Insurance for doctors is crucial for protecting against the various risks, not only inherent in medical practice but also in life. Aside from health and malpractice insurance, doctors can benefit from other policies that protect their wealth and business interests when things go wrong.

In this guide, we'll take a look at the insurance policies both doctor employees and private practice owners need to know about. 

Insurance for doctor employees

Doctor employees are typically covered by their employer when it comes to the basics, such as medical malpractice insurance and health insurance. Here are the other types of insurance employees should consider.

Key types of insurance for doctor employees

1. Income protection:

• Disability insurance: doctors who purchase disability insurance should get an "own-occupation" policy, which covers individuals who become disabled and are unable to perform the occupational duties they have been trained to perform. There are many nuances in disability insurance coverage. Opting for a more expensive policy with comprehensive own-occupation and specialty-specific language may be worth it compared to a cheaper policy with less effective coverage.

  1. There are different tax treatments to consider depending on who pays for the disability policy.  According to the IRS:

  • If both you and your employer have paid the premiums for the plan, only the amount you receive for your disability that's due to your employer's payments is reported as income.

  • If you pay the entire cost of a health or accident insurance plan, don't include any amounts you receive for your disability as income on your tax return.

• Life insurance: For doctors, term life insurance can be a good option. Term life insurance involves paying a premium for a set period, between 10 to 30 years, and if the doctor dies within that term, the policy pays out to the beneficiary. Since doctors are high earners and life insurance gets more expensive as you age, it's useful to purchase term life when younger and plan to rely on personal savings and investments once the policy expires. More expensive whole life insurance is often inappropriately sold to doctors when a term life insurance policy would suffice. However, there are some cases where a whole life policy may be appropriate, including specialized estate planning and business purposes, as well as a way to provide asset protection.
  

• Tail coverage for malpractice insurance: You should understand the coverage limits of your employer's malpractice insurance to know whether you need to purchase additional coverage. Policies are divided into two types: claims-made and occurrence-based. If your employer provides a claims-made policy, you are only covered for claims made within a specific period – while working with your employer, for example. You won't be protected against suits filed later in your career unless you purchase “tail coverage.” Tail coverage can be expensive, but it's essential to be insured for any claims that could arise later. You may be able to talk to your employer and see if tail coverage can be included as part of your contract.
  

2. Asset protection:

• 1. Umbrella policies do not cover damage to your own property or liabilities related to contracts, nor do they cover business losses. (Commercial umbrella insurance is separate, more detail on that below). The good news is, umbrella policies are relatively cheap and provide peace of mind, which is why Earned recommends that doctors have it. 

     Umbrella insurance: This liability insurance provides additional coverage beyond the limits of your homeowners and auto insurance. This is an additional safety net that covers high-earning doctors' assets and protects against bodily injury, personal injury, damage to someone else's property, as well as certain types of lawsuits such as slander, libel and defamation of character. Here's an example to illustrate its importance: If you have $1 million in Umbrella insurance and your auto insurance covers up to $500,000, but you are found at fault in an accident with a $1 million verdict, your Umbrella insurance would cover the remaining $500,000 not covered by your auto insurance. 

3. Financial planning and tax optimization:

• High-deductible health insurance plan: If an employer provides this option, doctors should consider a high-deductible plan that has access to a Health Savings Account (HSA). The HSA lets you set aside money on a pre-tax basis to pay for qualified medical expenses, and furthermore, they grow tax-free (interest and investment earnings are not taxed) and withdrawals are also tax-free.  A triple tax benefit!

• Long-term care insurance: A 2018 survey by the American Medical Association (AMA) Insurance Agency found that nearly 70% of physicians do not have long-term care insurance coverage. The survey found that of physicians without coverage, 36% said they planned to self-fund, while another third of physicians said they weren't sure how to handle a potential long-term care expense. Self-funding or purchasing long-term care insurance are both expensive options, and Medicaid coverage may not kick in until your finances have depleted. However, having a long-term care policy may provide peace of mind to you and your loved ones. It's worth talking to your financial planner, looking into the costs, and comparing providers before you decide whether or not to purchase long-term care insurance.

Insurance for doctor practice owners

Doctors who are practice owners automatically need to have more kinds of insurance to protect their business. Here's a look at which types of insurance are required, and others to consider:

Required insurance for practice owners

As practice owners, doctors are typically mandated by state laws or landlords to have certain types of insurance.  Broadly speaking, the important policies every medical practice should have in place are:

1. Medical malpractice: Also known as professional liability insurance, this type of insurance provides the baseline coverage your practice needs to protect against medical error claims.
   

2. Workers' compensation insurance: States typically mandate this type of insurance, which provides medical care and wage replacement to employees who suffer work-related injuries or illnesses.

3. General liability insurance: As its name indicates, this type of insurance provides broad coverage, protecting your practice against third-party claims for bodily injury or property damage that may occur on your premises or as a result of your operations.

Recommended insurance for practice owners

All the insurance types available can overwhelm a practice owner. This is not an exhaustive list, and not every practice needs all these policies. Some more complex and risky specialties like neurosurgery, thoracic-cardiovascular surgery, and cosmetic dentistry may benefit from more insurance coverage than other doctors.   Seeking out an insurance broker that specializes in medical practice and has knowledge in your specialties is a good way to narrow down options.

Here are the other types of insurance to consider for your practice. Most of these policies are good to have for a small to medium-sized medical or dental practice. Some policies listed below may be bundled into a single package called a business owner's policy (BOP).

1. Commercial property insurance: This may be included in a general liability policy. Commercial property insurance protects the practice's physical assets from damage like fire, explosions, burst pipes, storms, theft, and vandalism. The premium depends a great deal on the practice's location.

2. Employment Practices Liability Insurance (EPLI): This type of insurance protects businesses against lawsuits filed by employees claiming discrimination, wrongful termination, harassment, and other violations of employee rights. Insurers may provide this coverage as part of a BOP, or separately.

3. Business interruption insurance: This type of insurance replaces income lost when a business has to temporarily halt operations due to direct physical loss or damage. A fire or a natural disaster are some examples of events that can interrupt business operations.
   

4. Cyber liability insurance: While stolen or accidentally exposed data may not be top of mind for smaller practices, it can still happen. Cyber liability insurance covers a business in the event of costs related to data breaches, hacking, ransomware, and other forms of cyber theft. There may be cyber coverage included in a malpractice policy, but it's worth looking into a more comprehensive cyber liability policy.
   

5. Theft and employee misconduct insurance: If a practice has employees who handle money regularly, it's wise to have a theft and employee misconduct policy in place.
   

6. Commercial umbrella insurance: As with doctor employees, having a catch-all commercial umbrella insurance policy for a private practice can give practice owners additional peace of mind. 
   

If you're unsure whether you have the appropriate insurance coverage for yourself or your practice, Earned is ready to hear from you. At Earned, our trusted advisors can conduct an insurance review to spot gaps in coverage and policy types.  It is common in these reviews to find savings opportunities on premiums, tax-free exchange opportunities to improve coverage, in addition to assessing if the right levels of coverage are in place. Contact our team to set up an initial consultation.

The above information is for educational purposes only. Individuals should seek the counsel of a properly licensed professional prior to taking any action. Earned Wealth is an investment adviser and does not provide accounting advice or services.