Business Insurance Coverage your Physician Should Have
By Russ Faye
Your greatest exposure and risk as a Physician is in the area of Professional Services. Typically most doctors are well aware of the particulars of coverage in this area. There is liability when it comes to the business side of a medical practice and it is in this area where other types of coverage become very important.
Through consultation with a knowledgeable and reputable insurance agent, we encourage our clients to consider the following types of coverage:
This coverage is specific to your practice’s retirement plan. The Employee Retirement Income Security Act requires a plan sponsor to carry coverage for employee dishonestly with respect to the retirement plan’s assets. The policy covers those responsible for fiduciary management of the plan as well as those who handle investment assets in the plan. The amount of required coverage is the lessor of $500,000 or 10% of the plans assets.
In the last few years, how many times have you heard reports of employee embezzlement of funds or assets from a business or medical practice? Employee Dishonesty is another type of fidelity bond coverage which provides protection in the event that a staff member steals or embezzles money or property from your practice.
In most medical practice settings, the potential for theft is present with both accounts receivable and payable. Generally, it is recommended to have a base coverage of at least $100,000.
In addition to carry the insurance, it is important to establish sound internal controls to reduce the possibility of an employee misappropriating practice assets.
In your practice you may own an automobile which is used by the doctor and thus it would be natural to have a policy covering those vehicles.
Coverage for employees may be overlooked when they are using their personal vehicles to conduct business for the practice. Staff members may be running errands for the practice, handling bank deposits or other activities away from your practice that can give rise to liability in the event of an accident.
Non-owner auto coverage protects you when an employee or third party is injured while carrying on business duties for your practice. Standard coverage is $1 million and is coordinated with an umbrella policy.
This type of policy ties into other types of coverage to protect against claims that exceed the limited of the other individual policies.
An umbrella policy can extend coverage to gaps under other policies. An example may be covering the cost of legal expense to defend against a claim. Because this type of policy supplements other coverage, you want to be sure that you can recover from an event that might otherwise drain the assets of the practice.
Employee Theft of Sensitive Customer Data
This coverage for a medical practice is designed to protect against misappropriation of sensitive patient information.
In most situations, this coverage would pertain to a non-employee hacker gaining access to patient records also known as a cyber-breach. In addition, coverage would include accidental interception of sensitive information from perhaps a failed network firewall.
Coverage typically extends to the injured party to provide assistance to recover from the incident such as restoring one’s credit and other related indemnity theft repairs.
This type of coverage addresses issues regarding human resources such as wrongful termination, sexual harassment and employee misconduct.
This type of coverage protects the physician owner as well as claims asserted against staff. Basic coverage is for damages but there can be separate coverage for legal expenses involved in defending a claim.
Business Overhead Expense
This type of disability insurance is most suited for a smaller practice and is very important to the solo practice. If the physician is unable to work due to a disability or other issue, the insurance provides cash flow to continue paying the practice’s overhead expenses needed to keep the business running. Some of those expenses could be for rent, payroll and utilities. The elimination period or waiting period is relatively short and the coverage does not go beyond a couple of years.
Life and Disability (Key Man)
These policies cover the life and ability to work for those in key positions.
For a medical practice, this would include the physicians and any other significant income-producing providers important to the practice.
Life and disability insurance for those in key positions are secured for the purpose of providing cash flow while the practice replaces the lost production. For those practices with significant value, key man life and disability coverage is also important to provide cash to pay the estate of the deceased or to acquire the ownership interest of a disabled physician.
If the practice must support a buyout payment without the help of insurance coverage, then the practice can wind up in a bad financial situation. The lost production capacity will cost the practice top-line revenue and the required buyout obligation will be beyond normal overhead expenses.