As a dental professional, you may be aware of the insurance you need to protect yourself and your family, but what about the insurance you may need to protect your business?
Your dental practice is its own living, breathing entity. As the owner, you must ensure that your practice will thrive along with your career growth while safeguarding your bottom line. You need a way to help protect against potential lawsuits, data breaches, and other unforeseeable circumstances that your business could face.
Here, we’ll discuss what you need to know about insurance policies and options that may help mitigate the risk to your business. You can consider this a guide to protecting your dental practice.
Types of Business Insurance Explained
Business Loan Insurance
What Is It?
Business loan protection may help you make loan payments related to your dental practice when you are unable to work due to illness or injury. Depending on your lender, disability insurance may be required as a condition of lending. Business Loan Protection disability may satisfy the requirement while preserving your personal disability insurance coverage.
Why Do You Need It?
Even if you become ill or injured and can no longer generate income, your loan payments will continue. This type of insurance may serve as a backup plan for making your monthly business-related loan payments on time.
In the following scenario, a doctor secures a practice loan to start or purchase a practice, resulting in a monthly payment to the lender of $7,500 a month. The lender requests disability insurance as a condition of lending.
Scenario 1
- The doctor has $8,000 a month of individual disability insurance
- The doctor has personal expenses of $6,000 a month
In scenario 1, if the doctor becomes disabled, $7,500 may be paid to the bank to cover the loan payment leaving only $500 a month for the doctor’s personal expenses, resulting in a $5,500 a month shortfall.
Scenario 2
Assuming the same facts as in scenario 1, but here the doctor secures business loan protection disability insurance of $7,500 a month.
In the event of a disability, the Business Loan Protection Disability policy may make the loan payment of $7,500 a month to the lender, preserving the doctor’s individual disability insurance and thus eliminating any shortfall.
It is important to note that whether or not a lender requests disability insurance, Business Loan Protection Disability insurance should be considered when obtaining a practice loan, as in the event of a disability, the bank will continue to expect payment.
Business Loan Protection Insurance Coverage Details & Benefits
Keep in mind that business loan protection will likely only cover loan debt related to your business, but it can keep you from defaulting on those loans and the consequences of default.
The cost of business loan protection insurance will vary based on your personal and medical information, as well as your loan amount.
To further protect yourself should you become unable to work, consider pairing this coverage with disability income insurance so that you have a way to cover your business loans and your personal expenses.
Business Overhead Insurance
What Is It?
Business overhead insurance may help cover routine business expenses for your practice if an injury or illness prevents you from working. This policy may serve as a financial lifeline for your practice and help keep the “doors open.”
Why Do You Need It?
This coverage may help you cover recurring operational expenses that can’t wait until you recover or sell your practice, such as:
- Staff salaries
- Utilities, rent, and property taxes
- Principal and interest payments on business loans
- Accounting and legal fees
- Professional dues
- Some business insurance premiums
Business Overhead Expense Insurance Coverage Details & Benefits
Typically, business overhead expense insurance provides benefits through reimbursement of covered business expenses. Approved claims will be reimbursed up to the maximum monthly allowed as described in your policy. Some policies may allow for any remaining benefit to be used in the future or may allow for an extension of your stated benefit period.
Most contracts give you the option to choose an elimination period of 30, 60, or 90 days at the time of purchase. The benefit period will likely be 12 months, 18 months, or 24 months.
For example, say a practice owner is totally disabled and has business overhead expense disability insurance for $20,000 a month with a 30-day elimination period and a 12-month benefit period.
- In Month 1 of disability, no business overhead expense disability benefits are payable as the policy has a 30-day elimination period (deductible of 30 days).
- In Month 2 of disability, the doctor incurs covered expenses of $20,000, for which the doctor may be reimbursed $20,000.
- In Month 3 of disability, the doctor incurs $19,000 in covered expenses for which the doctor may be reimbursed $19,000. Depending on the terms of the policy, the $1,000 a month of coverage that was not used may increase the amount of reimbursement available in the next month to $21,000 or may be used to extend benefits to a 13th month.
In any event, as soon as the doctor is no longer responsible for overhead expenses, reimbursement stops, as would be the case if the practice is sold.
Keep in mind business overhead expense insurance will not cover your own wages and profits, which is another reason to consider individual disability income insurance.
Business Owner’s Policy (BOP)
What Is It?
A business owner's policy is considered a form of property and liability coverage for your business. A BOP bundles several insurance coverages into one policy. Some common BOP coverage options include:
- Property insurance
- General liability insurance
- Business interruption
- Employment practices liability insurance
- Data breach insurance
Why Do You Need It?
This policy may help protect against many property and casualty risks. A BOP can be tailored to fit the specific needs of your dental practice. For example, stretch endorsements may help to clarify and enhance base policy items within the BOP so you may have an appropriate coverage level for where it is needed.
BOP Coverage Details & Benefits
Similar to a homeowner’s policy, a BOP has multiple parts that you should familiarize yourself with so you may help n enable adequate protection. At the least, your BOP may include general liability insurance and property coverage, but several options could also address additional business protection needs.
When determining the amount of coverage for your equipment, limits should be selected to allow the replacement of all equipment with new equipment in the event of a covered loss.
For example, say an existing practice is purchased, and the sale includes existing equipment with a current value of $80,000. In the event of a covered property loss, the new owner will need to purchase new equipment to replace the damaged equipment. The cost to replace the equipment will oftentimes be significantly more as the $80,000 represented the value of “used equipment.”
A common misstep is electing the minimum coverage a BOP can provide and not updating your policy as your business needs change. A BOP typically becomes more complex if you own multiple practices.
Builder’s Risk Insurance
Builder’s risk insurance coverage may help protect your practice during building construction. In some cases, builder’s risk insurance may be required for government regulation compliance or to meet contractual agreements with your bank.
What Is It?
A standard policy may cover:
- Property damage
- Arson and vandalism
- Theft
- Damage caused by severe weather, such as hail or lightning
- Building collapse
It’s crucial to keep in mind that, in most cases, this insurance is not likely to include coverage for workplace accidents, workplace injuries, or liability coverage.
In addition, it does not cover business personal property i.e. dental equipment , furnishings. As construction approaches completion, and equipment deliveries are scheduled, you should speak with your insurance agent about obtaining a business owners policy which includes coverage for business personal property.
Why Do You Need It?
If you are investing in a new construction, remodeling, or installation project, a builder’s risk insurance policy may help protect your investment during the construction process.
Builder’s Risk Insurance Coverage Details & Benefits
Even if your new construction is already underway, you may be able to obtain builder’s risk insurance. However, depending on the insurance provider and how close your building is to completion, there may be additional underwriting required.
Data Breach Insurance
What Is It?
Data breach insurance coverage may assist with cost mitigation should your dental office suffer a data breach. A data breach is a type of cyber attack in which private or sensitive data is accessed without authorization. In the case of your dental practice, this could mean that your patient data, credit card information, social security numbers, or other sensitive details were compromised.
Why Do You Need It?
Considering the amount of sensitive patient information the healthcare industry stores, it is no surprise that cybercriminals relentlessly choose these targets.
Data breach insurance may provide financial support for the repercussions of a cyber attack so you can focus on restoring patient trust.
Covered areas in the wake of a cyber attack may include:
- Public relations
- Good faith advertising
- Credit monitoring
- Notification services
- Legal fees
Some data breach policies may even provide data breach preparedness and response services to help protect your business even more.
Data Breach Insurance Coverage Details & Benefits
It is not uncommon for BOPs to include a data breach clause to assist with centralizing your coverage. Verify your data breach policy to see if a digital forensic investigation is included. Should a data breach occur, they can verify how the attack happened and help you take preventative measures.
Entity Malpractice Coverage
What Is It?
Even if you weren’t personally involved in an incident, your practice may be held liable in addition to the coworkers, partners, or employees named in the lawsuit or settlement. Entity malpractice coverage may offer protection should your dental practice be named as a defendant.
Why Do You Need It?
As your practice grows, so too may the risk of claims. For example, a general dentist at your practice may be sued by a patient claiming the staff mistreated them. Both the general dentist and your dental practice (as an entity) are named in the lawsuit. Your personal malpractice liability insurance may not cover the suit against your practice. That is where entity malpractice coverage can help, including with:
- Damages should your entity be found liable for malpractice
- Settlement costs
- Defense costs
- Arbitration costs
- Compensatory and punitive damages
You may be able to include entity coverage as part of your professional liability coverage, or you can purchase a separate policy to protect your practice.
Entity Malpractice Coverage Details & Benefits
If you own multiple dental practices under the same corporation, you may be able to include entity coverage for all of your practices within one policy. Even though it’s likely that all dentists at your practice locations carry individual malpractice insurance policies, there could still be action taken against your corporation. Since your needs may vary, it’s important to speak with an advisor who can help you fill in any coverage gaps and provide insight into your options.
Employment Practices Liability Insurance (EPL)
What Is It?
Employment practices liability insurance can help cover claims against your practice made by your employees.
Why Do You Need It?
Although larger corporations may see EPL as a necessity due to the sheer number of staff they employ, small to medium-sized businesses could also benefit from coverage, especially since they are less likely to have a Human Resources department or detailed employee policies.
Employment practices claims that may be covered by an EPL policy include:
- Harassment
- Discrimination
- Failure to promote
- Wrongful termination
This coverage may be included as a part of your BOP policy to provide a holistic approach to protecting your business.
EPL Coverage Details & Benefits
Pricing for EPL coverage is influenced by staff size, a history of previous lawsuits, and employee turnover rates. Some EPL policies may include support and prevention materials, including training programs and legal advice. If you can lower your liability risk through preventative measures, this may help reduce the price of some policies.
ERISA Bonds
What Is It?
The Employee Retirement Income Security Act (ERISA) states that protection for plan funds through a fidelity bond is required to “protect the plan from losses due to fraud or dishonesty,” according to the Department of Labor.
Why Do You Need It?
Certain employee benefit plans, such as 401K plans, may legally require an ERISA bond. They can be essential to securing your team’s assets and providing new and current employees peace of mind.
ERISA Bonds Coverage Details & Benefits
ERISA bonds may only be purchased from companies on the acceptable sureties on federal bonds certified company list.
General Liability Insurance for Practice Owners
What Is It?
General liability insurance, also called business liability insurance, may cover costs related to third-party accidents or injuries in addition to property damage. There are many instances in which general liability insurance may help protect your practice including:
- If a patient were to suffer a slip or fall on your property or cause property damage.
- Copyright infringement issues or other business litigation claims.
- Property damage due to a natural disaster.
Why Do You Need It?
In many cases, general liability insurance is necessary to help fill in the gaps of where your other insurance coverages end.
General Liability Coverage Details & Benefits
General liability insurance may also help you qualify for certain leases and contracts, and it is often a vital component of a business owner’s policy. It’s important to check and make sure that you know what is covered and not covered so you can ensure your business has a strong insurance foundation.
Life Insurance for Practice Loans
What Is It?
Life insurance coverage for practice loans can offer protection for your family, employees, and practice owners in the event of your untimely death. This coverage can offer a way to pay off any remaining balance on the business loans you used to start or expand your practice.
Why Do You Need It?
Your premature passing could leave behind considerable business loan debt for your loved ones. Depending on the value of your practice and outstanding debt, it may be difficult for your heirs to sell the practice for enough to pay off the loan. Life insurance coverage for practice loans can help alleviate this concern for those you leave behind.
In addition, a bank/lender may require life insurance as a precondition of the practice loan. It is important to note that when life insurance is required by a lender, the lender is typically not named as a beneficiary of the life insurance policy but is collaterally assigned the policy.
Life Insurance for Practice Loans Coverage Details & Benefits
When applying for life insurance, you would typically name a loved one, a spouse, etc., as the primary beneficiary and then collaterally assign the policy to the lender. In the event of your death, the bank receives the death benefit to pay off your loan balance, with any remaining proceeds being paid to your primary beneficiary.
In some cases, you may be able to combine your practice loan coverage with your life insurance coverage into a single policy. However, it may be wise to consider using a separate policy to avoid any potential delays in the payment of the proceeds intended for your family or loved ones.
Workers’ Compensation
What Is It?
Workers’ compensation may provide benefits, including medical expenses and wages lost, in the event that an employee suffers a job-related injury or illness at your dental practice. This coverage may be required by state law, and employees who suffer a work-related injury or illness can receive benefits through workers’ compensation regardless of fault.
It should be noted that workers’ compensation laws and requirements are regulated at the state level and accordingly vary from state to state. An experienced advisor will be able to guide you regarding the requirements in the state where your practice is located.
Why Do You Need It?
Workers’ compensation may replace at least a part of an employee’s lost wages should they suffer a work-related injury or illness. This coverage may also cover medical expenses for a work-related injury or illness.
Coverage Details & Benefits
Some policies may provide retraining costs if an injury or illness prevents the employee from returning to their previous job. Extended work-related injuries may have long-term benefits if the employee cannot return to work. Should an employee accidentally pass away on the job, workers’ compensation may pay beneficiaries.
Business Insurance for Dentists: Safeguard Your Dental Practice
When choosing business insurance coverage options for your dental practice, keep in mind that the best offense is a strong defense. Skimping on coverage could leave gaps in your protection, costing you in the long term. It is crucial to work with a provider who is experienced in working with dental professionals and understands your specific needs.
Treloar & Heisel has over 60 years of experience helping dental and medical professionals like you to protect themselves, their families, and their businesses.
To see what coverage can help safeguard your livelihood, schedule a consultation with an advisor today.
