Decoding the Language of Insurance: Key Terms for General, Professional, and Medical Liability Coverage
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Insurance can be complex and overwhelming, especially for those who are not familiar with the terminology. It can feel like learning an entirely new language, which often makes getting started even more intimidating.
As an Account Specialist, I work closely with clients to answer questions, clarify coverage, and help them feel more confident in understanding their policies, specifically Medical Professional Liability (MPL) policies. A common challenge I see is navigating the basic terms that appear in most insurance policies. The following is an overview of those key terms. Some are specific to MPL and other lines of Professional Liability, while others apply more broadly to general insurance policies to support a clearer understanding of policy structure and language.
When purchasing an insurance policy (specifically, MPL), there are three policy types to choose from: Claims Made, Modified Claims Made, and Occurrence.
- A Claims Made policy will respond to claims reported for services that took place on or after the retroactive date and while the policy is in force. No coverage is available once the policy is terminated unless a tail is purchased. The tail, also referred to as an Extended Reporting Period (ERP), is a very important part of a Claims Made or Modified Claims Made policy. When a policy is cancelled, tail coverage protects the insured if a claim arises after the cancellation date, as long as the incident occurred after the retroactive date and prior to the cancellation date of the policy.
- A Modified Claims Made policy, also known as a Pre-Paid Tail policy, is similar to a Claims Made policy. The difference is that the premium includes the tail cost. There is no need to purchase a tail when the policy is cancelled.
- An Occurrence policy responds to claims that occurred while the policy was in force, regardless of when the event is reported. No tail is required.
Once a policy is purchased, it is important to understand what the coverage includes. The declarations page of a policy is a summary of key information and will cover the most essential details. This page includes:
- Policyholder – Listed on the declarations page as the first named insured. This is the individual or entity that owns the policy, is responsible for premium payments, and has the authority to make changes to the policy.
- Policy Details – Includes the policy number, type of policy, and important dates such as the effective date, expiration date, and retroactive date, if applicable.
- Retroactive Date – The earliest date that an event could take place and still be covered under the insurance policy.
- Limits of Liability – The maximum amount the policy will pay if a claim arises. For example, limits may appear as $1,000,000 per claim / $3,000,000 aggregate. This means that during the policy term, there would be a $1,000,000 limit of coverage per claim and a $3,000,000 aggregate limit of coverage for the entire policy term should multiple claims arise. The insurance carrier will not cover any indemnity payments that exceed the policy limits. It is important to speak with an agent or attorney to ensure the coverage provides adequate protection.
- Premium Amount – The total cost of the policy.
- Endorsements – Any extra coverage added to the policy that is not automatically included. Endorsements can also refer to restrictions where coverage may be excluded.
Understanding these foundational terms, whether specific to Medical Professional Liability and other lines of Professional Liability insurance or more broadly applicable to general insurance, is an important step toward navigating insurance with greater clarity and confidence. By becoming more familiar with the structure and language of a policy, it becomes easier to make informed decisions and advocate for the right coverage. For additional support or guidance in reviewing a policy, connect with an Account Specialist to ensure your protection is aligned with your goals.