Chapter 4: Insurance For Your Practice

With a practice, your liabilities increase and there are insurance plans that help you transfer the risk from you to a third party. As well, some insurance policies become an important factor for employee hiring and retention.

                4.1 Health and Dental for Partner Physicians and Staff

                4.2 Professional Expense Insurance

                4.3 Buy-sell partnership strategies

                4.4 Commercial Office Insurance

As you start your practice, you should speak with a licensed insurance professional about your own personal and practice risks. Doctors of BC provides members with access to non-commissioned Insurance Advisors who provide complimentary reviews. Email insurance@doctorsofbc.ca to book a meeting.

 

4.1 Health and Dental coverage for Physicians and Staff

A typical health and dental plan will provide partial or complete reimbursement for employees, physicians and their dependents’ medical expenses such as drugs, paramedical practitioners, medical supplies, out-of-country emergency care and dental cleanings. Plans may also include a small life insurance component and basic disability coverage. Premiums can be a tax-deductible expense to the corporation. Plan rates typically depend on the coverage levels, the number of staff you have covered, and the average age of workers. The larger the clinic, the more flexible plan options are available.

Premiums for staff members can be paid wholly by the clinic or shared with the employee (i.e. 50/50 split). Depending on the situation, physicians may also enroll in the clinic health and dental plan.

 As an employee benefit, health and dental plans can help attract and retain staff.

Details of the Doctors of BC Health and Dental plan.

 

4.2 Professional Expense Insurance

It’s ideal to ensure there is a legal, written agreement between clinic partners outlining what (if any) liability a disabled physician would incur if he/she were unable to practice at the clinic for a specific period of time.

Most physicians have personal disability coverage that provides a monthly tax-free benefit if they are unable to work due to a disability. While the disabled physician can use some of this money to financially support his/her clinic, often the coverage is insufficient to support both clinic and personal or family financial obligations.

Professional Expense Insurance (PEI) provides a monthly reimbursement specifically for your professional and office expenses. These expenses may include rent, staff salary, equipment rentals, accounting fees, membership dues, college fees, and cell phone costs. Benefits generally pay after 14 or 30 days of a disability and benefits can be paid for up to 15 or 24 months. Premiums are considered a tax-deductible expense.

Any revenue generated while the physician is disabled (i.e. locum earning income) will offset benefit payments.

Details of the Doctors of BC Professional Expense plan.

 

4.3 Buy-Sell Strategies

Details of a partnership should be written in a signed legal document. This document should clearly define the obligations of the partners, shareholders and corporation in different circumstances, including death, disability, disagreement and divorce.

As the partnership agreement is being drafted, it’s recommended the parties involved speak with a licensed insurance professional who can assess whether any strategies require insurance. Two strategies, buy-sell life insurance and buy-sell disability/critical insurance, are outlined below.

Buy-Sell Life insurance – upon the death of a partner, a tax-free lump sum is paid out for use by the clinic or the surviving partner to purchase the deceased’s shares or assets of the clinic. This allows the deceased physician’s beneficiaries to be fairly and quickly compensated and allows the surviving partner to continue the business without major financial distress.

Buy-Sell Disability or Critical Illness – this policy provides cash for the clinic or partner to purchase the disabled insured's share of the business.

Contact a Doctors of BC Insurance Advisor at insurance@doctorsofbc.ca for more information.

 

4.4 Commercial Office Insurance

Owning and operating a medical practice is a serious business and one which requires a significant financial investment to establish. Here are some are some key points to consider when purchasing insurance to protect your investment.

Office Contents and Medical Equipment

Contents of a typical medical office include computers, laptops, filing cabinets, office and waiting room furniture, and various types of medical equipment ranging in cost from small stethoscopes to large laser hair removal machines and x-ray machines.  It is important to make sure that these items are all insured on a replacement costs basis so that the items will be replaced with brand new items if they are lost, damaged or stolen.  The total replacement cost of all office contents and equipment should be taken into account when choosing a limit of insurance. Failure to do this can lead to you having to contribute towards a claim out of your own pocket if it is found that you had underinsured the total value of your contents.

Leasehold Improvements

When renting office space, most leases typically make the tenant responsible for all improvements and renovations made to the space, even if the tenant did not have to pay for them at the start of the lease.  Consequently, after a fire or water damage loss, most tenants are responsible for repairing or replacing any improvements that have been done to their space.  This can amount to many thousands of dollars and it is critical to ensure that any improvements are included in the limits chosen under your insurance policy.

Loss of Business Income

Sometimes a fire or major water damage loss, even at your neighbor’s premises, can result in the closure of your business for a few weeks. Loss of income resulting from such a forced closure can be recouped by ensuring that your insurance policy contains loss of income coverage. For most offices, make sure the loss of income limit is at least 12 months and is not capped by a dollar limit.

Commercial General Liability

This coverage is required by most leases and it covers the medical office against general business liabilities including any bodily injury, such as slip and fall, and property damage suffered by members of the public whilee on your premises. A high limit is preferable for physicians, basically as much as the budget for insurance will allow.  Please note this is different from medical malpractice liability insurance.

Non-owned Automobile Liability Coverage

For physicians who have employees working at the clinic, there may be instances where an employee uses their own vehicle for clinic business, such as attending a seminar, picking up supplies or collecting mail.  If the employee is involved in a motor vehicle accident while on clinic business, and is found to be negligent, the clinic itself can be sued for damages.  A policy should contains this type of coverage to prevent any nasty surprises.

Employment Practices Liability

For owners of medical clinics, claims can arise from a variety of exposures including discrimination based on sex, age, illness, harassment, assault, demotion, unfair dismissal and emotional distress at work.  Employers face potential awards granted by both administrative tribunals and courts of law.  This type of coverage can provide insurance to pay out for punitive damages and also provide access to a hotline for free legal advice when situations occur.

Directors and Officers Liability

If you are involved either as a director or as an owner in the business aspects of a medical clinic where you have no medical relationship with patients, you are well advised to have separate liability insurance for the business aspects of your clinic to ensure that the clinic will protect you financially for any claims arising from that business relationship

A Directors and Officers Liability insurance policy covers a company’s Directors and Officers for defense costs, settlements and judgments for claims by shareholders, customers, creditors, regulators and other third parties for allegations of unpaid wages, mismanagement, negligence, misrepresentation, customer protection and privacy violations and copyright infringement.