In this article, I’m going to talk about business insurance – not personal stuff like life and disability. (I shared thoughts on life and disability insurance in separate posts you can read here and here).
The bottom line with insurance: as a business owner you’re going to feel like you have insurance coming out of your ears.
And that’s usually okay. While it’s possible to be overinsured, the bigger and more common error is to be underinsured. The whole point of insurance is to protect you from something catastrophic that could ruin you financially. Yes, insurance will cost money. But insurance will rarely, if ever, make a dent in your long-term financial goals. But not having insurance when you actually need it can derail your entire financial future.
Quick story: one of my first transition clients called from vacation in Hawaii on a Monday in a panic. This was 4 years after he bought his practice. He needed to know if I had a copy of his contents insurance policy (I didn’t, but helped him track it down). His office manager came to the office, opened the door, and had to wade through waist-deep water to even get through the door. A pipe had burst in the ceiling over the weekend and had been running all weekend. Everything (and I mean everything) in the office was destroyed. He was insured, and made it through some pain and is doing even better after the emergency. All thanks to being insured. Phew.
There are dozens of different insurance policies you could get as a business owner. Your goal is to insure against events that you cannot afford to have happen. You should be aware of a few of the most common and useful types of insurance for practice owners. The bank you chose will set the rules on the minimum policies to have. They’ll likely include the list below, but I’ll note which ones aren’t required but you might consider.
1. Professional Liability Insurance (Malpractice) Most buyers already have have this covered. As an owner beware that a policy can also cover hygienists and assistants employed in your office. You can buy a “claims policy” at a discount rate when you’re first getting started and may consider purchasing an “occurrence” policy. Both protect you as a medical professional and have slightly different rules about when coverage kicks in. A discounted claims policy will cost about a few hundred a year for a recent graduate, but rates will increase after five years and will generally be higher in metro areas.
2. Workers Compensation Insurance Workers’ compensation insurance is generally mandatory for all offices and the requirements will vary from state to state. Usually, this will be set up automatically with the help of your payroll company but be sure to ask so that you are compliant with your state’s regulations. These rates are set by your state.
3. Business Contents Insurance Business contents insurance generally covers the “stuff” in your office – office furnishings, equipment, building improvements on leased space, and buildouts. It can also include business income accounts receivable and wind/hail coverage. Rates are determined by location and the amount of property protected by the policy. This is the one that protected my flooded client.
4. General Liability Insurance General liability insurance covers practices against claims for bodily injury and property damage that happen at your office, from normal business operations and products of the dental practice. Rates are determined by location and risk factors determined by the insurance company. This is typically referred to as the “slip and fall” policy.
Now, two policies that won’t be required that you might want to ask about:
5. Umbrella or Excess Liability Umbrella insurance provides extra coverage in the event of claim loss in excess of underlying policy limits. For example, you are sued for $2 Million, but your malpractice coverage only covers claims up to $1 Million, your umbrella policy would kick in a cover the rest. Umbrella can cover general liability, employer’s liability, auto insurance liability and other types of policies. This is usually dirt cheap and I recommend it.
6. Cyber Security As a dentist, you’ll be a target for financial schemes. Sorry. One increasingly common one is for hackers to lock you out of your office computers and demand a ransom payment. There are probably good IT solutions to a problem like this (offsite backups?), but I know an increasing number of dentists are both being affected by this and getting insurance policies to cover it. Something to ask about.
Okay, so where do you get all this? Your likely best option is to talk with an existing insurance relationship you have. Second best is the brother, cousin, ex-roommate who sells insurance. Third place is my rolodex. I’m happy to make recommendations, of course, and don’t have any referral arrangements with anyone. Fourth, but still a good option are referrals from the bank. I put this one in last place because I’ve heard rumors (but never confirmed) that some banks get kickbacks from the insurance companies who get business from the bank. Honestly, the policies I’ve seen from bank contacts look pretty good. But it’s something to be aware of. (See!? You’re already a financial target!)