Insurance needs for healthcare practices tend to be one of the larger overhead expenses for the entity and its owners. It is also a very important asset to continuation of the entity and its owners. Here are a few of the more important policies that should be considered for the healthcare practitioners:

Medical Malpractice Insurance

Medical malpractice happens when a healthcare provider treats a patient below the accepted standard of practice and causes injury or death to the patient. Most malpractice cases involve medical error. Medical malpractice insurance helps healthcare providers offset the risk and costs of lawsuits due to medical malpractice.

Buy-Sell Insurance

A buy-sell insurance policy provides coverage for business owners who are insured under the policy. The company or the individual co-owners buy life insurance policies on the lives of each co-owner. Life insurance creates a lump sum of cash to fund the buy-sell agreement at death. The policy also pays the beneficiaries quickly after the owner’s death to ensure that the buy-sell transaction can be settled quickly. Life insurance proceeds are generally income tax-free, but a C-corporation may be subject to the alternative minimum tax. The premiums on the policies must be paid annually, or the insurance will lapse. The coverage may be adjusted periodically to reflect changes in the value of the business.

Life insurance

How much do you really need? Any method used to determine family needs will be an estimate for that time. Since circumstances change often, it is important to review your insurance needs when there is any significant change to your financial situation, whether it will be an increase in income or expenses.

Although we prefer to meet with you to finalize your life insurance needs, there are certain “rules of thumb” that can be used for estimates; such rules often utilize a multiple of earnings approach.

One such rule is to estimate the amount of life insurance by multiply the earners’ income by the factor of six to eight, then by a physician earning $300,000 annually should have $2.1 to $2.4 million of life insurance. A similar “rule of thumb” takes immediate cash needs into account. This rule is five times gross income plus mortgage, debts, final expense and other special needs. Assume the same physician has a mortgage of $750,000, medical debt of $200,000 and college funding requirement for his or her children totaling $400,000. The insurance needs in this case would be $2,850,000.

As you can see, the “rule of thumb” methods provide a wide variety of selections. This is why it is necessary to analyze a family’s entire financial profile, including the ages of the family members, to accurately determine the proper amount of current insurance needed.

We believe the most reliable approach to determine the proper level of insurance is by way of a needs analysis. The first need is often the most underestimated: this is the family’s current cash need upon death and includes funeral expenses, estate settlement costs, tax liabilities, liquidation of debt, settlement of buy-sell agreements, mortgage settlement, education funding and other special funding needs. By addressing the above, the insured can have insurance that allows his or her family to maintain a similar lifestyle.

The second category is the estimated income need for the family. This need is determined by estimating the surviving spouse’s annual income requirement over his or her remaining life expectancy less any annual earnings. Once this amount is estimated, an assumption must be made regarding an annual inflation percentage. A second assumption must be made regarding after-tax earnings. The difference between the after-tax earnings rate and the inflation factor is the percentage that is applied to the income need in order to determine the present value of the income need. This amount represents the capital, which must be set aside currently in order to ensure the surviving spouse receives the annual income needed each year for his or her remaining life expectancy. This amount is often much higher than most people expect.

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Disability Insurance
It is common for people to disregard the amount disability insurance needed in order to prepare for a worst-case scenario when one spouse dies or becomes disabled and the other is unable to work. The total current cash need and income needs are satisfied by the capital assets available to the family. This will typically include cash, savings and other liquid investment assets. Do not include the value of assets that will not be sold in order to generate cash, such as the family home. The capital assets will also include the present value of any pension or other retirement benefits that will become available at some point in the future.

It is also important to factor in the present value of benefits that will be received from the Social Security Administration. Upon death, the children of the decedent may be entitled to a monthly check until they reach age 18. The surviving spouse will typically begin to receive benefits at normal retirement. A disabled worker will begin to receive Social Security benefits upon meeting the Administration’s definition of total disability.

The insurance need is the difference between the family’s total current cash and income need less the capital assets. The family must evaluate whether or not to purchase insurance equal to the amount of the calculated need. Many times, the calculated need will be very expensive. Take, for exmple, a young couple in their late 20s with two young children. Their current cash requirements may include full payment on a new mortgage and funding for college. At the same time, the surviving spouse’s income need will be very high due to the relatively long life expectancy for someone in their late 20s. The calculated insurance need, if fully funded, may take a dent in the family’s lifestyle due to the high premium requirements for a large policy.

Long-Term Disability Insurance

Long-term disability insurance provides the insured with a stream of income for an extended period of time. There is typically a 30- to 60-day waiting period that determines the date that the first reimbursement is available. The longer the waiting period, the less expensive the premium for the policy will be. This type of insurance policy can replace the insured’s net pay up to $16,500 per month as of 2013.

Long-term DI is a type of insurance that is sometimes overlooked by younger individuals. However, statistics show that some claims occur for age groups 20 to 40 due to accidents occurring from leading a healthy lifestyle. Such accidents can include intramural sporting events, skiing, biking, etc.

Long-Term Care Insurance

Long-term care insurance policies provide for the type of assistance a person needs to perform activities of daily living, known as ADLs. Long-term care needs usually arise as part of the normal aging process, but they can also be due to an injury or illness. Long-term care Insurance protects a person’s assets against the high cost of long-term care. LTC insurance can protect a person’s retirement savings and assets and help the person take control of his or her long-term care decisions. Although the policy may not cover one hundred percent of the expenses, the additional claim proceeds is a significant addition toward aiding long-term care needs.

Business Overhead Expense Insurance (BOE)

Business overhead expense insurance protects the everyday operations of a company. BOE insurance reimburses the costs of business operations when the primary employee such as an owner becomes disabled. BOE covers overhead expenses, such as employee salaries, employment tax and benefit costs, rental payments on equipment and property, the principal and interest on mortgaged business property, utility payments, property taxes, legal and accounting fees, general office supplies and business insurance expenses. BOE insurance covers overhead expenses up to two years. If the business’ principal is expected to be disabled longer, he or she can rely on an existing personal disability policy for added revenue or consider selling or letting the business dissolve.

Employment Practices Liability

Employment practices liability insurance provides protection for an employer against claims made by employees, former employees or potential employees. The insurance covers discrimination, wrongful termination of employment, sexual harassment and other employment-related allegations. It also covers the firm and its directors and officers.

Property & Casualty Insurance, Business Interruption Insurance, Flood Insurance

Property & Casualty Insurance
Property and casualty insurance protects homes, cars and businesses. Property insurance protects a business owner with an interest in physical property against its loss or the loss of its income-generating ability. Casualty insurance protects a business owner against legal liability for losses caused by injury to other people or damage to property of others.
Flood Insurance/Windstorm Insurance
Flood insurance and windstorm insurance are separate types of coverage that protects home or business against flood and wind damage. Flood insurance is an expensive policy considered additional coverage.

Group Health & Dental Insurance/Employee Benefits Insurance

Group Health & Dental Insurance
Group health and dental insurance is employer-sponsored health coverage for business owners, employees and their dependents. Group health and dental insurance policies usually cost less for participants than individual plans that offer the same benefits because the risks are spread among the group. Employers and employees can share costs and there are special tax incentives available to businesses that provide group health insurance.
Employee Benefits Insurance
Employee benefits insurance is employer-sponsored insurance that covers employees, retirees and expatriates. The benefits include but are not limited to pension plans, group life insurance, group health insurance, group disability income insurance and dental insurance. 

Workers’ Compensation & Employee Disability Insurance

Workers’ Compensation & Employee Disability Insurance
Workers’ Compensation provides benefits to employees who become injured or ill on the job. Employee disability benefits insurance provides temporary cash benefits to employees who become injured or ill outside of work. The two policies are typically mandatory for an employer to obtain should he decide to hire employees other than himself. One should check with their payroll adviser regarding these potential insurance needs when starting a company, as there are significant fines for not having these policies in place. The typical state insurance policies reimbursement rarely covers an employee’s full net pay. For this reason, group disability policies or personal disability policies are a smart addition to the state-mandated policies.

Directors & Officers Liability Insurance

Directors & Officers Liability Insurance
Directors and officers liability insurance protects directors and officers of an organization from damages resulting from alleged or actual wrongful acts they may have committed in their positions. Claims from employees, clients and stockholders may be made against any company and against the directors and officers of the company. Since a director or officer can sometimes be held responsible for acts of the company, most directors and officers will want to be covered rather than risk their personal assets.

Billing Errors & Omissions Insurance

Billing Errors & Omissions Insurance
Billing errors and omissions onsurance provides legal and audit expense reimbursement as well as coverage for fines and penalties associated with medical billing errors or violations. The Physicians Billing Errors & Omissions Insurance will provide coverage for physicians in the event that they are investigated for billing and coding errors.

Network Security & Privacy Insurance/Data Breach Insurance/Media Liability Insurance/Cyber Liability Insurance

Network Security & Privacy Insurance
It is critical for companies to protect and maintain confidential client information such as financial data, personal health information, social security numbers, etc. When data security is breached, a business might face many unexpected costs such as costs to comply with state notification requirements, liability claims and damage to the business’ reputation. A network security and privacy insurance policy protects a company against the direct costs suffered from security breach, such as potential fines, productivity loss and financial damage. The policy also covers costs incurred for damage to third parties, such as virus damage and identity theft remediation. Healthcare providers may buy these policies to cover the residual risk of a breach that reveals HIPAA-protected information.

Data Breach Insurance
Data breach occurs when sensitive, protected or confidential data is copied, transmitted, viewed, stolen or used by an unauthorized individual. Data breach may involve information such as financial data, personal health information (PHI), personal identifiable information (PII), intellectual property, etc. Data breach insurance policies may cover costs associated with recovering and restoring lost data, notifying customers, business interruption, regulatory fines and potential lawsuits. Data breach insurance can be purchased as stand-alone policies or as a supplement to an existing policy.

Media Liability Insurance
Media liability insurance is a type of errors and omissions liability insurance that is designed for publishers, broadcasters and other media-related firms. It protects a business against claims arising out of the gathering and communication of information. Media liability insurance provides coverage against defamation, invasion of privacy, infringement of copyright and trademark and plagiarism.

Cyber Liability Insurance
A cyber liability insurance policy covers liability that arises out of unauthorized access to electronic data or software. Cyber liability insurance provides coverage for intangible assets against events such as liability claims for spreading a virus or malicious code, computer theft, extortion or any unintentional act or error made by employees when performing their jobs.

Automobile Insurance

Automobile Insurance provides coverage for cars, trucks, motorcycles and other road vehicles. The coverage includes financial protection again physical damage and bodily injury resulting from traffic collisions. Auto insurance also offers financial protection for events other than traffic collisions, such as theft of the vehicle, damage due to flood, etc.

Personal Umbrella Insurance

Personal umbrella insurance protects a person’s assets against liability or lawsuits. An umbrella insurance policy covers liability that exceeds what the standard policies would cover. It also provides coverage for claims that may be excluded by the primary policies such as auto insurance and homeowner's insurance.

Managed Care Errors & Omissions

Managed Care Errors & Omissions (E&O) Insurance
Managed care errors and omissions insurance provides liability insurance protection to managed care entities for errors and omissions related to the delivery of managed care professional services. Errors and omissions policies may cover costs such as medical negligence, peer review, antitrust, potential lawsuits, etc. E&O can be sublimit for network security and privacy insurance, patient notification and credit monitoring costs, data recovery costs, multimedia liability, etc.

Surgery Center Liability

Surgery Center Liability Insurance
A surgery center liability policy protects medical professionals working in a surgery center. The policy can cover the costs of a medical malpractice lawsuit and other potential liability and lawsuits.

Endoscopy Center Liability Insurance

Endoscopy center liability insurance protects medical professionals working in an endoscopy center. The policy also covers administrative issues in the endoscopy center.

Dialysis Center Liability Insurance

A dialysis center liability Insurance policy provides coverage for nephrology medical groups and dialysis centers. The coverage may include liability on an occurrence or claims-made basis, incident-sensitive trigger, defense outside limits, unlimited reporting endorsement available with reinstatement of limits, prior acts coverage offered, etc.

X-Ray/Imaging Centers Insurance

An x-ray and imaging center has a high risk of exposure to medical malpractice claims. It is important to have separate coverage other than medical malpractice insurance for imaging centers. X-ray/imaging centers insurance covers physicians, associates, medical facilities and equipment.

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