Physician Insurance Education Library

Policy mechanics glossary

Coverage structures and contract mechanics — not products, but where claims get won or lost.

• Claims-Made vs Occurrence

  Determines whether coverage follows the incident or the filing date. Drives tail exposure in malpractice, EPLI, D&O, cyber, and E&O.

• Tail Coverage

  Prevents post-employment malpractice gaps; typically ~1.5–2x expiring annual premium; who pays is a contract negotiation point.

• Nose / Prior Acts

  The new carrier covers the old period — often cheaper than tail, but must be negotiated during the transition.

• Retroactive Date

  Claims from incidents before this date may not be covered at all — check it on every claims-made policy.

• Per-Claim vs Aggregate Limits

  A $1M/$3M policy means $1M per claim, $3M total per year — both numbers matter.

• Defense Inside vs Outside Limits

  If legal fees erode the limit (inside), a long defense can consume the coverage before any settlement.

• Deductible vs Self-Insured Retention

  With an SIR you fund (and often manage) the early defense yourself — very different cash exposure.

• Consent to Settle / Hammer Clause

  Determines whether the insurer can settle over your objection — reputation-critical for physicians since settlements are NPDB-reportable.

• Exclusions

  The policy is defined by what it doesn't cover. Read exclusions before limits.

• Portability

  Group coverage usually dies when employment does; individual policies follow you.

• Taxation of Benefits

  Pay disability premiums with after-tax dollars and benefits are tax-free; employer-paid premiums make benefits taxable — a ~40% real-coverage difference.

• Own-Occupation Tiers (True / Transitional / Modified)

  True pays even if you earn elsewhere; Transitional pays the income gap; Modified pays only if you don't work at all. The single most consequential definition in physician disability.

• Admitted vs Surplus Lines Carriers

  HNW, wildfire, coastal, and specialty risks increasingly require surplus-lines markets — different guaranty-fund protections and broker licensing.

• Carrier Financial Strength Ratings

  Disability and LTC are 30-year promises; the insurer's solvency rating matters more than small premium differences.

• Commissions & Conflicts

  Permanent life and annuity commissions can exceed 50–100% of first-year premium — understanding who gets paid what is the first question in any pitch.

• Vacancy Clauses

  Standard property policies void coverage after 30–60 days unoccupied — the silent killer of rehab-project coverage.