Surplus Malpractice Coverage Has Perks

Physician's Money Digest, October31 2003, Volume 10, Issue 20

Physicians from all over the countryare in distress about the malpracticeinsurance crisis. Insurancerates have gone through the roof andmany physicians with marginal claimsexperience are being forced into the secondaryinsurance market, or going withoutany insurance at all.

Supplemental Insurance

Supplemental coverage is in additionto a physician's current malpractice coverage.So, if a physician has $1-million/$3-million coverage with a traditionalcarrier, supplemental coverage wouldbe above that amount.

For example, if a physician had a verdictof $1.5 million and their coveragewas only $1 million, the supplementalcoverage would kick in to pay for theother $500,000. Without the insurance, aplaintiff's attorney could go after thephysician's personal assets for the$500,000 not covered by the primaryinsurance carrier. With supplementalcoverage, a physician can fund that overagein a tax-deductible manner.

Growth on Premium

You're probably thinking to yourselfthat the last thing you need is more insurancepremiums. However, there is a supplementalmalpractice insurance programavailable where the client can get not onlya return of their premium on supplementalinsurance, but also growth on the premium,assuming good claims experience.

For example, if a 40-year-old physicianhad good claims experience and paid$100,000 in supplemental malpracticeinsurance coverage each year for 10 years,the refund numbers would be as follows:

Premium cost each year: $100,000

Account value available for refund atage 60: approximately $3.18 million.*

*This is a net number after expenses,with an assumed growth rate of 8% onthe premium paid.

Income Tax Reduction

Many physicians are looking for waysto reduce their taxes. With the supplementalmalpractice insurance program,physicians receive current income taxreduction by paying deductible premiumsfor insurance coverage. Further, withgood claims experience and the refundoption, physicians can get back the premiumspaid as well as all investmentgrowth on those premiums. When thepremium and growth are returned, themoney will be distributed to the physician,much as a 401(k) plan is distributed,where they will pay taxes on the money.

If you like the idea of supplementalmalpractice coverage while building alarge supplemental benefit, then this programis something you should consider.

Roccy DeFrancesco, JD, is anattorney and author of "The Doctor'sWealth Preservation Guide."He has run a medical practice andlectured for many state and nationalmedical associations. For a freeasset protection, income, and estate tax reductionCD, or for questions or comments, call 269-469-0537 or e-mail roccy@wealthpreservation123.com.