Employee Benefits

Short Term Disability
Long Term Disability
Accidental Death and Dismemberment
Critical Illness Plan
Long Term Care Insurance

Business Insurance

Professional Liability (E&O)
General Liability
Worker's Compensation
Employee Practices Liability (EPLI)
Directors and Officers Protection (D&O)
Medical Malpractice

Employee Benefits


A health maintenance organization (HMO) is a managed health insurance plan that provides health care services to plan participants through a broad system of participating health care professionals and medical facilities. The HMO emphasizes preventive health care, including periodic physical exams and encouragement of a healthier lifestyle.

HMO patient service generally revolves around a primary care physician (PCP). The PCP is the primary health care contact person who oversees, coordinates and helps manage your care. As an HMO plan participant, you have the freedom to choose any PCP that belongs to the HMO network.

In the event that you need to see a more specialized provider (such as a cardiologist or oncologist), your PCP must provide you with a referral to a specialist within the network in order for the expense to be covered by the HMO. Care received from an out-of-network in many cases is not covered by the HMO at all–check with your plan or agent to be sure.

HMO-insured individuals are often required to pay a relatively small co-payment (“copay”) at the time of each visit and/or for each prescription. The amount of the copay is a pre-specified, flat fee, unconnected to the actual cost for the health care service received.

Remember, non-emergency care must generally be received through the HMO network of providers in order for the claim to be paid.


A preferred provider organization (PPO) is a plan that has contracts with a network of “preferred” providers from which you can choose. You do not need to select a PCP and you do not need referrals or authorization to see other providers and/or specialists in the network.

If you receive your care from a doctor in the preferred network you will only be responsible for your annual deductible (a feature of some PPOs) and a copayment for your visit. If you get health services from a doctor or hospital that is not in the preferred network (known as going “out-of-network”) you will pay a higher amount. And, you will need to pay the doctor directly and file a claim with the PPO to get reimbursed.

PPO medical insurance is often amongst the more affordable health insurance plans. Because PPOs have negotiated fixed fees with their providers and may limit claims from out-of-network providers, they can keep their costs low. This results in lowering the health insurance cost for consumers.

When comparing health insurance plans, it is important to note whether your physician or preferred hospital is in the PPO network. In addition, be sure to review the medical expenses, including co-pays and deductibles, which may apply to both in-network and out-of-network services. Although PPOs are affordable health insurance options, carefully estimate all potential out-of-pocket expenses before selecting a plan.


A health savings account (HSA) is a tax exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses for beneficiaries covered under a qualified high deductible health plan. With an HSA, you can pay for current and future eligible medical, dental and vision expenses.

You own and control the funds in your HSA. Money you contribute to your HSA is federally tax deductible, whether or not you itemize deductions. Your funds can be conveniently accessed by a debit card to pay medical expenses. An HSA is similar to an IRA; however, HSAs are specifically dedicated to medical expenses.

In order to open an HSA, you must be covered by a qualified high deductible health plan, not also be covered by any other health plan that is not a high deductible health plan, not be enrolled in Medicare, and not be claimed as a dependent on another person’s tax return. A high deductible health plan costs less than traditional health care plans due to the higher deductible, so the money saved on monthly premiums can be added to your HSA. High deductible health plans are available to individuals under age 65, families and employer groups of all sizes.

In 2012, a high deductible health plan consists of an annual deductible of at least $1,200 for an individual and $2,400 for a family. In addition, the out-of-pocket maximum limit, including deductibles (excluding premiums), is $6,050 for an individual and $12,600 for a family. In the case of a family plan, the high deductible health plan may not start paying for any individual until the $2,400 family deductible is satisfied. Please be aware that not all plans with high deductibles qualify you to open an HSA. The policy must meet the specific HSA design specified by the U.S. Congress. Call our office for help with determining what high deductible plans qualify for HSA accounts.


A health reimbursement arrangement (HRA) is an employer-funded spending account that can be used to pay qualified medical expenses.

The HRA is 100% funded by your employer. The terms of these arrangements can provide first dollar medical coverage until the funds are exhausted or insurance coverage kicks in. The contribution amount per employee is set by the employer, and the employer determines what the funds can be used to cover and if the dollars can be rolled over to the next year.

In most cases, if the employee leaves the employer, they can’t take remaining HRA funds with them. Typically, your employer provides a high-deductible health plan and establishes an HRA in your name to help pay for your eligible out-of-pocket medical expenses. The HRA is funded by your employer. You may not contribute to the funding of your HRA.

If you use all of your funds and incur additional medical expenses that are your responsibility, you’ll be required to pay for these additional expenses out of your own pocket. These plans provide an incentive to become actively involved in your health care spending.


A flexible spending account (FSA) is a voluntary employer-sponsored program for employees to save a portion of their income to be used to pay for qualified medical or dependent care expenses incurred during their benefit plan year. Contributions are tax-free. Health and dependent-care FSA plans give employees the opportunity to realize tax savings on medical and daycare expenses through two separate pre-tax accounts.

The money employees contribute to their health care FSA can be used to reimburse themselves for eligible, out-of-pocket health care expenses made for themselves and/or covered dependents. Accounts are funded through payroll deductions. The employer determines the plan year and the maximum contribution amount an individual may contribute to their health care FSA during the plan year.

A dependent-care FSA is set up to reimburse an employee for their eligible, dependent-care expenses. Eligible expenses include dependent-care expenses for children under age 13, a disabled spouse, and/or a disabled relative or household member who depends on the account holder for at least half of his or her support. Accounts are funded through payroll deductions. The IRS limits dependent care maximums to $5,000 per year, $2,500 if the employee is married and filing separately.

When an employee enrolls in a health care and/or dependent care FSA, they need to elect the total amount of coverage they need for the plan year. In other words, they will have to decide upfront how much money they want to have deducted from each of their pay checks to fund this account. These deductions are exempt from state, federal, and FICA taxes.

Encourage your employees to calculate expected spending as closely as they can in order to determine the total amount of funds they want deducted from their annual income in a plan year. Once enrolled, an employee can’t change their annual contribution election unless they experience a qualified status change, such as marriage, divorce, birth or adoption of a child, death of a dependent, or a change in the employment status of their spouse.

Funds in a health care and/or dependent care FSA can only be used throughout the plan year. Unused funds will revert to the employer. Funds can’t be transferred from one account to another or rolled into the next plan year. In addition, employees must file claims for an expense incurred during the plan year and before the end of the run-out period, in order to receive a reimbursement from the FSA. All funds remaining in the account following the run-out period will be “forfeited” and returned to the employer. To receive a reimbursement from the FSA, employees must submit a completed reimbursement/claim form with an itemized receipt or bill that indicates the date and type of services and the amount they are
responsible for.

Health Equity pays claims weekly. If they choose, individuals may submit a completed direct deposit form and have reimbursements directly deposited into a personal account. Otherwise, payment will be mailed in the form of a check. Please note that there is a $2.00 fee for reimbursement provided via check. To learn more about this type of employer sponsored program call our qualified agents.

Short-Term Disability

Short-term disability insurance covers a percentage of your lost salary should injury or illnesses knock you out of work for more than a few days. Payments generally kick in when you have exhausted any available sick leave. You might see a large chunk of your salary early on, but payments are often reduced to 60% of your salary, or less, after a few weeks. Duration of benefits varies by policy, but six months is typical. Contact our office for more details

Long-Term Disability

Long-term disability insurance is a more typical insurance product in that it protects you from catastrophic illness or injury, including tragic twists of fate that permanently ends your ability to earn a paycheck. These policies usually pick up where short-term disability policies leave off. Some last only five or 10 years, but you want one that covers you until age 65.

Accidental Death and Dismemberment

Accidental death and dismemberment insurance can be a separate policy unto itself or it can be added as a rider to an existing life or health insurance policy.

Accidental death and dismemberment insurance pays either the policy holder or the beneficiary of the policy in the event of death or dismemberment which occurs as the direct result of an accident. When signing up for an accidental death or dismemberment policy, you will have the option to add on coverage for hospital stays or to add a spouse or children.

Fatal accidents and the loss of vision, hearing, speech or limbs may be covered by an accidental death and dismemberment insurance policy. Any injuries or death need to be proven to be a direct result of an accident to receive the benefits of the policy. Once the injuries or death have been proven, it may take a few months of the accident to begin to receive the benefits from the policy. Policy limitations apply. Call one of our knowledgeable agents for more details.

Critical Illness Plan

Critical-illness insurance is not medical or life insurance, but a policy that covers the financial gaps when you suffer a heart attack or stroke or are diagnosed with a major illness, such as cancer, or you if you need a transplant. Once known as ‘cancer’ insurance, many companies are now expanding their policies to include several diseases or conditions, including but not limited to renal failure, blindness, paralysis, Alzheimer’s disease, and terminal illness

The benefit is triggered by covered serious health condition such as:

  • Heart Attack
  • Stroke
  • End-Stage Renal Failure
  • Coma
  • Major Human Organ Transplant
  • Paralysis

While you, or a covered family member, are being treated for or are recovering from a critical illness, there’s a good chance that you will be facing deductibles, co-pays, and even costs for travel and lodging. The security of knowing that you’ll receive a lump sum cash benefit from some plans will allow you to concentrate on your recovery, not your finances. Our experts can provide additional information, call us today.

Long Term Care Insurance


Long-term care includes many different services that help people with chronic conditions overcome limitations that keep them from being independent. Long-term care helps individuals maintain their levels of functioning, rather than improving or correcting medical conditions. If individuals have physical illnesses or disabilities, they will often need hands-on help with their activities of daily living (ADLs). These ADLs include bathing, continence, dressing, eating, toileting and transferring. If individuals have cognitive impairments, they usually need supervision, protection, or verbal reminders to do their everyday activities. Skilled care and custodial care are the terms most often used to describe long-term care and the type or level of care you may need.

Long Term Care Insurance:

Long-term care insurance is designed to help pay for an individual’s long-term care expenses. Depending on the plan you choose, it may pay part or all of your care.

Long-term care insurance policies are not standardized like Medicare Supplement plans. Instead, companies offer policies that combine a variety of benefits and coverage in different ways. Policies may also be complicated. Every insurance company must define its terms, benefits, and exclusions in the policy.

Companies must deliver to a prospective buyer an “Outline of Coverage” which helps to explain these terms. Bottom line: Be thorough when shopping for long-term care coverage.

You should understand what services the long-term care insurance policy covers and the many types of long-term care services you might need. Some policies cover only stays in nursing homes. Others cover only care in your home. Still others cover both nursing home and home health care. Many policies also include coverage for adult day care centers, assisted living centers, or other community facilities. Home health care coverage also varies. Some policies pay benefits only for skilled nursing care performed in your home by registered nurses, licensed practical nurses, and occupational, speech, and/or physical therapists.

When you apply for a long-term care policy, you will have a choice in designing your policy. You decide on:

  • The daily benefit amount
  • The maximum benefit period, and
  • The elimination period that would best suit your needs.


The benefit may be a set dollar amount or may be stated as the number of years, months, or days you will receive benefits. However, before the benefits start, you must satisfy an elimination period, which is the length of time you must wait after entering a nursing home or using home care before benefits from your policy will begin. The elimination period will range from zero to 180 days. You must determine the period of time you are able to pay for care out of pocket in order to select the appropriate number of days for your elimination period. Call us for help with finding the best LTC plan.

Business Insurance

Professional Liability (E&O)

Also known as E&O (errors and omissions) A form of liability insurance that helps protect professional advice- and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are potential causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm.

Professional liability coverage sometimes also provides for the defense costs, including when legal action turns out to be groundless. Professional liability insurance is required by law in some areas for certain types of professional practice (especially medical and legal), and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or service.

Professional liability insurance may take on different forms and names depending on the profession. For example, in reference to medical professions it is called malpractice insurance, while errors and omissions (E&O) insurance is used by consultants, brokers and lawyers. Other professions that commonly purchase professional liability insurance include accounting and financial services, construction and maintenance (general contractors, plumbers, etc., many of whom are also surety bonded), and transport. Some charities and other nonprofits/NGOs are also professional-liability insured. Call our professional for more information and a competitive quote.

General Liability

General liability insurance is an essential element of any comprehensive insurance program. Our General Liability products afford primary protection for bodily injury, property damage, advertising injury and personal injury to a third party for which a company is liable.

General liability insurance addresses a wide range of liability loss exposures, falling into two categories:

  • Premises and operations liability — liability for conditions or activities arising out of the premises or operations of a company
  • Products and completed operations liability — liability of a company to a user who is harmed by products manufactured, sold or distributed by the company

General Liability can be purchased either packaged with property insurance, or monoline. A general liability insurance program can include a blend of traditional insurance and alternative risk financing mechanisms to help manage a company’s risk. Furthermore, the general liability policy form can be purchased on an occurrence basis or a claim-made basis. Reach out to our experts for more information about the types for business insurance packages available for your specific type of business.


Business property insurance is a necessity. Property insurance protects your business, from a small to a major financial loss. Whether you own your building, lease your workspace or work at home, we will help you protect your business’ physical assets.

Essentially, business property insurance coverage can be defined in two ways: by what is insured, and the type events leading to the loss.

Commercial property insurance coverage safeguards a company’s buildings, contents, equipment, and other real and personal property.

This includes:

  • Inventory
  • Improvements made to the property
  • Furniture, equipment (owned or leased) and supplies
  • Computers and data processing equipment
  • Records, valuable papers and other documents
  • Fences, signs, and other outdoor property not attached to a building


Typical coverage extends to losses resulting from events such as:

  • Fire
  • Lightning strike, hail, or windstorm
  • Explosion
  • Riot, strike or other civil commotion
  • Damage caused by vehicles, vandalism and aircraft


Additional coverage, called endorsements, can fill in where basic property leaves off. These include coverage for:

  • Floods, earthquakes and volcanoes
  • Building collapse and glass breakage
  • Business income
  • Equipment breakdown


We understand that your business is unique and constantly changing. We can help secure a tailored commercial building insurance policy to fit your specific needs. When you want to the best protection for your business, UHS Insurance is the Agency to turn to for help with securing superior coverage. Call us for a competitive quote or for more information

Worker's Compensation

Workers’ compensation insurance is mandatory in most States for all employers who have one or more employees, whether they’re part-time or full-time. Worker Compensation Insurance coverage ensures medical and wage-loss benefits to employees who are injured during the course of their job. Employers who provide coverage are protected against lawsuits filed by injured workers.

The need to aggressively confront the workers’ compensation challenges before us continues to gain social, economic and political attention. UHS Insurance Agency takes a comprehensive, consultative approach to risk management, working as trusted advisors to help drive down our clients’ workers’ compensation cost — and drive up their profitability. Our team delivers a broad array of risk consulting and claims management assistance designed to make the process less complicated. Our knowledge, along with our tools and resources, enable our Workers’ Compensation experts to bring effective total cost of risk solutions to our clients. Call our office today to learn more about how we can help.

Employee Practices Liability (EPLI)

EPL coverage protects the Corporation, its management and its employees for allegations that proper policies and procedures regarding the treatment of employees (including job applicants) were not adequately established, implemented or enforced properly.

It is the general consensus of the legal community that the issue is no longer whether or not a company will have an employment related claim but rather WHEN!

With the enactment of numerous federal and state statutes, employers are increasingly being scrutinized regarding their internal policies and procedures for the treatment of their employees, including former and prospective employees. It is not sufficient for an employer to merely develop a handbook. Established policies in compliance with state and federal law must be fully described and distributed to all employees. Furthermore, management has the burden of making sure these practices are fully implemented AND ENFORCED!

Traditional thinking was that employment practices claims were limited to wrongful termination, racial discrimination and sexual harassment issues. Changes in the workplace as well as new statutes and legal rulings have expanded the responsibilities of employers and thus increased their exposure to costly litigation.

• Discrimination Claim

Discrimination claims are no longer limited to race issues and now are commonly brought for allegations of discrimination based on age, disability, national origin, race, religion, sex, pregnancy, etc.

• Wrongful Termination/Constructive Discharge

Wrongful Termination claims now include Constructive Discharge allegations where the employee was not terminated per se but the working environment was so intolerable as to force the employee to resign. Corporate restructuring and downsizing has had a tremendous impact on Wrongful Termination litigation.

• Harassment

Harassment claims have evolved from “sexual harassment” to include all forms of workplace harassment.

• Retaliation

Employees are increasingly filing Retaliation claims alleging the employer retaliated against them in response to an employee’s action./p

• Defamation

Allegations the employer make critical and defaming comments about prior employee when giving references

Directors and Officers Protection (D&O)

D&O coverage is basically professional liability coverage for corporate executives. It protects corporate assets as well as the Personal assets of Directors & Officers for allegations of negligence in performing their duties as corporate managers.

Many Directors & Officers of privately held corporations do not see any need for D&O coverage due to the fact that the company has limited shareholders. This, unfortunately, is a misunderstanding of the exposures faced by Directors & Officers and can lead to disastrous results.

Directors & Officers face the same exposures whether the company is privately-held or publicly-traded.

Whether a company has one owner or hundreds of shareholders, state statutes mandate the behavior of Directors & Officers in discharging their management responsibilities. The failure or alleged failure to act within these statutory guidelines can result in litigation putting at risk both the corporate balance sheet and the personal assets of the individual Directors & Officers.

In many instances, privately-held corporations do not have the resources of publicly-traded companies. Corporate decisions may be made without accurate or complete information. Private corporations are also less likely to withstand the impact of costs associated with litigation against their management.

• Shareholder Litigation

Minority shareholders become disenchanted with alleged arbitrary decisions by majority shareholders. Private offerings of debt or equity expose Directors & Officers to alleged violations of state securities and “blue sky” laws and, under certain circumstances, even federal securities laws.

Merger and Acquisition activity often results in litigation against the Directors & Officers of both the acquired company as well as the acquiring company. The alleged failure to make adequate disclosures of the firm’s financial condition and/or operating problems to a potential suitor is likely to result in litigation. Conversely, the alleged failure of Directors & Officers to perform their due diligence in acquiring a company resulting in an alleged “overpayment” or acquisition of unexpected liabilities/exposures is another likely cause for litigation.

• Employment Related Litigation

Claims by employees, including potential new hires and past employees, seem to have no boundaries. Private and public companies have obligations to their employees as defined by state and federal statutes. The alleged failure to comply with these statutes and/or civil law is likely to result in litigation.

This is one of the fastest growing sources
of litigation against Directors & Officers and often includes allegations that management failed to ESTABLISH, IMPLEMENT AND/OR ENFORCE adequate policies and procedures.

Corporate policies and procedures must also be adopted to address the treatment of customers, clients, vendors, etc. by employees of the Company. There is increasing litigation brought by non-employee third parties alleging discrimination and/or harassment by the Corporation and its employees.


With the prestige and responsibility of becoming a Director or Officer also comes the knowledge that your personal assets are at stake for allegations of mismanagement and breach of your duties as fiduciaries of the corporation.

To protect their personal assets, Directors & Officers have historically relied on the corporation to provide the broadest indemnification provisions available in the corporate by-laws and the purchase of D&O coverage.

Most states have statutes which detail the conditions under which a corporation may indemnify its Directors & Officers.

As a general rule, corporations may indemnify their D&O’s if it can be established they acted in good faith and in a manner they reasonably believed to be in the best interests of the company. In many cases, indemnification may not be allowed where it cannot be established that the D&O’s met the required standard of conduct.

When is indemnification not available?

  • Bankruptcy – bankruptcy trustees may not allow assets of corporation to be used to indemnify individuals
  • Insolvency – corporation may not have sufficient assets to indemnify the D&Os
  • Derivative Actions – while defense costs are often indemnifiable the majority of state statutes prohibit indemnification for settlements/judgments of derivative suits
  • Specific Statutes Prohibit Indemnification – securities laws limit indemnification of judgments (but not settlements), under RICO laws there is conflicting case law
  • Specific Conduct – court rulings may prohibit indemnification due to specific facts

Directors & Officers Liability coverage is designed to address situations when Indemnification is available and when it is not.


Fiduciary coverage protects the Corporation and its employees for breaches of their fiduciary responsibilities in the handling of employee benefit plans.

ERISA (Employee Retirement Income Act of 1974) was enacted in response to public concern that funds of private pension plans were being mismanaged and abused. Among other things, ERISA requires sponsors of private employee benefit plans provide accurate disclosure information to plan participants and imposes standards of conduct to all individuals who manage those plans (fiduciaries). These conduct standards include the following duties of care –

  • Duty of Loyalty – plan fiduciaries must discharge duties solely in the interest of the plan participants and beneficiaries
  • Duty of Diversification – plan fiduciaries must diversify investments to minimize losses to participants and beneficiaries
  • Duty of Non-Deviation – plan fiduciaries must discharge duties in accordance with plan documents

Similar to the SEC provisions imposed upon Directors & Officers of corporations, ERISA also imposes personal liability upon the plan fiduciaries. Individuals can be held personally liable and their personal assets exposed for violations of their responsibilities, obligations or duties imposed under the act. Fiduciary Liability coverage was developed in response to the enactment of ERISA to protect both Plan Sponsors (corporations) and Fiduciaries (individual plan managers) for liabilities arising from the management of employee benefit plans.

Recent corporate scandals which resulted in horrendous shareholder losses also triggered losses under Fiduciary Liability policies. Typical allegations included breaches of the fiduciary’s Duties of Loyalty and Diversification.

In today’s environment, almost every employer offers a 401K plan or other retirement vehicle to their employees in addition to health and – welfare plans. Corporations and their fiduciaries face multiple exposures including:

  • ERISA Violations
  • Conflict of Interest in investment of plan assets
  • Imprudent investment decisions
  • Delinquent employer contributions
  • Improper disclosure to plan participants
  • Computer Fraud



Though difficult to believe (or not) crime causes a greater amount of commercial property losses than any other type of property losses. Current estimates are as high as $50 million annually in the United States for employee dishonesty losses alone. Employee dishonesty is just one of many types of commercial crime exposures that you should consider.

The fundamental Crime Insurance parts are:

  1. Employee Theft
  2. Forgery or Alteration
  3. Inside The Premises – Theft of Money and Securities
  4. Inside The Premises – Robbery or Safe Burglary of Other Property
  5. Outside The Premises
  6. Computer Fraud
  7. Money Orders and Counterfeit Paper Currency


Commercial Crime insurance coverage can be written as a part of your Commercial Package Insurance Policy or it can be written as a separate standalone policy. The advantage of having the coverage as part of your commercial package insurance policy is that it is easier, one bill, one underwriter, etc. The advantage of a stand alone would be if you needed to customize forms and coverage to meet specific needs to your business or if the Commercial Package insurance company is not in a position to offer you the amount of crime insurance that you need.

There are two basic types of coverage forms in commercial crime:

Discovery Form

The discovery form covers losses that are identified, or discovered, during the policy period, even if the loss happened some time before.

Loss Sustained Form

The loss sustained form will cover only losses that occur during the policy period and up to twelve months after the policy expires. The loss sustained form could expose you to the risk of financial loss since many crime losses are not discovered for years after the fact.

It is important to note that in the policy who is considered an employee and who is excluded from coverage. Generally an employee is a person currently employed or an ex-employee who was recently terminated, compensated by salary, wages or commissions, and be subject to control by you as the employer. Temporary are included while they are working for you. Excluded persons would include agents, leased employees, and independent contractors.

A company’s directors and trustees are not considered employees; however, corporate officers are generally covered as employees. There has been some cases, where corporate officers are deemed to be excluded because of the corporation is closely held and the officers are also controlling stockholders. If this applies to you, consult your attorney and insurance agent for further advice.

It is possible to arrange your crime coverage on a blanket basis, covering all your employees or to arrange the coverage only for specifically named individuals. Obviously, the blanket form is preferred by most employers as it offers broader coverage.

Just about all businesses need commercial crime insurance, at the very least, employee theft. Setting an appropriate limit of insurance can be tricky. The amount that could be stolen from you likely exceeds your expectations by a long shot. For further advice on the subject of commercial crime, contact your attorney and our insurance agents.

Medical Malpractice

Most health care providers need to buy professional liability insurance. Nearly all states require that physicians have liability insurance. Even in states that don’t, physicians usually have to have insurance coverage in order to get privileges to see patients at a hospital.

Medical malpractice insurance falls into three categories: claims-made, occurrence and claims-paid coverage. The most common type of policy is claims-made coverage.

Claims-Made Coverage

Claims-made policies cover policyholders for alleged acts of malpractice that take place and are reported to the carrier during the policy period. Claims-made policy premiums are relatively low for the first few years due to the fact that there is often a significant lag between when a treatment is administered and the filing of a claim resulting from that treatment. Because of this, claims-made premiums are structured to increase each year that the coverage is in continuous force until the risk presented approximates a “mature” risk. This is usually in years 5, 6, or 7 for individual physicians.

As a result, one advantage of claims-made coverage is that premiums are based on actual past and current experience. Policyholders therefore do not pay premiums for future liability that is difficult to project.

Another advantage of claims-made coverage is that it enables physicians to increase liability limits when necessary. For example, the limits of liability in effect at a policy’s inception may not be enough to cover a settlement incurred today. In this case, the physician may which to increase his or her limits of liability. The most desirable claims-made policies establish the limits of liability available to the policyholder as those in effect at the time a claim is reported rather than those in effect at the time the incident occurred.

Since claims-made policies only cover claims reported, and arising from, incidents that occurred while that policy is in effect, policyholders must be wary when switching carriers or otherwise terminating coverage. When terminating a claims-made policy with one carrier, physicians should obtain either “tail” coverage (extended reporting coverage) from their old carrier or retroactive (prior-acts) coverage from their new carrier. Both of these coverages insure against claims reported after the end of the original policy period for incidents that occurred while that policy was in effect.

When purchasing a claims-made policy, prospective insureds should look for a guaranteed right to purchase tail coverage. They should also verify the length of time that tail coverage will be available since some companies offer tail coverage only for a fixed number of years. Another feature to look for is tail coverage that is provided at no charge upon retirement for permanent and total disability and in the event of death.

Tail Coverage

Premiums for tail coverage are determined by a doctor’s specialty, territory, limits of liability and length of continuous claims-made coverage. Tail coverage gets more expensive the further back in time it must provide coverage since the liability assumed by the carrier becomes greater. It is usually a percentage of the insured’s prior year’s premium.

Prior Acts (“Nose”) Coverage

Prior acts coverage provides similar protection as reporting endorsement coverage. However, unlike a “tail,” nose coverage is purchased through the new insurer.

Occurrence Coverage

An occurrence policy insures for any incident that occurs while the policy is in effect, regardless of when a claim is filed. Under an occurrence policy, insureds pay premiums that take into account not current experience, but future projections as well. Such claims are called “incurred but not reported” (IBNR). Occurrence insurance rates can vary significantly because of the difficulty in projecting future claims expenses. Under an occurrence policy, the limits of liability are those in effect when the incident occurred.
The advantage of an occurrence policy is that neither retroactive (prior acts) nor tail coverage is needed when terminating coverage.

Claims-Paid Coverage

Claims-paid coverage is often used by Trusts. Under a claims-paid policy, premiums are based only on claims settled during the previous year and projected for the current year. Claims-paid policies are generally assessable for a number of years after the policy has been terminated. In addition, claims-paid policies usually have restrictive claims “triggers,” under which a claim is not considered formally made until a “Summons and Complaint” is received. As a result, policyholders changing from claims-paid coverage to claims-made coverage might find it difficult to obtain retroactive (prior acts) coverage from the new carrier. Physicians leaving a claims-paid carrier will most likely have to purchase expensive tail coverage from that claims-paid carrier.