The disability insurance you may have individually can take care of your basic needs, such as your student loan payment and mortgage, but what happens if you own your own practice and become disabled? Your individual policy likely won’t include funds for hiring someone to replace you. That’s where business overhead expense insurance comes in.
Business overhead expense insurance is a disability policy that can be customized to suit your needs. This policy lets you set aside an amount of money to cover a period of time, no longer than two years, intended to cover a period of time needed to either hire a new doctor for your practice or to heal and come back to work.
Some things to look for in business overhead expense insurance is the amount of coverage, whether you can pay for the salary of another doctor, and the termination period for when the policy will begin paying out.
The amount of coverage is self-explanatory: you choose an amount anywhere from $10,000 per month to $30,000 per month. Choose an amount that can cover your needs.
Hiring another doctor is a piece of the policy you need to be sure is included before you buy it. Many policies will include terms to cover costs of running the practice, like your staff, your rent and all other basic expenses but won’t cover costs of hiring new staff. Be careful that the contract states you can use the funds to pay the salary of another doctor.
The termination period is important because if you choose a period that’s too long, like 60 or 90 days, you may run out of income before that date hits, leaving you in a bad situation. Many doctors who own a practice will have accounts receivable coming in for a period of time from past cases, and you need to ensure your business overhead expense insurance will overlap with that money, rather than leaving yourself with a gap.
With these types of policies, you’ll want to make sure there isn’t a significant drop on money coming into the practice, which is why this type of coverage is so important to those who run their own practice.