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Updating the Doctor’s Business Insurance Portfolio

Most Medical Practitioners Lack Adequate Coverage

By Dr. David Edward Marcinko; MBA, CMP™

By Professor Hope Rachel Hetico; RN, MHA, CMP™

[ME-P Publisher and Managing Editor]dave-and-hope1

Good insurance coverage—especially property and liability insurance—is essential for private independent medical practices. And, malpractice insurance is a separate beast; altogether. But, far too often, experts from the Institute of Medical Business Advisors Inc. find that doctors sign standard “form” contracts, and review only the section in which premiums are discussed.


Overlooked Issues

Here, we outline some critical but frequently overlooked issues that financial advisors may want to discuss with their doctor clients; or that physicians might consider want to consider themselves:

• Coverage: Most property is insured for the appraised value or cost. The appraisals however, are often less than the actual cost of replacement. Rather, the office and other critical property should be insured for their full replacement or cash value (replacement cost less depreciation). Replacement value has little relationship to typical insurance valuations.

• Upgraded values: When replacing old instruments or equipment, medical practices are purchasing “next generation” equipment. But in many cases, the proceeds from replacement value insurance do not cover the full purchase prices of upgraded equipment. Doctors can protect themselves against shortfalls in replacement costs with policy riders known as functional replacement endorsements. In essence, when the old equipment is superseded, functional replacement allows for the costs of purchasing the available, upgraded equipment.

• Business interruption insurance: Medical practices need adequate income protection in the event of a fire or other disaster. Business interruption insurance provides doctors with income disaster relief. With this type of insurance, revenue projections must be made and updated periodically. It is advisable to enlist a qualified insurance broker, agent or counselor because the language in this type of policy can be difficult to decipher.

• Business continuation: Medical practice business interruption insurance ends 30 days after the property is replaced. However, it may take doctors much longer to get back to business as usual. An extended period of indemnity rider allows businesses additional time for disaster recovery. The additional period is often a full year.

• Off-the-premises insurance: Sometimes medical office property damage can be caused by a problem off the premises, such as a power disruption. If a practice does not have off-premises direct damage coverage, it will not be insured for damage to equipment caused by the loss of electricity, which may, in turn, have been cause by a storm. So it’s often helpful to insure for this type of damage—as well as loss of water and telecommunications.

• Exclusions: Insurance policies often contain strange exclusions: Property is damaged because a boiler explodes, but boiler malfunction is excluded from coverage in the property insurance policy. Many business owners and doctors are unaware of this. All policies should be carefully reviewed for exclusions.

• DME Inventory: Without a rider, insurance typically covers only the cost of the durable medical equipment, goods or related inventory, not its selling price. It may be, however, that an extended wait for the materialization of profits presents a hardship for the practice. If a doctor wants additional protection to cover the sales price of damaged inventory, a selling price endorsement rider is needed.

• Safety codes: If a practice’s building was purchased many years ago, coverage for compliance with current and more stringent safety codes is essential. This is called an ordinance or law endorsement, and it covers the cost of restoring damaged property in a manner that complies with current safety ordinances.

• Data processing and IT rider: Electronic data processing and health information technology coverage riders cover offices for the full cost of replacing lost hardware and software. They also protect against the loss of practice income from disruptions in billing or services.

• Supplier damage: If a medical practice is closed down because a major supplier sustains significant property damage, medical offices may have no means to cover the loss. A contingent business interruption insurance rider protects the physician-owner from a loss of income.

• Worst case scenario: “Worst case scenario” coverage is available, but sometimes requires a customized amendment to provide adequate medical practice insurance coverage.

• Earthquake and Flood Insurance: Protection against earthquake and flood damage may also be desirable. Many offices are surprised to learn they are in earthquake zones. Everyone knows about it in California, but Massachusetts has a number of earthquake zones as well.

Disclosure: Both authors are former financial advisors and licensed insurance agents.insurance-book

MORE: Business Insurance


Medical professionals should sit down with their consultants and advisors and review their levels of insurance coverage to make sure they have adequate protection. It is also important to ensure that their coverage suits their circumstances—and they are not paying for something that might not be appropriate for their specific situations.


And so, your thoughts and comments on this Medical Executive-Post are appreciated?

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

2 Responses

  1. Doctors definitely have more financial needs than most ….
    Mike Rowan


  2. Mike,
    Very insightful comment – not.


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