liability insurance typically covers.
Defense Counsel & Court Costs
The biggest expense in defending a lawsuit will be the cost of experienced, professional legal counsel. Professional liability insurance typically covers all the costs of legal representation from start to finish. Some policies will also offer reimbursement to compensate for your time in court, as well.
Besides the expense, the potential damage to your reputation and worry can take a toll. Not surprisingly, 95% of medical practitioners who are sued will experience periods of emotional distress throughout a protracted legal process, according to a study published in the National Institute of Health. As many as 39% experience major depressive disorders.
Even if a suit is never filed, there can be significant risks and costs from a claim of malpractice.
“In the event of a pre-suit demand, defense counsel appointed by an insurer can take steps to preserve the relevant evidence and to resolve the claim prior to the filing of a lawsuit,” said Soto. “These pre-suit actions can be crucial to protecting an insured therapist from years of lengthy and costly litigation.”
Costs Associated With Licensing Board Actions
A legal defense may also be necessary for dealing with state licensing boards to avoid license suspension or revocation. The American Psychological Association (APA) reported that 40% of psychologists will receive a licensing board complaint over the course of a 20-year career.
While the most common complaints to licensing boards are about sexual misconduct, multiple relationships, or boundary-crossing violations, an unhappy patient can file complaints for other reasons, as well.
“Such (professional liability insurance) coverage allows mental health professionals to focus on working with an experienced attorney who will assist in preparing the appropriate documents and testimony for presentation to licensure boards, rather than bearing the full burden of handling such complaints alone,” Soto said.
What Affects the Cost of Professional Liability Insurance?
Several factors will affect the cost of professional liability insurance, including the amount of coverage. Other factors include:
- Practice Location: Where you practice will be factored into the cost of professional liability insurance. Some states have legal climates that are more favorable to claimants (and less favorable to defendants), which can result in higher insurance premiums.
- Practice Details: The type of therapy you offer may affect your premium, as will the size of your practice and the specific practice setting.
- Claims History: Prior lawsuits, claims, or complaints to a medical board are relevant to determining the cost or premium of your policy.
- Types of Coverage: The type of coverage you choose will also impact your policy premiums.
- Claims-Made Policies: A claims-made policy only offers coverage for claims made against you while the policy is in force. If the policy expires or is terminated, there is no coverage for any claims made against you outside the policy effective dates.
- Occurrence Policies: An occurrence policy will cover your practice for professional services you provided when the policy was in effect, even if a claim is reported after the policy period ends.
Since an occurrence policy provides greater protection than a claims-made policy, you can expect to see higher rates. Some insurers also offer “tail” coverage you can buy at the end of your claims-made policy to provide coverage for claims made after the policy period ends. This effectively extends the value of a claims-made policies, but the “tail” coverage can be costly.
3 Things to Consider When Choosing the Right Professional Liability Insurance Provider for You
If you ever have to deal with a lawsuit or a complaint to a state licensing board, your reputation and livelihood are on the line. You need a trusted and experienced insurance partner on your side who will help you defend yourself and your practice.
Here are some of the key items you’ll want to consider:
The Insurance Company’s Business Reputation
Always check reviews from professional associations and discuss options with your peers. A good place to start is with your state’s department of insurance. This can help you ensure they are licensed to do business in your state and list any complaints against the insurer.
The Insurance Company’s Financial Stability
You need to know that if you ever need to pay for a legal defense, the insurance company will be there when you need them, especially if a judgment goes against you. The insurance carrier must have the financial resources to pay all of their claims, including yours.
You’ll want to review the carrier’s financial stability rating with A.M. Best, Fitch, Moody’s Investor Services, or Standard & Poor’s Insurance Rating Services.
National & Local Resources
Your insurance carrier should have a strong national presence to understand the landscape, but you also want to work with a carrier that has regional or local experts. This is especially important for those with practices that may cover multiple states or have any thoughts about moving or opening up additional practices in other locations.
With Berxi, you can choose from a range of insurance products and limits to protect your practice. Part of the Berkshire Hathaway Specialty Insurance Company, Berxi allows therapists and other medical professionals a quick and easy way to buy professional liability insurance coverage and download a certificate of insurance in a single day.
Berxi malpractice policies provide defense coverage in addition to the limits of insurance. That means that money spent on your defense won’t be deducted from the amount available to pay claims. If you have a $1 million liability limit, you’ll still have $1 million to handle any settlement or damages beyond your legal fees.
There are also options for flexible or no deductible plans and payment plans. Customers with claims-made policies will also be able to purchase customizable nose and tail coverage.
Get started today with a quote from Berxi. Many therapists and other healthcare professionals find they can get premium coverage at prices around 20% lower than other providers.
Image courtesy of iStock.com/ThitareeSarmkasat