Evaluating and Choosing the Right Insurance to Protect Your Dental Practice

When we think of insurance, what comes to mind? Car, health, homeowners, and life insurance, right? But once you start digging into the different levels and choices of insurance under each of those broader umbrellas, it becomes much more complex and — honestly — overwhelming. How many hours do you spend weighing and comparing options?

Now add in a new business and the insurance you’ll need to protect it, your assets, your employees, and yourself. Whether you’re purchasing an existing dental practice or starting one from scratch, this investment carries a level of risk. Insurance helps minimize the impact of risk, but once again, you’ve got a lot of options to choose.

Here’s a list of the most common insurance types available to protect dental practices.

Business Owner’s Policy

Offering a broad range of coverage, it generally includes general liability, legal fees, lost earnings, lost/reconstructed patient records, medical waste disposal violations, office technology, and property damage. You can also add a rider to some policies to cover employment practices liability insurance.

Entity Malpractice Insurance

Should you or your partners face a malpractice lawsuit, the plaintiff could also potentially name your dental practice as a separate defendant. So while you might already have protected your personal assets with professional liability insurance, your business would lack the same protection. It could be found responsible for damages.

Worker’s Compensation

No one wants to think about the possibility of workplace injuries, but they happen. Many states — including New Jersey —  require employers to cover on-the-job injuries and work-related illnesses but even if it’s not required, it’s a good idea. Healthcare had the highest rate of work-related injuries in 2020.

Worker’s comp typically covers medical care and lost wages. Some policies also offer training programs designed to prevent injury and illness in the workplace.

Employment Practices Liability

Sometimes, your business owner’s policy will include this insurance — but not always. It’s designed to protect practices from employment-related lawsuits including discrimination, failure to promote, harassment, and wrongful termination. While practices carrying a small staff may have a lower risk, your risk may increase if your practice is large to start or scales up. Many of these policies also include HR policy templates, legal advice, and staff training/education.

Data Breach Coverage

We live in an increasingly digital age, and data breaches have become far more common. More than 45 million patients were victims of data breaches in 2021 — a 32% increase from 2020. Whether it’s a social engineering attack, phishing sent via email, lost or stolen files, or even a disgruntled employee bent on causing damage, it’s critical to take steps to protect your practice.

Data breach insurance will help you manage a breach and mitigate costs — and these policies typically include professional assistance for a quicker response. Some plans also include coverage for credit monitoring, good faith advertising, legal defense expenses, and public relations management.

ERISA Bonds

The Department of Labor executed the Employee Retirement Income Security Act (ERISA) to protect companies’ employee benefits plans from abuse, fraud, and mismanagement. The ERISA Bonds cover anyone who handles funds in your dental practice’s employee-sponsored retirement plans. If you’re offering a pension plan and structure your practice as a partnership, proprietorship, LLC, S-corporation or C-corporation, you must have this protection by law.

Business Overhead Insurance

What happens if you’re in an accident or experience an unexpected illness and you can’t work during your recovery? When you own a dental practice, your ability to earn an income doesn’t just affect your personal finances. This insurance pays the monthly expenses of your practice until you resume working.

The normal business operations expenses it covers include accounting, legal fees, payroll, property taxes, rent, select business insurance premiums/professional dues, and utility bills. It may also cover costs related to equipment interest and depreciation or your business premises (like upkeep such as snow removal and grass mowing).

Disability Buy-Sell Insurance

What happens if you co-own your dental practice with a partner or two, and one of you suffers an illness or injury that prevents you from working long-term? You (and your remaining partners) could face serious financial struggles. But you can use this policy to fund buy-out of that partner’s business share.

Disability buy-sell insurance benefits all practice partners. First, it ensures the disabled partner receives fair market compensation for their share. Second, it may eliminate the need for you to fund the buy-out via a bank loan or from cash flows.

Life Insurance Buy-Sell Policy

Like a disability buy-sell policy, the life insurance buy-sell policy protects your practice should one of its partners die. You can use the proceeds from this policy for the buy-out of the deceased partner’s share — and ensure fair compensation for that person’s heirs.

Insurance is meant to protect you and your family, your practice, your employees, and your patients. Plus, your insurance requirements may change over time, so even if you’re a long-time practice owner, it never hurts to revisit your current plans to see if you need to make a change.

But it’s challenging to navigate your options solo. My team and I can help. Want to learn more? Please contact me.