In purchasing professional liability insurance for rehabilitation centers, a major consideration is balancing cash flow and claims protection. Following is an explanation of two policy options and a comparison of their possible financial impacts.
Occurrence Based Option
An occurrence format covers claims arising from incidents that happened during the policy period, even if suit is filed after the term expires. Costs are paid according to the limits that were in force at the time of the alleged infraction.
In contrast, the claims-made option pays for lawsuits instigated during the coverage term, regardless of when the incident took place. The policy in force when the suit is filed is used to determine payment limits.
Initial premiums for the claims-made option may be lower than the occurrence format, allowing more cash flow in early coverage years. However, insurance must be maintained continuously to prevent expensive endorsements for gaps. Sudden cancellation by either party could be costly.
Since the occurrence form uses terms in force when an incident happened, payments count towards that year’s total limits rather than current ones. On the other hand, inflation and increasing court costs may render past maximums insufficient in the existing market, necessitating an expenditure of funds to cover excess sums.
Determining the Best Option
Careful research and evaluation of your company’s needs can help determine the choice that is best for your business. Discuss insurance for rehabilitation centers with a professional agency to find out more about the benefits of each option.