There are many different types of insurance companies—stock, mutual, reciprocal, risk retention group, risk purchasing group, surplus lines, self-insurance programs—but only a few types of coverage. By far the most common types are:

Occurrence: an insurance policy providing coverage for any incident that occurs during the term of the policy, regardless of when a claim arising from the incident is made. Occurrence policies are "long tail" policies, ensuring coverage for the life of the patient and physician. In other words, coverage remains in force even if the provider changes careers or the company shuts down.

Claims Made: an insurance policy providing coverage for claims that both occur and are reported to the insurer while the policy is in force. An incident occurring during a policy period but reported after its expiration or discontinuation exposes a provider and facility to potentially significant damages, unless someone purchases "tail" coverage. Claims made policies must be renewed annually. Once a contract period ends, the regular purchases of "tail" continues coverage.

The policies differ, as well, in their distribution of aggregate amounts set aside for the settlement of claims. For instance, on a claims made form, the aggregate amount covers the term of the policy. Occurrence policies, on the other hand, make the full aggregate amount available each year so that the aggregate is not diminished over time.

Claims made policies tend to cost less than occurrence and therefore remain quite popular.

Factors affecting the cost of a policy include:

   *Physician or provider specialty. Costs vary based upon exposure to risk.
   *Type of coverage, occurrence or claims made.
   *Limits of liability: aggregate amounts, deductibles and managed care requirements.
   *Location of practice. Costs vary according to state, county and city.
   *Loss history.

When evaluating malpractice coverage, one must also be cognizant of consent to settle clauses. Each insurance company classifies itself as either a consent to settle company or a pay on behalf company. Consent to settle companies refuse to settle a case without the approval of physicians named in the lawsuit. Pay on behalf companies, however, do not require a physician's consent for the settlement of a claim, nor do they need to notify physicians of a lawsuit. Many physicians or providers apply for a position or for a state medical license assured of a clean record, only to discover several marks against them. More than merely a surprise, such unexpected inaccuracies on an application cause significant delays in licensure proceedings—among other problems.

An insurance contract generally breaks down into a few basic components: Declarations include the policy number, name of insured parties, coverage dates, liability limits, specialty classification, any deductibles and the premium. The insuring clause states the intent of coverage. Conditions specify the responsibilities of each party, the company and the insured, as well as exclusions that delete or reduce coverage.

In broad terms, a company promises to defend and indemnify on behalf of the insured, while the physician or practice commits to report any claims, cooperate with the company in investigating and settling the claim and provide consent for a settlement. Common exclusions to a malpractice contract involve incidents and issues unrelated to clinical care: general liability (auto, fire); contractual liability; criminal or sexual acts; claims arising from services rendered outside covered dates and locations; and so forth.

A contract may also include endorsements placed at the request of the insured or mandatory by state regulation or company policy. These either restrict or broaden coverage through riders, terminology changes and by naming additional providers to the coverage agreement.