Essential insurance considerations for new practice owners

Grow Community
Clive Levinthal, CEO of Experien Insurance Services
12 November 2024
8 minute read

A new dental practice has unique risks and the right insurance coverage can help mitigate some of these, to safeguard your investment and hard work. Experien Insurance Services is an experienced insurance broker specialising in the Dental Industry. Clive Levinthal shares some important tips for new dental practice owners considering insurance for property, liability and personal health risks.

The importance of structuring your insurance correctly

One of the most common mistakes new practice owners make is failing to align their insurance with the legal business structures. Many practices have a collection of different legal entities, such as a Self-Managed Super Fund (SMSF) owning the business property and a separate entity managing the trading operations and independent contractors providing clinical care. Clive stresses that each of these entities needs its own insurance coverage.

For instance, an SMSF that owns the property must have a separate policy to cover the property’s value. Meanwhile, the entity managing the day-to-day practice operations will require coverage for the trading assets. Overlooking these details could result in critical insurance claims being declined.

Business interruption insurance: a crucial safety net

Business interruption insurance is often forgotten, yet it’s vital for protecting your practice’s revenue if disaster strikes. Clive explains that in cases such as fire or water damage (which, surprisingly, is a common issue for dental practices), business interruption insurance steps in to cover lost revenue while the practice is unable to operate.

This coverage ensures that you can continue to pay your staff, meet rental commitments, and cover other fixed expenses, even if your practice is temporarily shut down. Without this safety net, you may find yourself in a financially vulnerable position, unable to maintain your operations.

It’s also important to note that not all business interruption policies are created equal. Some may exclude coverage for the associate/contractor dentists’ share of income, which could lead to a significant shortfall if the practice has multiple associates contributing to the revenue.

Professional indemnity insurance for practice owners

Most dentists are familiar with (individual) professional indemnity insurance, as it’s a mandatory requirement to cover any claims arising from clinical work. However, Clive highlights that practice owners also need to consider a different type of cover—practice professional indemnity insurance.

This policy protects the legal entity that owns the practice in the event of a claim brought against the practice. If a patient sues both the treating dentist and the practice itself, this policy steps in to cover the legal costs and compensation for the practice. Without it, practice owners could be financially exposed to claims against the business entity, even if they personally didn’t treat the patient.

Business expense disability cover: protecting your fixed costs

While income protection insurance covers your personal (take home) income in case of injury or illness, it doesn’t account for the ongoing costs of running your practice. Business expense disability cover steps in to cover those fixed costs, such as rent, staff wages, and loan repayments, if the practice owner is unable to work for specified reasons.

Clive stresses the importance of having this cover in place to ensure your business remains financially stable, even if you’re temporarily unable to work. Without it, you may find yourself dipping into personal savings to keep the practice afloat.

From structuring your insurance correctly to ensuring you have business interruption and practice professional indemnity coverage, these policies are important considerations for protecting both your practice and your personal finances.

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