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Risk and Insurance 101: What Every New Practice Owner Should Know

As you embark on the new world of practice ownership, you may be feeling a bit overwhelmed with all the preparations.  One of the most important steps will be determining which types of insurance you will need to properly protect your investment and livelihood.  If you are taking out a business loan, there is a good chance that your banker has already given you a list of insurance policies they require.

To help you navigate this process a little easier, here is a breakdown of the basic types of insurance you should consider:

  • Business Owner’s Policy
  • Workers’ Compensation
  • Employment Practices Liability Insurance
  • Entity Malpractice Insurance
  • Data Breach

Business Owner’s Policy

The business owner’s policy bundles together some key protections in one policy.  The primary components include: general liability coverage, property coverage, and business interruption coverage.  For practices that do not own any vehicles, it’s common to package in some hired and non-owned auto liability, just in case an employee runs errands or travels for business.

The most common types of property coverage that may be included are building coverage if you are purchasing the real estate, tenant improvements coverage if you are upfitting your leased space, and business personal property, for all of your furniture, some fixtures, computers and equipment.

Workers’ Compensation

Workers’ compensation coverage protects your employees as well as your practice when a work-related injury or illness occurs.  Part 1 protects the employee by paying for medical expenses and a portion of their lost wages.  Part 2, employers liability insurance, provides legal defense coverage when an employee contends the injury was caused by employer negligence.

If your business resides in North Carolina and you have three or more employees, this coverage in mandatory.  It’s not a matter of if, but when, a needle stick will happen.

Employment Practices Liability Insurance

If you have employees, you cannot afford to go without employment practices liability insurance (EPLI).  The most popular coverage within the executive liability insurance family, EPLI protects your business against alleged discrimination, wrongful termination, sexual harassment, retaliation and other wrongful acts during the course of employment.

Do you know any businesses that have had to lay off or furlough employees due to closures due to the COVID-19 pandemic?  What is the likelihood that one or more of their employees was not happy with the way the layoffs were handled?  If they sue, this is the coverage that will pick up and defend the employer.

For the latest on EPLI market trends and pricing, read Sentinel’s recent article, here.

Entity Professional Liability (Malpractice) Insurance

You probably already have professional liability to protect yourself as an individual against allegations of negligence that arise from the services that you provide. But what about protection when the practice is also named in a suit?  Your practice is variously liable for the errors of all associate dentists, dental hygienists, and dental assistants.

Some dental malpractice claim examples include: failure to obtain informed consent prior to a procedure, extraction errors, infections from procedures, failure to diagnose, failure to treat, and failure to administer anesthesia when appropriate.

Data Breach Response and Cyber Liability

The healthcare industry is a popular target for hackers, and dental practices are no exception.  As a care provider, your practice will be entrusted with sensitive information such as medical and billing records, credit card numbers and other personal identifiable information. Data breaches may occur from cyber attacks, lost computers and mobile devices, theft, and human errors, such as clicking on phishing links.

When these events occur, data breach coverage will pay for many of the common costs associated with a breach, such as recovery of lost data, credit monitoring, notification services, reputation management and legal expenses.

Other Insurance Considerations

  • Business Overhead Disability Insurance – Protection to pay for your practice’s business overhead expenses if you are unable to perform your job, due to illness to injury.  This is especially important to new practices that have not had time to build a cash reserve for emergencies.
  • ERISA Bond – Protects employee benefit plans from losses that result from employee dishonesty and fraud.  This coverage, which is often required by the federal government, is necessary for anyone in the practice who handles property or manages funds for others. Learn more about ERISA bonds here.

 

Still wondering which types of insurance coverage you should purchase for your new practice?  Perhaps you are confused as to which risk and insurance strategy is right for you.  For instance, should you purchase lowers limits of coverage in the beginning and then increase down the road after you have built your client list and have more cash flow?

Fortunately, you don’t have to make these decisions alone.  Whether you are new to practice ownership or simply want to review your existing business insurance coverage, we are here to guide you.

Contact Sara Biggs Jarrett Today

Sara Biggs Jarrett, CIC, CRM, Director of Medical and Dental Services

Phone: 984-365-1060 | Email: sjarrett@sentinelra.com