Think personal disability insurance isn’t important for dentists? Think again

No one wants to think about becoming disabled. But think outside yourself. What happens to your family in the event you become disabled and unable to perform your job as a dental professional? Simply put, it's a good idea to plan. Buy disability insurance.

Here’s the good news: After years of schooling, hard work, and determination, it’s finally time to open your own dental practice. Now for the bad news: Many other dentists have been in the same place in their careers, seemingly on top of the world, only to see all their best laid plans crumble because they didn’t take the necessary steps to properly insure their success. Without question, owning a dental practice—or any other medical practice, for that matter—is unique in the world of small business. As a doctor, you don’t produce goods that can be inventoried, stockpiled, and sold without your participation. You offer a specialized set of essential services, which means your health and ability to work productively is indispensable to the business.

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What dentists should know about disability insurance: Part 1
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You need to have personal disability insurance that reflects this, which will provide protection for you and your family across a range of worst-case scenarios. Every carrier has pros and cons, but generally speaking, here are seven top issues dental professionals should think about when buying personal disability insurance.

1) Benefit amount—During residency, when money is often tight, dentists will frequently buy bare bones personal disability policies that offer only a nominal benefit. They then forget about them as their careers take off. This oversight can prove costly. As you accumulate additional income, there will also be an attendant rise in your day-to-day expenses. You need a policy that reflects this. Otherwise there could be a significant gap between the benefit amount and your personal obligations.

2) Additional coverage—Related to this is the ability to purchase additional coverage as your career grows, without having to go through the process of re-proving insurability. Obtaining an entirely new policy is a time-consuming venture of more bureaucracy and red tape. You want to have access to a more turnkey, seamless solution that will allow you to make adjustments once your income and expenses mushroom.

3) Policy language—Pay special attention to the fine print. Be sure to clarify what constitutes a disability. This is important because sometimes policy language may not fully reflect all of your specialized roles and responsibilities. It’s possible the benefit could be withheld as long as you are deemed capable of performing non-revenue generative duties around the office, such as providing administrative support.

4) Residual benefits—There are times when someone becomes partially disabled, limiting their ability to work a full schedule, and this slightly scales back the number of hours they put in. While working four days a week versus five doesn’t sound like much, with all other things being equal, it represents a 20% loss in revenue. That could be significant for most dental professionals. Does your personal disability policy offer residual benefits, helping to bridge the income gap that could result from having to work fewer hours?

5) Cost of living adjustments—To many, it might seem like a given. They think, “Of course my policy will keep pace with inflation or make other cost of living adjustments.” But many do not. Make sure yours does.

6) Elimination period—Most policies have elimination periods that range from one month to as long as one year. Relatively speaking, the sooner you receive the benefit, the more expensive the policy will be. However, delaying the benefit too long has risks, because going without income for an extended time can be financially draining. Typically, a 90-day elimination period makes the most sense. In any case, it’s best to maintain an emergency fund that will allow you to cover expenses for up to six months.

7) The length of the benefit—Whether it’s five, seven, or 10 years, the most important consideration is to have a policy that offers coverage until retirement. In some instances, it’s possible to purchase a supplemental policy that provides additional coverage when liabilities are more acute. Having an outstanding business loan is a good example of this. Also, keep in mind that because each policy is subject to underwriting, the holder may be limited in the number of options available in this area. Carriers will often not offer long-term benefits to people with poor health histories.

Something else to consider is business overhead insurance. This is separate from a personal disability policy, and will allow dentists to “keep the lights on” at the office and pay employees in the event of temporary disability. It’s very unlikely that personal disability insurance will cover any of the crucial and costly expenses that are fundamental to keeping patients onboard while you’re away, to ensure that your business is still there when you come back.

The first few years for almost any small business, including a dental practice, can be a fight for survival and a grueling uphill climb just to stay above water. When fortunes turn, however, it can be a bit like finishing a marathon—an exhilarating and, in many cases, life-defining evolution.

But when that happens, it can be easy to relax, pat yourself on the back, and forget about doing everything necessary to protect and insure what you’ve created. Don’t let this happen to you.

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Michael A. Rousseau is a financial planner with CCR Wealth Management LLC. He earned his designation as a Certified Financial Planner after graduating from the College for Financial Planning. Michael's prior experience includes comprehensive financial planning focusing on retirement, and income planning for individuals and families at a financial planning firm in the Boston area. Michael joined CCR Wealth Management LLC in 2013 and is responsible for gathering and analyzing information to develop and monitor financial plans for clients. He is an active member on the CCR Financial Planning and the CCR Corporate Services committees. He’s a member of the Financial Planning Association and the Massachusetts Chapter of the FPA.

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