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The majority of doctors have liability insurance, also called medical malpractice insurance. Liability insurance protects the doctor in the event that she is sued by a former patient. Most doctors pay for liability insurance out of pocket and one policy normally costs tens of thousands of dollars a year, though premiums can be much higher. A number of factors affect insurance prices, namely location, medical field, investments and type of company.
In most states and for most doctors, liability insurance costs between $10,000 and $40,000 in premiums a year; however, costs for some can reach as high as $200,000. Most doctors pay for the insurance using their salaries; few employers offer to pay the costs, though some doctors working for the government can count on the government to pay if they get sued.
Insurance costs vary dramatically, with one of the biggest factors being the state in which a doctor practices. State laws, policies and court history affect insurance premiums. For example, in 2009, My Medical Malpractice Insurance reported that obstetricians in California paid between $30,000 and $40,000, depending on the insurance company, while most obstetricians in New York paid upwards of $100,000, with some policies quoting rates at nearly $200,000.
A doctor’s area of medicine also affects insurance rates, as some fields are considerably more risky than others and more likely to bring up lawsuits. My Medical Malpractice Insurance compares quotes for three categories: internal medicine, surgeons and obstetricians. In most states, doctors practicing internal medicine pay insurance rates of around $10,000, while $30,000 is normal for surgeons and obstetricians get hit with the highest rates.
Investing and Lawsuits
Some debate exists about what drives liability insurance rates. Insurance companies claim that lawsuit settlements and awards drive costs. However, insurance companies invest most of the money they receive through premiums and derive profits from those investments. Some commentators, including CBS, point to data that show rates going up in bad investment environments and leveling out in good markets.
- My Medical Malpractice Insurance: New York
- General Accounting Office; Medical Malpractice Insurance; June 2003
- CBS News; High Cost of Medical Malpractice Insurance; Jaime Holguin; April 2004
- The Robert Wood Johnson Foundation; Understanding Medical Malpractice Insurance; Michelle M. Mello; January 2006
Calla Hummel is a doctoral student studying contraband in international political economy. She supplements her student stipend by writing about personal finance and working as a consultant, as well as hoping that her investments will pan out.