It was hours to go before he was closing a deal to buy a practice, a landmark moment in any dentist’s career. Everything was worked out except for one not so small thing: the insurance needed for buying and running a practice. The purchasing dentist had missed it in the flurry of items to cross off a checklist. Now, if the proper insurance wasn’t in place in time, the deal would be in jeopardy.
Anca Poirier, an insurance advisor with CDSPI Advisory Services Inc., remembers the panicked call from the dentist. To add a wrinkle, he was in another time zone and didn’t have access to a computer, printer, or scanner. Time was ticking. Anca was able to arrange a temporary binder for office insurance over the phone, providing the insurance proof needed to secure the deal.
Anyone looking to buy a dental practice does a great deal of due diligence. Evaluating locations, the practice’s financial state, patient information, cash flows, etc. is all about minimizing risk and taking great care. Insurance is another aspect of protection that needs full and prompt attention.
Yet, says Anca, “It’s a detail that can get overlooked.”
She understands why. Sometimes, dentists don’t fully grasp the scope of what insurance they require when buying a practice. Or, until a potential purchase and the financing is more concrete, the insurance discussion is farther down the list. Maybe a dentist has explorations or offers going on several clinics, adding to the complexity.
“This is usually a very stressful time for dentists,” Anca says.
Often, they only put insurance in motion near the closing day, adding unnecessary anxiety and urgency to an already nerve-wracking period.
Dentists aren’t insurance specialists, nor should they be expected to be. That’s why it’s important to connect early with the people who are.
If you need a loan for the purchase, the banks will always ask for proof of insurance. At a minimum, you need an office insurance package which typically includes commercial general liability, contents, and practice interruption coverage. Anca says most banks also want life insurance in the name of the practitioner, assigned to the bank. That can necessitate a medical exam, so you can’t wait until the last minute.
A key component in office insurance is commercial general liability insurance. This insurance provides protection in the event you unintentionally cause either bodily injury (ex slip and fall) or property damage to a third party. It is often also a requirement of your lease with your landlord that you have commercial general liability insurance.
When buying a practice, Anca says it’s important to explore how other types of insurance can add protection.
For instance, while practice interruption would cover you for fixed expenses and lost income if your business is closed or interrupted because of property damage or physical loss from an insured peril, it would not apply if you lost income due to an illness or injury. For that, you need office overhead insurance. And for the full complement, you would add disability insurance that would fill in the gaps by providing a monthly benefit you can use however you wish.
And all of that doesn’t include other types of insurance that practice owners should consider, such as malpractice insurance, insurance for your dental office staff (life, accident, disability), commercial building insurance (if you’ll own the building you will practice in), and more.
Anca’s advice when buying a practice is to start the insurance discussion as soon as possible. Give yourself ample time to explore what protection suits you best, discuss what’s an insurance need vs. a want, compare and perhaps see how you can save money, and make all the arrangements.
Beyond your insurance specialist, have a team of experts that works in tandem, i.e., your lawyer, accountant, financial advisor, banker, appraiser, broker, leasing advisor, etc.
“They should communicate and be on the same page,” says Anca.
That can help ensure that the process goes smoothly, and that nothing is overlooked or rushed.
To learn more about meeting your insurance needs when buying a practice, contact CDSPI* at 1.800.561.9401 or insurance@cdspi.com.
*Insurance advisory services provided by licensed advisors at CDSPI Advisory Services Inc. Restrictions may apply in certain jurisdictions.