Understanding Insurance Needs for Physicians’ Practice Protection

Understanding Insurance Needs for Physicians’ Practice Protection

Keeping patients safe and healthy—as a doctor running a practice, that’s your goal. It’s what drives you to hire compassionate staff, explore novel tech, and constantly expand your medical knowledge. 

But you must also protect your practice from unforeseen risks by obtaining the proper spectrum of liability coverage. Given the insurance landscape’s complexity, however, it can be tough to pinpoint the precise coverage types you need to safeguard your practice.

Free your mind to focus on patient care by thoroughly understanding essential coverage and how it suits your needs.

Medical Malpractice

Even under ideal circumstances, medical intervention may result in injury, death, or additional medical expenses resulting from an error in diagnosis or treatment. When such mistakes occur, patients may file a malpractice suit, requesting damages for:

  • Physical trauma
  • Healthcare costs
  • Mental distress
  • Pain and suffering
  • Related future expenses or lost income

This risk renders medical malpractice insurance the bedrock of physician practice protection. Lawsuits pose a threat to even the most skilled and attentive doctors, making malpractice insurance essential to protect both your reputation and your practice’s financial solvency. 

Government and insurer regulations also require certain minimum levels of malpractice coverage (amounts vary by state and specialty).

Standard malpractice policies provide coverage for:

  • Legal fees
  • Arbitration expenses
  • Court settlements
  • Judgements
  • Punitive damages

As an independent practitioner, you can obtain coverage through individual or group policies offered by private insurers. Alternatively, you can join a medical risk retention group (RRG), which typically consists of fellow physicians pooling resources.

While other insurance types play a critical role in protecting your practice, malpractice coverage eclipses them all. 

Individual Disability

On the surface, an individual disability policy provides benefits when you’re unable to work due to disability. Upon closer inspection, however, many of these policies contain subtle distinctions with regard to payouts. For example, some policies:

  • Supply benefits if you can’t perform your own occupation and take on different work while disabled.
  • Offer coverage if you’re unable to continue your normal duties but haven’t assumed new ones.
  • Pay out only if you’re unable to work in any discipline for which you’re qualified (or even “reasonably qualified”).

Needless to say, it pays to understand these nuances before selecting a policy. 

The best choice is a policy that includes a true own-occupation rider. Were you to become ill or injured, you could adjust your occupation to a less demanding role and still receive disability benefits, regardless of your new income.

You should also consider adding a partial disability rider, which backfills lost income if illness or injury force you to reduce your hours or the scope of your duties. 

Business Buy Out

As part owner of a private practice, your shares likely represent your most valuable asset—the source of present day income and retirement security.

Unfortunately, circumstances shift rapidly, and a once-stable practice can find itself in turmoil due to the sudden death, disability or departure of a co-owner. Shocks like this can destabilize a business and jeopardize long-term wealth.

To avoid this fate, many physicians opt for business buy out insurance (or a “buy sell agreement”). Under this structure, when a partner departs suddenly, an automatic sale of that owner’s business interest occurs. The remaining partners purchase it for an agreed-upon “fair price.” 

This ensures:

  • Immediate benefit to the departed’s family (in case of death or disability)
  • Continuity of the practice

Policies vary in structure, but they typically require the business to procure life insurance for each partner and use the proceeds to purchase the necessary shares.

Business Overhead

You’ve put in the work to build an excellent practice, but its day-to-day success depends on your skillset. What would happen if you suddenly became incapacitated, unable to perform your duties?

Vendor billing would continue, and absent the revenue your work generates, the practice could rapidly become insolvent. 

In this scenario, business overhead insurance provides peace of mind. A strong policy should:

  • Cover your firm’s expenses during your absence
  • Handle the shortfall if you can only resume limited duties
  • Furnish salary for replacement hires
  • Offer optional riders covering personal income loss

With quality business overhead insurance in place, you’re free to focus on what you do best: treating patients.

Life Insurance

As we saw above, your sudden absence would severely jeopardize your business. Even more so in the case of permanent absence. 

Physicians should procure life insurance to protect their practice. Life insurance comes in several varieties. A few key types to know:

  • IndividualIndividual life insurance provides a payout to your personal beneficiaries in the event of your death. It also helps protect your family in the event of sudden loss of income.
  • Key Man – While it takes a team to run a practice, some partners play an irreplaceable role. Key man insurance covers a business for the sudden loss of a critical earner. Additional riders may extend this coverage to disability.
  • Company-owned – A policy taken out by a business to cover the costs of replacing an employee upon their death. The company serves as the policy owner, must pay the premiums, and receives the death benefit.

Since it relies on such refined skills, and requires decades of experience, a medical practice can be a fragile structure. Shore up its foundations by covering for the potential loss of key contributors.

General Liability

While your practice functions as a financial and legal entity, it’s also a physical location visited by patients and staff. And like any business owner, your premises expose you to the risk of property damage and bodily injury claims unconnected to providing medical care.

For instance, a patient might fall and break their wrist while walking between exam rooms. Or a ceiling might leak and collapse, damaging patient belongings. In these instances, patients may file a claim against your office.

General liability insurance covers you for such claims. With practitioners’ enormous focus on patient well-being and healthcare standards, it’s easy to forget about broader, everyday risks. Such claims can present lofty price tags, however, so ensure adequate general coverage for your facility.

Cyber Liability 

Most modern practices store patient health records electronically, which are heavily regulated under the Health Insurance Portability and Accountability Act (HIPAA). While this data helps facilitate better care and coordination, all entities that collect, use, or store electronic protected health information (ePHI) must enforce physical, technical, and administrative safeguards.

If any unauthorized individuals access patients’ ePHI—whether through malicious means or negligence—it constitutes a data breach and a violation of HIPAA. Holding confidential electronic information also puts your practice at a general risk of a cyber attack.

When such breaches occur, cyber liability coverage guards against the fallout, which may include:

  • Regulatory fines
  • Legal expenses
  • Patient notification costs
  • Data recovery
  • Fixing compromised software
  • Victim credit monitoring (occasionally)

In the case of a data breach, sturdy cyber liability coverage also protects your firm’s good name by swiftly compensating patients and providing tools to surveil their credit and digital identities.

Business Property

Your practice likely relies on specialized medical equipment (such as MRI machines, blood pressure monitors, or ultrasound tech) that require substantial upfront investment. 

These assets drive your business, and unpredicted events (such as a fire or flood) could render them inoperable. As valuable property, they also make tempting targets for a break-in. 

As with any business, safeguarding your assets should take top priority. Business property insurance offers coverage in cases of:

  • Accidents that damage equipment
  • Burglary
  • Vandalism

With business property coverage, your practice can rapidly rebound from setbacks. Some policies also replace income lost due to accidents, smoothing the path to restored operations.

Worker’s Compensation

As a physician, you likely rely on a team of highly qualified staff to care for patients and handle the array of administrative tasks that arise in a busy medical practice. 

Unfortunately, your employees may suffer an accident or injury while on the job, resulting in a worker’s comp claim. In order to cover their expenses, you’ll need to obtain worker’s compensation insurance. These policies handle a variety of expenses incurred by hurt employees, including:

  • Medical bills
  • Lost wages
  • Death benefits

Maintaining quality worker’s compensation coverage puts your mind at ease, knowing that your practice remains financially secure and your staff can obtain the care and income they need until recovery.

Tomoro: Protect Your Assets, Enhance Your Future

A thriving practice is the fruit of countless years of hard work and dedication. You should take great pride in the accomplishment. Don’t put it at risk by overlooking insurance needs. Ensure adequate coverage so you can train your full focus on patient well-being.

In all great endeavors, focus is key. And at any given moment, thousands of distractions threaten to derail it. At Tomoro, we handle the complexities of wealth management so our clients can leverage their talents where it matters most. 

For over three decades, we’ve offered data-driven roadmaps to prosperity, individually tailored and fortified against life’s inevitable ups and downs. Unveil your vision: reach out to our team today.

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