Insurance is a vital cog in the home health agency or home health aid risk management wheel. Negligence and slip-and-fall claims are seldom predictable, and when lawsuits become a reality, the resulting financial impact is most often severe. Medical and non-medical health care and support providers deem it prudent and pragmatic to purchase a liability/malpractice policy that can safeguard them in the event of lawsuits, whether frivolous or merited.
Malpractice insurance premiums are driven by multiple factors. Data is available for medical malpractice insurance costs for doctors, which can serve as a reference for in-home health care providers. Let’s start by looking at how practice location affects rates.
Impact of location on premium
Insurers adjust premiums in response to the litigation costs of the particular state, which in turn are dependent on the state’s tort laws. A state with stringent tort reforms often has lower premiums. If the state has a highly competitive insurance market, then you can expect rates to be competitive as well. State regulations on policy limits also have an impact: higher premiums can be expected in states that require higher limits.
Doctors and health care practices based in New York pay more in malpractice insurance than those based in California. But malpractice costs have also dropped since 2004, which means that doctors in states with high malpractice premiums are also paying less than a decade ago. 
Malpractice insurance costs also tend to vary by city and county. If you are planning to start a home care business, it is best to identify the difference in premiums and include it in your start-up costs to ensure that you have adequate working capital and insurance coverage.
Number of home health aides (if you are an agency)
The number of home health aides you hire to work on behalf of your agency will naturally determine your total liability/malpractice insurance costs. You may cover all full-time home health aides with the same amount.
As your business grows and you add more aides to your employee roster, your insurance costs will increase proportionately.
It is not uncommon for home care agencies to delay communicating new employee additions or employee terminations to their insurer. This has an impact on the premium and increases the agency’s liability.
Hours worked and specific services rendered (if you are an individual home health aide)
The number of hours worked is also a driver of malpractice/liability premium, with over 20 hours a week typically considered full-time and less than 20 hours per week considered part-time. The nature of services you provide at the client’s premises will factor into your insurance premium. If you assist with medication management, skin care or wound care in coordination with a nurse practitioner, any risk perceived as being higher than, say, making meals, providing companionship and assistance with ADLs may attract a higher premium.
Home health aides should consider purchasing both general liability and professional liability insurance. This combined level of coverage encompasses all potential on-the-job risks.
The limits of an insurance policy tell you about the coverage offered by the insurer. ‘Per occurrence’ coverage is the amount the insurer will pay per incident. ‘Overall aggregate’ refers to the total amount the policy will cover during the policy period. A $500,000-$2,000,000 policy will pay up to $500,000 per incident during the policy’s duration; $2,000,000 is the maximum amount of total coverage offered during the policy period.
Home care agencies must purchase the minimum limits and guard against purchasing substantially more than what they need, as it can come under scrutiny in a malpractice suit. As mentioned earlier, medical malpractice limits vary by state. So, you should also understand what caps are in place in your state. Typically, policies stipulate between $1,000,000 per occurrence and $3,000,000 aggregate coverage. Damages in excess of these amounts will need to be paid by you.
Discussions with your attorney and a home care malpractice insurance agent will help you determine the appropriate limits for your business.
Claims-made versus occurrence coverage
A claims-made policy covers claims occurring during the period that the policy is active. If the policy expires and a claim is brought three months afterwards, then your policy won’t cover it. An occurrence policy sets effective dates and covers you for claims occurring during the coverage period. So, even if a lawsuit has been filed after the policy has expired, the incident will still be covered.
Claims-made policies are offered with ‘tail coverage’ that allow you to continue reporting claims after the termination of your policy. They are also usually 200% of the expiring premium, making them a better value proposition than occurrence policies, which are not widely offered and exist to ensure rate consistency in the malpractice insurance market.
The deductible is also a consideration when estimating malpractice insurance costs. The full deductible payment is required before the claim is defended. You have the option to increase your deductible to higher levels in order to keep your premium low.
Think malpractice premium rates are high? Here’s what you should know
Although malpractice costs are not as high as they used to be even 15 years ago, insurers have been making losses from claims, suggest older studies covering trends between 1998-2001.  Besides settlements and judgements, legal defense costs make up a significant part of the expenses related to claims. However, recent studies indicate that medical malpractice premiums are at the lowest they have been in 30 years. 
There are enough number of insurance companies for home care providers to choose from, and the A- rates ones offer competitive rates that even start-up businesses can make the most of to minimize their liability.