Why Protect?Now more than ever, you need an advisor you can trust and rely on
Becoming a practice owner has increased the stress and demand on your time. To make sure nothing falls through the cracks consider these three key points.
They didn’t teach business in dental school
Keeping on top of revenues and expenses, managing your team and dealing with suppliers is all new. We’ll share the knowledge gained from advising hundreds of practice owners so you can benefit from their experience.
Timing is everything
We understand the demands on your time and we know how to get things done quickly and efficiently so you can stay focused on building practice value.
It’s much more than just “you” now
As a practice owner, suddenly there are even more people relying on you. Employees and possibly partners are counting on you to deliver. We advise you. We look after your interests.
Solutions for Practice OwnersWe have what you need
You probably took care of the basic pieces of your financial plan shortly after graduating dental school. But now that you’re a practice owner you’ll have some new requirements. There’s a reason lawyers tell their clients to contact us when they are buying their practice – we know what practice owners need.
Disability Insurance (DI)
Practice owners typically get paid differently than Associates. It’s important to ensure that your DI is in alignment with your earnings. Replacing your income in the event of an illness or injury is essential to ensuring your standard of living is not seriously impacted by an unexpected medical event. DI is the cornerstone of your financial plan and the most important piece to get right.
Critical Illness Insurance (CI)
We all know seemingly healthy people who have been struck with cancer or other serious illness. CI steps in after the diagnosis of a critical illness to help you and your family cope with the financial consequences. With CI coverage there are many variations and options and we know them all.
You may already have Life insurance for personal reasons, but practice owners need to have life insurance to secure their practice loan. When referred to new clients we often see inappropriate structures. Life insurance is also a possible solution to excess cash accumulating in your DPC. Whatever the need for life insurance, we can advise you properly.
You may be focused on the health expense needs of yourself and your family or you may want to offer health benefits to your team. Either way, we have a range of individual and group options to meet your needs. Group insurance and health spending accounts are excellent ways to maintain a healthy and happy practice. And a happy practice helps ensure happy patients which is key to enhancing practice value over time.
Business Overhead Expense (BOE)
There’s a lot more riding on you now. If an illness or injury prevents you from working, employees still need to get paid, landlords still want their rent, bankers demand their regular principal and interest. BOE coverage transfers some of that risk to the insurance company so it’s not all coming out of your pocket at the worst possible time. And if the disability is career ending, it helps preserve the value of your practice while you prepare it for sale.
Your practice is the largest asset in your wealth portfolio, and needs to be treated as such. Some investment advisors fail to understand that point. They simply want you to invest outside of your business. Working with so many practice owners, we understand that your practice will be key to your long-term wealth accumulation. But you also need to avoid putting all of your eggs into one basket. Our balanced approach perfectly fits the situation.
Frequently Asked QuestionsWe have you covered
We’ve helped jump start the careers of thousands of dentists from all across Canada. Working closely with you as a trusted Advisor, we’ll get you quickly on the road to financial success.
Will the bank accept my personal life insurance for a loan?
Short answer: Yes. The bank doesn’t care if the life insurance is “purpose built” for the loan. As long as they have an assigned policy, they know they’ll get their money in the event of your death. BUT using your personal coverage is not ideal. You purchased that coverage in order to protect your family members or someone else close to you. Also, the premiums for a corporately-owned and corporately-paid policy that is assigned as collateral on a loan are deductible to the extent of the outstanding loan. We sometimes use existing personal life insurance as a quick way to get a deal funded if there is not enough time to obtain new coverage. But we are always looking to replace that with new “purpose built” coverage as soon as possible.
Should I get life insurance through the bank?
Only if used as a mechanism to get a deal done. The bank’s coverage will be more expensive (typically about double the cost). Sometimes if you sign-on to the coverage they will be able to release funds. During this time we will put new coverage into effect.
Can I use corporate funds to pay for my disability insurance?
No. Paying your disability insurance premiums with corporate dollars would mean future disability benefits would be taxable income. This would be very negative as the eligibility amount is determined from your income and assumes that the amount would be received tax-free.
Does my disability coverage change when I become a practice owner?
There is no immediate impact to your current personal (income replacement) disability coverage. Going forward, the income used to qualify for any future increases will be a combination of “T4 income” that you pay yourself plus the net income of your DPC.
You will need to purchase a new type of disability insurance called Business Overhead Expense (BOE) coverage. BOE reimburses your practice for overhead expenses that continue to be incurred while you are disabled. The three largest BOE expense categories are typically Staff Wages, Practice Loans and Rent/Mortgage. A typical practice will have overhead expenses that are far in excess of the principal dentist’s disability coverage. As an example, many practice owners will have $10,000 to $15,000 of income replacement disability coverage but $25,000 to $50,000 per month in overhead. Covering those costs (in addition to your own personal living expenses) would be impossible for most disabled dentists.
BOE policies differ from income replacement policies in that they are paid with corporate dollars. They also tend to have shorter waiting periods (most commonly 30 days) and shorter benefit periods (12 months). BOE is designed to mitigate the cost of owning the practice for a disabled owner, but only long enough to provide the time to determine whether the outcome of the disability will be recovery and return or the sale of the practice.
Do I need Business Overhead Expense (BOE) coverage if I have Triple Guard or Business interuption coverage?
Yes. Many dentists get confused between Business Interruption coverage and Business (or Office or Practice) Overhead Expense coverage. They are not the same. Office Interruption would reimburse your practice for lost revenue in the event that a fire, storm damage or other property issue prevented your practice from operating normally. BOE reimburses your practice for overhead expenses that continue to be incurred while you are disabled.
Do I need Business Overhead Expense (BOE) coverage if I hire an Associate or Locum?
If you are responsible for all or a significant portion of the expenses and all or a significant portion of the revenue that typically funds the expenses, then you need BOE coverage. If you have Associates, it’s reasonable to think you can lean on them for increased production, but it is risky to rely on them. They may not have the willingness or ability to fill the gap in production. In addition, Associates may take advantage of the situation and demand a higher split. Finally, we have not generally seen good experiences with Locums, other than for short periods or if you know the dentist personally. If you have one or more Associates it may condition the amount of BOE you purchase, but you will need some.