9 Tips Every New Dentist Should Know
About Insurance
LESLIE FRANKLIN
When it comes to making important financial decisions, where do you look go for guidance? If the decision involves insurance, both new and established dentists frequently turn to their professional associations. For example, the American Dental Association (ADA) has developed an insurance program specifically tailored to the unique needs of its members, and offers complimentary, unbiased assistance to help members learn the ropes and evaluate options. And, of course, dentists talk to other dentists.
This article shares tips about disability and life insurance from Great-West Life, underwriter and administrator of the ADA Insurance Plans. You’ll also learn what dentists say about their experiences (look for the » icons throughout this article).
1. Make insurance the foundation of your financial plan. Think of a financial plan as an ongoing process of wisely managing all of your financial resources and obligations so you can achieve your dreams and goals—whether that’s a new home, your own practice, no more debt, or a college education for your children. Insurance should be the foundation of your financial plan, because it provides a safety net for you, your loved ones, and your business.
» “In the business courses I took during dental school, I learned how important it is to build a web of protection as part of my financial plan, and that insurance is the first stop in putting together a total plan.” Joseph Matrullo, DMD (Tufts ‘04) Cranston, Rhode Island
2. Whether you’re a dental student or a new dentist, you need disability and life insurance, so get this insurance now while you are young and healthy. One of your top priorities should be obtaining high-quality disability insurance. Disability insurance is especially critical for dentists because of the significant physical demands of this profession and the considerable risks of a disabling injury.
Think of it this way: if you became disabled tomorrow, could you keep up with your monthly bills and loan payments? If you’re like most of us, the answer is probably no—not without disability insurance to replace the income you would otherwise be earning. It is also important to have life insurance to protect your loved ones and cover your financial obligations, such as your student debt.
There’s another incentive to start your insurance portfolio now: You have a much better chance of qualifying for coverage and paying the lowest rates when you are young and healthy. Your health could change at any time and possibly render you uninsurable when you need coverage the most.
» “A professor told us about a student who was in his third year of dental school when he broke his arm and suffered permanent nerve damage. Just like that, he was forced to give up his dream of practicing dentistry. The professor used that story to drive home how important it is to protect the investment we have made in ourselves with adequate insurance.” Bobby Jivnani, DDS (Baylor ’03) Richardson, Texas
3. You don’t have to get sick or die to get something out of disability or life insurance. If you plan to purchase an existing dental practice or start a new one, you’ll probably need a sizable loan. And in most cases, the lender will require you to provide insurance—both disability and life—as collateral for that loan, in case you should become disabled or die before the loan is paid off. The collateral assignment process is simple and straightforward, and doesn’t cost anything extra. Your insurance company can even handle the paperwork.
You can use insurance during your lifetime for personal needs, too. For example, some types of life insurance can give you insurance protection plus a way to build savings. You can withdraw or borrow against the accumulated balance to make a down payment on a house, pay a child’s tuition, handle a financial emergency, and more.
» “When the owner of the practice I entered as an associate wanted to sell, I jumped at the chance. The practice broker referred me to a lender to finance the loan, and the only collateral the lender would accept was life and disability insurance.” Kathy Pawlusiewicz, DDS (Illinois ’03) Mt. Prospect, Illinois
4. Shop for top quality in a disability plan. Disability policies can vary dramatically, so shop carefully and read the fine print to understand exactly what you are getting. Insist on an “own occupation” policy that will pay full benefits—and not reduce those benefits—if you choose to earn other income while totally disabled from dentistry.
In addition, make sure you can renew your disability insurance for as long as you plan to practice—say, up to age 70—and that own-occupation benefits are payable throughout the entire benefit period, not just for the first few years. Since you could possibly become disabled in your 30’s or 40’s, that could make all the difference between having a lifetime of financial freedom or being forced to find another job after a few years just to survive.
» “I was permanently disabled from dentistry at age 39, and I would be in dire straits today if I did not have my disability policy. It’s been a lifeline. I’ve been able to keep my home, help my parents, and pursue other interests.” Randolph Hatten, DDS (Tennessee, ‘89) Charlotte, North Carolina
5. Add business overhead expense coverage to your insurance portfolio as soon as you own a practice. As a business owner, you need a second type of disability insurance. Business overhead expense insurance reimburses you for certain operating expenses like rent, payroll, and utilities while you’re disabled, so your practice can continue to function in your absence. Policies generally cover principal and interest on loans (including your student loans) and also include benefits to hire a replacement dentist who can treat your patients while you recover.
Business overhead expense insurance is often less expensive than disability income insurance. But it’s equally critical: The benefits can buy you time—time to recover from your disability, or time to sell your practice on the most favorable terms.
» “My insurance company representative gave me a great tip when I needed disability insurance as collateral for my practice loan. He suggested business overhead expense insurance, which is much less expensive than disability income insurance, and generally satisfies a lender’s requirement.” Sepideh Malekpour, DDS, (Creighton, ‘00) Glendale, Arizona
6. There are things you can do to lower your insurance costs. Start with an amount of insurance that your budget can handle now, and be diligent about increasing your coverage as your income grows. You’ll have more to protect by then, plus be better able to afford greater protection.
With disability insurance, in particular, you can lower the cost by selecting a longer waiting period (the number of days you must be disabled before benefits are paid). You also can mitigate your financial risk, while keeping premiums more affordable, by splitting your coverage with multiple waiting periods.
Another cost-saver is to get group insurance through a professional association like the ADA. It’s generally less expensive than buying an individual policy on your own because of the group rates the association can negotiate.
» “The ADA enables dentists to obtain low cost, yet high-quality, coverage. The money I save with the ADA Insurance Plans more than pays for membership in the association.” Steven Fink, DMD (New Jersey, ’91) Kinnelon, New Jersey
7. Take advantage of options to customize your coverage. Policy options let you customize coverage to your specific needs and pay only for the features you want. This is not only a great budgeting advantage, but it supports the reality that all dentists’ situations are slightly different.
With life insurance, for example, you can purchase inexpensive accidental death coverage that will increase the benefit if death results from an accident. There’s also a disability waiver of premium option that allows you to continue your coverage without paying premiums if a total disability prevents you from earning income.
To bolster disability insurance, consider an option that provides future coverage increases without another medical exam. You also may elect a cost of living adjustment option, which increases benefit payments to keep pace with inflation. It may seem expensive, but it’s an extremely valuable add-on if you’re permanently disabled at a young age and need benefits for 20 or 30 years.
The most valuable disability option allows you to collect partial benefits without being totally disabled; this is in the event that you can perform clinically, but only on a part-time or limited basis. The ADA considers this type of feature indispensable for today’s practicing dentist, since not all disabilities are total or permanent, and because even a partial disability can dramatically affect a dentist’s income.
» “A fall from a ladder left me with permanent nerve damage and numbness in both feet. I’ll never be able to practice full-time again, but at least I can practice part-time as my health permits. I receive a partial disability benefit from my insurance company, which helps supplement my reduced earnings.” David Chen, DDS, New York, New York
8. Only buy from a financially strong insurance company. Insurance is a long-term purchase; most dentists obtain coverage and then keep it for many years and even decades. Your protection is only as good as the company that stands behind it, so take time to find a financially strong, reliable company that you can depend on.
Independent rating services are a good way to check the financial stability of an insurance company. Go online to A.M.Best (www.ambest.com), Standard & Poor’s (www.standardandpoors.com), and Moody’s Investors Service (www.moodys.com).
» “Check out the company thoroughly for its financial strength and its reputation for paying claims, then keep up to date on the company’s status. I learned the importance of this when I became disabled and filed for benefits with two insurance companies. The first company took my information and began paying benefits every month. The second company has sent me only one check.” Don Rothenberg, DMD (Tufts, ‘71) Marblehead, Massachusetts
9. Demand good service and reliable information. In addition to an insurance company’s financial strength, check out the company’s reputation for an objective, pressure-free sales process, prompt service, and an overall positive customer experience. Your professional association and your peers are good sources for referrals.
» “If you have to file an insurance claim, you want an understanding human being on the other end of the phone who will help you get through this very vulnerable time. It made me realize that a good relationship with an insurance company is as important as the insurance contract itself.” Neil Dicker, DDS (New York, ‘73) Orefield, Pennsylvania
Editor’s Note: This article does not constitute legal, tax, or financial advice. Please seek professional input as appropriate to your situation. ■
Leslie Franklin is Director of New Dentist Markets at Great-West Life & Annuity Insurance Company. She meets regularly with new dentists and dental students across the country to help them understand how to use insurance to attain personal and professional goals. Great-West Life underwrites and administers the ADA Insurance Plans and is the sole provider of ADA-sponsored life and disability insurance to ADA members. For more information, call 888-463-4545 or go to www.insurance.ada.org.