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Disabled Office or Disabled Dentist: Get the Right Insurance to Protect Both
David H. Shantz
Vice President of Group Special Accounts Great-West Life & Annuity Insurance Company Greenwood Village, Colorado
Financial experts have long agreed that a well-structured and diverse insurance portfolio is the foundation of financial security. For dentists this is especially true, because a major uninsured loss in either your personal life or business could quickly jeopardize your standard of living and the profits won from years of hard work and careful planning.
Both property insurance, which protects your practice from damage as a result of fire, theft, and other perils, and disability insurance, which separately protects you and your practice if you are disabled by an illness or injury, are equally critical components of your insurance portfolio. It can be thought of as protecting against the possibility of a disabled office and a disabled dentist.
Property Insurance for the Practice
Several types of property insurance should be considered when you operate your own practice.
- Operatory and office equipment and contents insurance covers the replacement of lost or damaged property. Ideally, this coverage should provide for reimbursement on a “new for old” basis without deduction for depreciation. The limits of your coverage should be periodically reevaluated to make certain they reflect your property’s current value.
- Office records and money insurance reimburses for the cost of reproducing damaged, destroyed, or stolen office or professional records. It also replaces money that is destroyed or stolen.
- Patient charts insurance reimburses you for the expense of retaking images of patients whose records have been damaged, destroyed, or stolen.
- Accounts receivable insurance compensates for uncollectible receivables resulting from damage or destruction of records in an insured loss.
- Practice interruption and extra expense insurance, which is sometimes called business interruption insurance, provides compensation for lost or reduced income if your practice is temporarily shut down as a result of damage by a covered event (like a tornado). It also may provide compensation for the extra expenses of setting up a new or temporary office after the loss.
Disability Insurance for the Dentist
There are two types of disability insurance that can protect you and your practice if you are disabled by an injury or illness: business overhead expense insurance and disability income insurance.
- Business overhead expense insurance reimburses you, the dentist, for covered office overhead expenses (essentially, those that keep your practice operational) if you cannot work in the practice because of a total disability. The typically covered overhead expenses include rent or mortgage payments, utilities, a replacement dentist’s salary, employee salaries and benefits, student loans, and practice loans. Benefits generally are payable for up to 2 years, based on the assumption that if a dentist is totally disabled for longer than 2 years, he or she will most likely sell or close the practice. Business overhead expense insurance is relatively inexpensive and often is purchased in tandem with disability income insurance.
- Disability income insurance helps replace your monthly income to support yourself and your family if you are disabled. Ideally, the policy will pay benefits if you are unable to perform the duties of your “own occupation” (ie, dentistry) rather than less generous policies that only pay if you are unable to perform “any occupation” (such as consulting, teaching, or administration). Coverage should approximate 60% of your net monthly earned income (after expenses, but before taxes) because that is approximately how much you take home each month to support your family. I also recommend that you look for a policy that extends “own occupation” coverage for a long period, such as to age 65.
Your insurance portfolio should be examined to ensure you are adequately protected against the possibility of a disabled practice or your own disability. Then, make a point to review and adjust your insurance regularly (or whenever your income or practice value increases noticeably) so both your personal and business coverage keeps pace with your changing needs.
Great-West underwrites and administers the American Dental Association (ADA) Insurance Plans and is the sole provider of ADA-sponsored life and disability insurance to ADA members. For a free copy of the ADA’s comprehensive Insurance for the Dentist handbook, call 888-463-4545. Information on the ADA Office Overhead Expense Plan (Group Policy #1106GDH-OEP) and ADA Income Protection Plan (Group Policy #1105GDH-IPP) can also be found at www.insurance.ada.org.
This article does not constitute legal or financial advice. Please seek professional input as appropriate to your situation.