With so many options to consider, how do you ensure you get enough, but not too much?
Shopping for business insurance can often feel like a game of “what if?” What if an employee steals from me? What if my patient data is compromised by a hacker? What if a natural disaster prevents my dental practice from servicing patients?
The right set of business insurance coverage will provide a clear answer to those scenarios and protect the most important aspects of your practice. Because there are unique risks associated with owning a dental practice, business insurance is essential.
“There are three phases of a career when dentists are looking for insurance: leaving medical school, becoming an associate and, the ultimate goal, becoming a business owner. Your needs dramatically change when you become a practice owner,” explains Gracie Martinez, an insurance advisor with HWG Insurance, an agency focused on providing life and disability coverage to dental professionals. “We work with our clients every step of the way to explain the changes throughout these three phases and what is critical.”
Gracie Martinez, HWG Insurance
What does business insurance cover?
Most commonly, dental practice owners have a Business Owner’s Policy (BOP) with a bundle of coverages, which is often more economical than individual policies. Depending on your needs as your practice grows, you may also consider a standalone policy to increase limits and access additional features.
There are many coverages to consider, whether they are a part of a BOP or a standalone policy:
- Flood and earthquake: These events are usually excluded on business policies and affect some states more than others. In the event of either of these natural disasters, you would not qualify to file Business Interruption unless you have this coverage.
- Property and casualty: Protects the physical assets of your practice, including your office space, building or equipment. These types of policies not only protect you, but your patients and other office visitors from injury or loss on your practice’s premises.
- Business or commercial auto: Safeguards your practice when employees use their own vehicles or a practice-owned vehicle for running errands. This is especially important when personal auto insurance does not provide adequate protection.
- Malpractice: Limits exposure to claims of bodily or personal injury from patients. This is a must-have for every dentist to carry individually at any phase of their career, and especially business owners who can opt to get entity coverage for the whole practice. Some state boards require malpractice insurance; however, terms and amount vary. Even if your practice provides malpractice insurance for associates, some may opt for additional coverage.
- Employment practices liability (EPLI): Helps protect your practice from lawsuits brought by employees for issues such as discrimination, sexual harassment, or wrongful termination.
- Employee dishonesty/ERISA: Defends your practice from crimes committed by employees like embezzlement, theft, or fraud. David Harris, Certified Fraud Examiner and CEO of Prosperident, believes that more than two out of every three dentists will be victims of fraud. Good basic business practices combined with insurance can help protect your practice.
- Workers’ compensation: Often regulated by law in many states, this coverage provides benefits to employees for work-related injury or illness, such as covering medical bills, compensation and missed wages.
- Cybersecurity: Designed to mitigate losses from cyber incidents like data breaches or computer network compromises; this provides assistance to the business owner to manage the incident. Every business is susceptible to this type of loss with increases in data being captured electronically, highly skilled hackers and new technological innovation with which to keep up.
- Business interruption: Replaces income lost in the event that a natural disaster or other covered event results in business being halted. Gracie notes that in areas at higher risk for natural disasters, this is vital: “In 2017 when Hurricane Harvey came through, we had a client who thankfully had business interruption coverage. Their leased office space had major electrical impact. The practice filed a claim with insurance to help cover operational costs.” It is important to be aware of the limitations in the policy as to the type of events covered.
- Life and disability: Insures your company’s most valuable asset–you. If your business cannot withstand a long-term absence from you or another owner, life and disability insurance can close the gap.
What’s at risk?
Every practice, whether large or small has risks that insurance can protect against while the landscape may always be changing.
For example, cybersecurity insurance is increasingly important as more practices rely on electronic patient records. Accenture’s Ninth Annual Cost of Cybercrime Study found that the average cost of cybercrime for an organization increased from $1.4 million to $13 million in 2019.
“Some insurance carriers often have a limit of $1 million. However, if you have a hundred clients and you have a data breach, you’re looking at not only legal costs, but costs of investigating the trail of the issue in your data environment to determine what information was compromised, setting up a call center for providing information and processing claims and setting up crediting alerts. There are a ton of unexpected costs,” emphasizes Gracie, “but with the right policy, you give your business the opportunity to still offer quality customer service with confidence despite a claim.”
On the other hand, any growing practice will have employees, which brings to light many complicated issues and risks.
“Practices handle cash, checks and vendor payments, and employee theft can occur,” notes Michelle Baird, CFO of Tectonic Advisors. “The larger the practice, sometimes the more liability. But I believe that smaller practices are at higher risk for fiduciary crime because they are doing a lot of things manually. There have been situations where a very trusted front office person has slowly committed small crimes. Over time, it builds up.”
You can avoid these kinds of horror stories with the right coverage. Keep in mind the following tips when exploring options:
- Know what each policy excludes and consider whether the coverage is adequate for your practice. Review endorsements or riders which add, delete, exclude or alter coverage.
- Understand any existing coverage you may have. Business owners can over-insure through duplication if they don’t fully understand policies. This can create issues which, at best delay resolution and at worst can negatively affect the coverage actually provided were an incident to occur.
- Revisit policies annually and evaluate whether you should increase or decrease your coverage.
- Think about what a true interruption would mean to your business finances. Do you have financial liquidity in both your business and personal finances to weather a loss of income and keep your business intact through the disruption?
How should I purchase business insurance?
With a variety of insurance carriers offering many different products, it can be overwhelming to make a decision. Luckily, there are many resources available and you don’t have to go at it alone.
Insurance agents can help you navigate offers from insurance carriers, evaluate your current coverage, and look for ways to save money. However, having multiple experts on your team is a great idea.
For example, if you have a multi-state practice, it helps to have an expert with business experience in those respective states. In addition, in many cases, insurers are limited to only one state and insurance laws vary from state-to-state. Coastal areas like Florida, California, New York and Texas often carry different rates, products and nuances.
Also consider that financial planners can help you understand which policies are applicable to you and your business because they have a close understanding of your business and personal finances, risk tolerance and any gaps in coverage.
David Clifford, President of HWG Insurance emphasizes that expertise is vital: “If you look at a firm like Cain Watters that only deals with dentists, they’re looking at this all day long and understand the industry.”
Is it time to evaluate your business insurance needs? Take the next step and schedule a complimentary consultation to learn more about how business insurance policies can help you meet your financial goals.
Cain Watters is a Registered Investment Advisor. Cain Watters only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Request Form ADV Part 2A for a complete description of Cain Watters investment advisory services. Diversification does not ensure a profit and may not protect against loss in declining markets. Past performance is not an indicator of future results.