Malpractice Insurance for Private Practice Therapists: Four Questions to Ask

4 Questions Private Practice Therapists Should Ask Malpractice Insurance Providers 

*This article was written by CPH and Associates. The Private Practice Pro does NOT receive compensation of any kind from CPH. 

Carrying a professional liability insurance policy is an essential part of establishing your private practice. Professional liability insurance (also called malpractice insurance) protects you against claims or suits arising from the services you provide. The cost of defending yourself against lawsuits and grievances can be prohibitive, and you should ensure that your professional liability insurance is fully equipped to cover your practice. CPH & Associates, a malpractice insurance provider, has compiled these four questions that you should ask about your insurance policy:

1.) As a private practice therapist, do I need individual or corporate malpractice coverage?

If you have an LLC or corporation, you should carry a corporate policy which will cover the business, you as the owner, and your employees (if applicable). If a claim or lawsuit arises from your professional services, it is possible for your business entity to be named in the lawsuit. An individual policy will only cover the individual therapist. An individual policy will not provide any coverage for your business entity for claims, incidents, or lawsuits arising from your professional services. 

2.) Does my policy have occurrence or claims made coverage?

There are two types of malpractice insurance policies: Occurrence and Claims Made. Occurrence coverage is lifetime coverage for your policy period. This means that the policy will cover alleged incidents that occur during the policy period, regardless of when the claim is reported. It does not matter if the policy is active when the claim is reported. It only matters that the policy was active when the treatment or incident occurred. For example, a former client may try to sue you for services provided 3 years ago. As long as you were insured at the time of the treatment, your occurrence policy will cover you for future claims.

Alternatively, claims made policies can only cover claims that occur and are reported while the policy is active. Once your policy ends, the coverage ends. At the end of a claims made policy, it is recommended that you purchase a tail policy to provide coverage if a claim is reported after the policy expires. Using the same example of a former client suing you 3 years after you saw them, with a claims made policy, your policy must be active or within the tail period in order for you to receive coverage.

3.) Does my malpractice policy cover me for telehealth services?

With telehealth services becoming increasingly popular, you should confirm that your insurance policy covers you for these services. CPH & Associates’ professional liability policy will cover tele/internet therapy, provided such practice is authorized or allowable under the scope of your license in the state where you practice and provided you are performing such services lawfully. There is no endorsement or additional rider for telehealth services.

Should I add other coverages?

Your insurance policy may allow you to add additional coverages to further protect your practice beyond just malpractice insurance. CPH & Associates provides options to add general liability and cyber liability to protect your practice from bodily injury claims and data breaches.

If you rent or lease an office space where you see clients, you can add general liability coverage to your policy. General liability or “slip and fall” coverage protects you from bodily injury and property damage claims that may occur at a rented office space. General liability can protect you if a client or third party sustains an injury on the premises of your office (including stairways, parking lots, bathrooms, etc.) and holds you liable for the injury.

If you store electronic health records on your computer or server, consider adding cyber liability. Cyber liability is data breach coverage which protects you if an unauthorized third party accesses client information. Cyber liability includes network security and privacy liability coverage and customer notification expense coverage. For example, someone could hack into your server or steal your computer. Cyber liability would cover the costs of conducting a forensic investigation into the breach, notifying affected customers, and notifying the appropriate regulatory bodies.

CPH & Associates provides malpractice insurance for mental health professionals throughout the US. With up-to-date legal resources and exceptional customer service, CPH malpractice insurance can protect your career against malpractice claims/suits and regulatory board complaints. A policy with CPH is tailored to meet your needs, with options to add general liability, cyber liability, and coverage for your LLC or corporation. Find peace of mind with CPH.

Visit our website to get a quote & apply.

Frequently Asked Questions About Malpractice Insurance for Therapists

Do private practice therapists need malpractice insurance?

Yes. Professional liability insurance can help protect therapists when a client files a malpractice claim, licensing board complaint, or lawsuit connected to professional services. Some employers, landlords, contractors, or licensing boards may also require coverage.

Is professional liability insurance the same as malpractice insurance?

Yes. The terms professional liability insurance and malpractice insurance are often used interchangeably. Both generally refer to coverage for claims arising from professional services, errors, or alleged negligence.

How much malpractice insurance should a therapist carry?

The appropriate coverage limit depends on the therapist’s practice structure, services, contracts, location, and level of risk. Common policy limits vary, so therapists should compare coverage requirements and discuss their circumstances with an insurance provider.

Do therapists with an LLC need separate malpractice insurance?

An individual malpractice policy may protect the therapist without covering the LLC or corporation. Therapists operating through a business entity should ask whether they need corporate or entity coverage in addition to individual coverage.

What is the difference between individual and corporate malpractice insurance?

Individual coverage protects the named therapist. Corporate or entity coverage may protect the business itself and, depending on the policy, its owners or employees when the organisation is named in a professional liability claim.

What is occurrence malpractice insurance?

Occurrence coverage generally applies when the alleged incident happened while the policy was active, even if the claim is reported after the policy ends. Therapists should review the exact policy terms, exclusions, and reporting requirements.

What is claims-made malpractice insurance?

Claims-made coverage generally requires the policy to be active when the incident occurs and when the claim is reported. When this type of policy ends, additional protection may be needed for claims reported later.

What is tail coverage for therapists?

Tail coverage extends the reporting period for certain claims after a claims-made policy ends. It may be important when a therapist changes insurers, closes a practice, retires, or moves to a different type of policy.

Which is better for therapists, occurrence or claims-made coverage?

Neither option is automatically best for every therapist. Occurrence policies may provide longer protection for incidents during the policy period, while claims-made policies may initially cost less. Therapists should compare long-term costs, tail coverage requirements, exclusions, and policy limits.

Does therapist malpractice insurance cover telehealth?

Some policies cover telehealth, but therapists should never assume it is automatically included. Ask whether coverage applies to online sessions, clients located in other states, phone services, messaging, and every jurisdiction where you practise.

Does malpractice insurance cover therapists working across multiple states?

Coverage may depend on the policy, the therapist’s licences, and where the client is physically located during treatment. Therapists should confirm that every state in which they provide services is included and that their practice is legally authorised.

Does malpractice insurance cover licensing board complaints?

Some professional liability policies include defence coverage for licensing board investigations or disciplinary complaints. Coverage limits, deductibles, exclusions, and access to legal counsel can vary significantly between policies.

Does malpractice insurance cover legal defence costs?

Many policies cover certain legal defence expenses, but the details matter. Ask whether legal fees are included within the policy limit or paid in addition to it, since this can affect how much coverage remains for a settlement or judgment.

What does general liability insurance cover for therapists?

General liability insurance generally covers claims involving bodily injury or property damage at the practice location. For example, it may apply if a visitor is injured in an office, hallway, stairway, bathroom, or parking area.

Do telehealth therapists need general liability insurance?

A fully virtual therapist may have less premises-related risk than someone renting an office. However, general liability may still be required by a landlord, coworking space, business agreement, or other contract.

What is cyber liability insurance for therapists?

Cyber liability insurance may help cover expenses related to data breaches, hacking, ransomware, stolen devices, privacy incidents, forensic investigations, client notifications, and regulatory reporting.

Does malpractice insurance cover a client data breach?

Professional liability insurance may not provide complete protection for privacy or cybersecurity incidents. Therapists who store electronic records should ask whether cyber liability is included or must be purchased separately.

Are employees and contractors covered under a therapist’s malpractice policy?

Not necessarily. Practice owners should ask whether employees, interns, associates, supervisors, and independent contractors need individual policies or can be included under the organisation’s coverage.

Does malpractice insurance cover coaching services?

Therapy and coaching may be treated differently under an insurance policy. Therapists offering both services should confirm that coaching activities are covered and clearly separate the scope, agreements, and expectations for each service.

What exclusions should therapists look for in a malpractice policy?

Review exclusions related to telehealth, services across state lines, supervision, record breaches, sexual misconduct allegations, criminal acts, prior incidents, business disputes, coaching, and services outside the therapist’s professional scope.

When should therapists purchase malpractice insurance?

Therapists should have appropriate coverage before providing services independently. Waiting until a claim, complaint, or incident occurs is too late because insurance generally does not cover known events that happened before coverage began.

How often should therapists review their malpractice insurance?

Review the policy at least once a year and whenever the practice changes. Important changes include adding employees, opening an office, expanding into telehealth, becoming licensed in another state, forming an LLC, supervising clinicians, or offering new services.

What questions should therapists ask before choosing a malpractice insurer?

Ask about policy type, coverage limits, deductibles, defence costs, licensing board coverage, telehealth, corporate protection, prior acts, tail coverage, cyber liability, general liability, exclusions, and the process for reporting a possible claim.