In the event of an injury or illness, are you and your dental office prepared for the continued expenses that will accrue while you’re unable to work? Certain coverages, such as business overhead expense insurance, may help your practice retain financial security while you are recovering.
Most people don’t like to think about unpleasant outcomes (understandably!), nor do they pause to answer the question, “What if I became disabled and were unable to work?” According to the CDC, 26% of Americans have at least one disability. This equates to millions of people with a disability. Business overhead expense insurance can help keep the lights on at your practice. Below, we’ll discuss what to know about business overhead expense insurance for dentists so you can work toward business financial security.
In the event that you are disabled and unable to perform regular dental work, business overhead expense (BOE) insurance may protect your business from financial harm. Despite the reduction in business revenue, you will still need a way to pay bills to avoid further business disruption until the dentist can return to work.
BOE insurance may cover expenses such as:
Consider the current financial state of your business and consult with a financial advisor.
Having a business overhead expense policy is a great way to help protect your practice, but it doesn’t cover everything. BOE is intended to reimburse the practice for the fixed recurring monthly expenses of the practice. It will not pay for new inventory (dental supplies) and other expenses that did not exist before the onset of the doctor’s disability.
In addition, BOE insurance doesn’t cover the disabled owner’s salary. That’s why you will still need to look at a disability income insurance for dentists.
Business office expense policies are reimbursement policies. At claim time, the actual claim payment received is based on the actual expenses incurred. In other words, a $10,000 per month overhead expense policy may pay less than this amount if the expenses at the time of disability are less than this figure. Some policies allow any unused benefit to continue past the stated benefit period or be used in future months.
Most business overhead expense contracts have a 30, 60, or 90-day elimination period and benefit periods between 12 months and 24 months. Usually, we suggest a 30-day waiting period. Also, a twelve-month benefit period may be sufficient as most practitioners would resume, sell or liquidate their practice within one year. Every situation should be analyzed and tailored to his or her needs.
EXAMPLE:
- $60,000/Monthly Gross Practice Receipts
- $30,000/Month Expenses
- $30,000/Month Net Income
Based on the assumption that the dentist is carrying $ 15,000/month of personal disability income insurance coverage, there would still be a $45,000 shortage without business overhead expense coverage. In determining the appropriate amount of business overhead expense insurance to obtain, the doctor along with an experienced insurance advisor should review the expenses of the practice to determine which expenses will be ongoing.
For example, if it is determined that $10,000/month of the $30,000/month of practice expenses are for dental supplies, the doctor may wish to obtain $20,000/month of business overhead expense Insurance. As mentioned previously, BOE will not reimburse for dental supplies. Further, it is reasonable to assume that if the doctor is not practicing due to the disability, no dental supplies will be consumed.
This type of coverage is often overlooked and can result in the forced sale of a practice or closing the doors under very difficult circumstances.
In the unfortunate event that you are disabled, your practice should not suffer further setbacks. By covering fixed expenses, business overhead expense insurance can help your practice to continue until you can return to work.
With the help of a BOE policy, you can avoid instances where your practice would have to close due to the inability to make payments. In a way, this policy is your lifeline during unexpected circumstances so that the future of your practice is not at risk.
It can be a challenging time if you become unable to work and have expenses that are not covered by your disability income insurance policy. Having business overhead expense insurance as a supplemental policy to disability income insurance can give you that extra coverage to keep your practice doors open despite life’s unpredictable moments.
An advisor can help you determine the needs of your practice. Learn more about BOE insurance today.
Treloar & Heisel, an EPIC Company, is a premier financial services provider to dental and medical professionals across the country. We assist thousands of clients from residency to practice and through retirement with a comprehensive suite of financial services, custom-tailored advice, and a strong national network focused on delivering the highest level of service.