Starting your own medical practice is exhilarating. You're finally calling the shots, building something that's yours, and delivering care exactly how you envision it. But here's what catches most new practice owners off guard: insurance isn't just about protecting yourself from malpractice suits. It's a complex, constantly evolving checklist that starts before you see your first patient and grows as your practice does. Miss a coverage type or delay credentialing, and you could be looking at delayed revenue, denied claims, or financial devastation from a lawsuit.
This guide walks you through exactly what insurance you need from day one, when to add new coverages as you grow, and the mistakes that trip up even experienced physicians. Let's make sure your insurance strategy is as solid as your clinical skills.
Day One Coverage: What You Need Before Opening Your Doors
Before you unlock your practice doors for the first time, three types of insurance are non-negotiable. Your lender will require them, state law mandates some of them, and frankly, operating without them is financial suicide.
Medical malpractice insurance is your first priority. In most states, it's legally required to practice medicine. But even where it's not mandatory, you absolutely need it. The average cost varies wildly by specialty—psychiatrists and dermatologists might pay $4,000 to $12,000 annually, while general surgeons face $30,000 to $50,000, and OB/GYNs in high-cost states like Florida or New York can pay $150,000 to $200,000 or more. That's roughly 3.2% of most physicians' incomes. And here's the timeline issue that blindsides new practice owners: insurance credentialing takes 90 to 120 days per payer. You need to start this process at least five months before opening, or you'll be treating patients you can't bill.
General liability insurance is your second must-have, and it's always required if you're renting space. This covers slip-and-fall accidents in your waiting room, damage to your rented property, and injuries to patients' personal property. A Business Owner's Policy (BOP) bundles general liability with commercial property insurance, usually at a lower cost than buying them separately. For a new practice, this is the smart move—you're protecting your physical space, equipment, and liability exposure in one package.
Business property insurance (often included in a BOP) protects your physical assets—exam tables, computers, medical equipment, furniture—from fire, theft, vandalism, or natural disasters. When you're investing $70,000 to $100,000 just to get your practice off the ground (not counting your own salary), losing your equipment to a fire without coverage would be practice-ending.
When You Hire Your First Employee: New Coverage Kicks In
The moment you hire your first employee—even part-time—your insurance requirements change dramatically. Workers' compensation insurance becomes mandatory in almost every state. This covers medical costs, rehabilitation, and lost wages if an employee gets injured or becomes ill on the job. A medical assistant who strains their back lifting a patient, a receptionist who develops carpal tunnel, a nurse who's exposed to bloodborne pathogens—workers' comp handles all of it.
Employment Practices Liability Insurance (EPLI) isn't legally required, but it's increasingly essential. This protects you against claims of wrongful termination, discrimination, harassment, or retaliation from employees. You might think you'd never face such a claim, but healthcare practices are sued for employment issues more often than you'd expect. Legal defense alone can cost tens of thousands, even if you win.
Group health insurance isn't federally required for practices with fewer than 50 full-time equivalent employees, but offering it helps you attract and retain quality staff. You can typically offer group coverage with as few as two eligible employees, though most insurers require 50% to 75% participation (usually around 70%). If traditional group coverage doesn't work for your budget or participation rates, consider an Individual Coverage HRA (ICHRA) or Qualified Small Employer HRA (QSEHRA)—these let you reimburse employees for individual insurance premiums with no minimum participation requirements.
Growth Triggers: When to Add More Coverage
As your practice expands, new insurance needs emerge. Here are the triggers that should prompt you to update your coverage.
Cyber liability insurance should be added as soon as you're storing patient records electronically—which is basically from day one in 2025. HIPAA violations can result in fines up to $50,000 per incident, and a single data breach can cost a small practice over $100,000 in forensic investigations, legal fees, patient notification, credit monitoring, and regulatory fines. If you're handling electronic health records (and you are), this coverage is essential.
Commercial auto insurance becomes necessary if you purchase vehicles for the practice—whether for patient home visits, medical deliveries, or running errands. Your personal auto policy won't cover business use, and the liability exposure is significant.
Business interruption insurance (also called business income insurance) is worth considering once you're profitable and dependent on steady revenue. If a fire, flood, or other covered disaster forces you to close temporarily, this coverage pays for lost income and ongoing expenses like payroll, rent, and utilities while you're unable to see patients. It bridges the gap between disaster and reopening.
Practice overhead insurance (also called disability overhead insurance) protects the practice if you—the owner-physician—become disabled and can't work. It covers your practice's fixed expenses during your disability, ensuring your staff stays paid and the lights stay on until you return or close the practice in an orderly way.
Common Mistakes to Avoid
The biggest mistake new practice owners make is delaying insurance credentialing. You cannot bill insurance companies until you're credentialed, and the process takes three to four months minimum. Start this the moment you decide to open a practice—before you sign a lease, before you hire staff. Otherwise, you'll be seeing patients you can't bill for months.
Another common error is underinsuring malpractice coverage to save money. The difference between adequate and inadequate limits might be $5,000 per year. But a single lawsuit that exceeds your policy limits could cost you your home, savings, and retirement. This isn't the place to cut corners. Work with an experienced medical malpractice broker who understands your specialty's risk profile.
Finally, many physicians forget to update their coverage as the practice evolves. You add a new procedure, hire specialists, expand to a second location—and suddenly your existing policies have coverage gaps. Schedule an annual insurance review with your broker, and notify them immediately of any major changes to your practice. It's far easier to add an endorsement than to discover you're uninsured after a claim.
Getting Started with Your Insurance Strategy
Start by finding a commercial insurance broker who specializes in medical practices. Not a general business insurance agent—someone who lives and breathes healthcare. They'll understand your specialty's unique risks, know which carriers offer the best rates and claims service, and can bundle policies to save you money.
Get quotes from at least three carriers for malpractice insurance, as prices vary significantly. Ask about claims-made versus occurrence policies, tail coverage costs, and whether the carrier has experience defending physicians in your specialty. These details matter enormously if you ever face a claim.
Build insurance costs into your startup budget realistically. Between malpractice, general liability, property, workers' comp, and cyber coverage, you're likely looking at $10,000 to $250,000 annually depending on your specialty and location. Don't underestimate this line item—it can make or break your cash flow in year one.
Starting a medical practice is a massive undertaking, and insurance is just one piece of the puzzle. But it's a piece that can destroy everything you've built if you get it wrong. Start early, work with specialists, and update your coverage as you grow. Your future self will thank you.
