If you’re a physician, you’ve probably asked yourself this question at some point—or maybe you haven’t, which is part of the problem. The short answer is yes. In many situations, doctors face direct personal liability that puts everything they’ve worked for at risk.
Most physicians assume their malpractice insurance handles everything. It doesn’t. I’ve watched doctors lose homes, retirement accounts, and decades of accumulated wealth because they didn’t understand where their coverage ended and their personal exposure began. The difficulty with most people is they wait too long to understand these systems. By the time they’re sitting across from me, the lawsuit has already been filed.
Where Personal Liability Comes From
Malpractice claims are the obvious concern, but they’re not the only source of personal liability for physicians. When a judgment exceeds your policy limits—and this happens more often than you’d think—the plaintiff’s attorney comes looking for your personal assets. That’s your house, your investment accounts, your retirement funds. Everything you’ve built over a career becomes fair game.
Then there’s the business side of medicine. If you own or co-own a practice, you’ve likely signed personal guarantees on leases, equipment financing, or lines of credit. Those guarantees mean exactly what they say: if the practice can’t pay, you pay. I’ve seen physicians who thought they were protected by their corporate structure discover that their signature on a guarantee made that protection meaningless.
Employment disputes within a practice create another layer of exposure. Wrongful termination claims, discrimination allegations, HR violations—these often pierce the corporate veil and land directly on the physician-owners. Regulatory fines and compliance violations add to the list. The sources of personal liability for a practicing physician are more numerous than most realize.
Why Malpractice Insurance Isn’t Enough
Here’s what I tell every physician who sits down with me: your malpractice insurance is not an asset protection plan. It’s one piece of a much larger puzzle, and it has significant limitations.
Policy limits create a hard ceiling. If you carry $1 million per occurrence with a $3 million aggregate, and a jury awards $2.5 million on a single claim, you’re personally responsible for that $1.5 million difference. Plaintiffs’ attorneys know this. They look at your coverage, they look at your assets, and they structure their demands accordingly. Are doctors personally liable for amounts beyond their coverage? Absolutely—and sophisticated attorneys build their cases with that in mind.
Coverage exclusions catch many physicians off guard. Certain procedures, administrative decisions, and business activities may fall outside your policy’s protection. Tail coverage gaps when you change employers or retire create windows of exposure that can last for years. The plaintiff’s bar understands these gaps intimately, even if you don’t.
The Business Side of Medicine Creates Additional Exposure
Physicians who own their practices face a compounded set of risks. The entity structure you chose when you started out—whether that’s a PLLC, PC, or partnership—may not provide the protection you think it does. I’ve seen too many doctors operating with structures that made sense twenty years ago but leave them completely exposed under current circumstances.
Real estate holdings tied to the practice are particularly problematic. If your practice owns its building, or if you personally own the building and lease it to your practice, you’ve created connections between assets that a creditor can exploit. Partnership disputes and buy-sell agreement failures have destroyed physician wealth that took generations to build.
And then there’s the reality that successful doctors carry a target. You drive a nice car, you live in a good neighborhood, your kids go to private school. Plaintiffs’ attorneys see that. They know you have assets worth pursuing. The more successful you become, the more attractive you become as a defendant—not because you did anything wrong, but because you have something worth taking.
What Physicians Can Do About It
The good news is that solutions exist. The state of Wyoming and a number of other states have worked hard to make sure that you can protect the assets you’ve worked so hard to acquire over the course of a lifetime.
Proper entity structuring is the foundation, but entities alone aren’t enough. You need separation between your professional activities—where liability is generated—and your personal wealth. This is where asset protection trusts become essential. A properly structured trust can hold your accumulated wealth in a way that puts it beyond the reach of future creditors while still allowing you to benefit from those assets.
The critical word there is “future.” This planning must happen before a claim arises. Once you’re sued, once there’s a judgment, once a creditor has a claim against you—the window closes. Courts look unfavorably on asset transfers made after liability attaches. The time to protect yourself is when everything is going well, not when you’re already in trouble.
What we’re looking at is separating what you’ve built from what you’re still building. Your practice generates income, but it also generates risk. The wealth you’ve already accumulated shouldn’t be exposed to the risks you’re taking today. That separation is what asset protection planning accomplishes.
The Risk Isn’t Theoretical
If you’ve been in medicine long enough, you know colleagues who’ve been sued. You may have been sued yourself. The statistics on malpractice claims over a career are sobering—the majority of physicians in high-risk specialties will face at least one claim before they retire.
You’ve spent a lifetime building something. You’ve worked hard. You need to be able to keep it. The process of protecting yourself is straightforward, it’s comparatively quick, and it will preserve your financial and emotional well-being for years.
The biggest mistake I see physicians make is the same mistake I see entrepreneurs make: they think because things are going well now, they’ll continue going well forever. That’s not how the world works. Prepare for the inevitability of challenges. Put the structures in place while you can. What you’ve earned deserves protection—and the law provides tools to accomplish exactly that.