How owning a clinic changes your insurance needs

What should you consider when opening your own clinic or joining a partnership?

Proper income and expense protection
Most physicians carry some form of disability insurance to protect their personal income in the event of an illness or injury. Did you know that insurers use your net income to calculate how much insurance to issue? For clinic owners, business expenses often mean that your net income is significantly lower than your gross income. Unless you separately insure your clinic’s overhead expenses you may need to use personal disability benefits to fund clinic expenses in the event of a disability. This could result in significantly lower personal income replacement than intended during a disability.

The solution to this is professional expense or office overhead insurance. In the event of a disability, this policy specifically reimburses those business expenses that continue, such as rent, MOA salaries, equipment leases, or utilities. This type of policy usually has a very short waiting period (often only 14 or 30 days before you can begin remitting expenses) and the benefit period is usually only 12 to 24 months. It provides you the flexibility to keep your office running in the short term. If you are off work for more than 6 months, you will likely be finding a successor or closing your practice.

Funding buy-sell agreements
Most partnerships draft buy-sell agreements so that shareholders know what will happen if a partner dies or becomes disabled. It’s important to explore whether your buy-sell agreement is adequately funded. Using life insurance, disability buy-sell insurance, or both is an excellent way to insure that partners will have the necessary funds to fulfill their obligations in the event the buy-sell agreement is triggered by a death or disability.

Property and liability insurance
Have a qualified general insurance broker review any lease agreements to ensure that your property and liability insurance fully covers your obligations as a tenant. As well, ensure you have adequate business interruption insurance for any loss of revenue in case a fire, flood, or other disaster damages your business premises.

Health and dental benefits for employees
It is very common for physicians to carry health and dental policies for themselves, and to own the policies through their corporation, since health and dental plan premiums are tax deductible. A caveat to being able to deduct the premiums is that the corporation must offer similar benefits to all eligible full-time employees of the corporation. If you have full-time employees working more than 20 hours per week and you have a health and dental plan for yourself, you likely need to offer benefits to your employees. If you do not offer these benefits and the CRA audits your corporation, it could deem the health and dental plan as a shareholder benefit and void the tax deductions. Employee benefit plans also attract good employees, boost employee loyalty, and encourage your employees to be proactive about their own health.

Owning a clinic has many rewards, and it is important to do your  insurance homework so your business is properly protected. For a complimentary, comprehensive insurance review, contact Ms Erin Higgins, insurance advisor at Doctors of BC, at ehiggins@doctorsofbc.ca.