Therapist Insurance

Malpractice Coverage 101 for Therapists

Caring for people means you face the risk of liability claims, whether you provide counseling or psychotherapy. Insurance for therapists, such as psychologist malpractice insurance, can protect your practice from potential liability claims and lawsuits. Counselor liability insurance is a specialty area, and it requires a knowledgeable agent to ensure that your risks are covered.

Data on Psychologists, Counselors, and Therapists

  • Number of U.S. psychologists 2002-2012: 2,112
  • Number of U.S. therapists and counselors 2002-2012: 17,826
  • Approximately 30% of adult primary care patients and 19% of child patients present with some sort of psychological disorder
  • The most common referrals to psycologists and other behaviorists are for:
    • depression
    • anxiety
    • grief
    • substance abuse
    • coping with a chronic illness

How to Get Protection from Liablity Claims and Lawsuits

Like medical doctors, attorneys and architects, those in the field of psychology, therapy and mental health provide professional services that can result in personal injury or financial loss to others. The answer in each case is a professional liability policy tailored to the risks of the profession. Malpractice insurance for therapists and psychologists is professional liability coverage designed to protect you from claims related to your work in therapy or counseling.

It only takes one malpractice lawsuit to derail your career and drain your assets. Psychologist malpractice insurance can help you practice your counseling profession with confidence.

This coverage, also called counselor liability insurance, is available for individual practices or group practices. Normally, group practices are covered as a group of individual practitioners. This setup benefits you as a participant since claims against group members do not decrease your coverage limits. For example, if you had a $4 million personal annual aggregate and a group member had to pay a claim of $1 million, that person's personal aggregate would decrease to $3 million, but yours would remain $4 million.

What Does Psychologist Malpractice Insurance Cover?

Whether you have individual or group coverage, your counseling insurance policy will typically cover:

  • Legal fees and court costs: Provides legal fees and court costs from the beginning of a claim until it is settled. Some policies offer replacement pay for the days you attend court.
  • Legal defense costs before state licensing boards: Offers legal defense costs for dealings before regulatory boards.
  • Professional boards or committees: Covers professional services carried out as a psychologist while serving on professional boards or committees, and includes members of formal accreditation, educational institutions, HMOs and more.
  • Sexual misconduct: Pays defense costs and potential claims resulting from sexual misconduct accusations.
  • Advertising injury: Covers issues that result form your advertising. Includes libel, slander, defamation, copyright infringement and false advertising.
  • Personal injury: Protects you against personal injury claims resulting from right to privacy issues, false arrest, slander, libel and more.
  • Premises liability: Covers liability issues that occur on your practice premise.

Claims-Made vs. Occurrence Coverage

When you purchase your counselor malpractice insurance, you need to decide between two types of coverage. One is called a claims-made policy and the other is known as an occurrence policy.

  • A claims-made policy only covers claims if the claims-made policy is active
  • An occurrence policy covers events that happened when the original policy was in force, even if the occurrence policy is no longer active.

For example, with an occurrence policy, if the alleged incident occurred five years ago and you no longer had the policy, the claim would still be covered. But under a claims-made policy the incident would only be covered if you had the policy five years ago and had continued the coverage to the current date.

Additional Claims-Made Coverages

If you purchase a claims-made policy, the day the policy starts is called the retroactive date and it becomes a permanent part of your policy. Any claims between that date and the expiration date of the policy are covered. Any claims before or after those two dates will not be covered under the policy.

However, some claims-made policies offer endorsements or add-ons for prior acts at an additional cost. For example, if you wanted protection from claims a past client might make when purchasing a new psychologists malpractice insurance policy, you could add that coverage to your new policy.

Also, claims made policies offer an extended reporting period or "tail" option for psychologists who retire or stop practicing. This covers claims that may be filed in the future but happened while the policy was active.

Comparing Benefits of Claims-Made and Occurrence Policies

Many psychologist, therapists and counselors purchase the claims-made policy when they are first starting out, as it is significantly less expensive than the occurrence coverage. But to retain the claims protection, they must continue to maintain the policy. One benefit of the claims-made policy applies to coverage limits. If your coverage limits expand, they apply to previous years, but an occurrence policy restricts you to the policy limits in place at the time of the alleged incident.

So if you had a policy limit of $1 million five years ago under a claims-made policy, but now you have a $2 million limit under the same policy, you can cover a five-year-old claim for $2 million. Under the occurrence policy, you would be bound to the $1 million limit you had at the time of the incident.

Each policy has its strengths depending on your situation and what phase of your career you are in. Think carefully about the pros and cons and discuss each option with your agent.

How to Compare Counseling Insurance Quotes

There's no time like the present to ensure that your investment in your education and your practice are protected from the risks of claims – warranted or not. A solid and comprehensive psychologist malpractice insurance policy can provide the protection you need, and peace of mind. The first step is to compare quotes from several insurance companies and getting your questions answered.

Now, who's ready to get their insurance problems solved?