Insurance

Insurance has become a major part of dental practices’ expenses. All types of premiums are increasing, from disability insurance to malpractice and general liability. This is why it is a good area to target in trimming your overhead.

On average every office pays somewhere around:

• $1000-$3000 for general liability.
• $2000-$10000 for malpractice insurance (for each doctor).
• Up to $10,000 for disability insurance (for each doctor).
• A few thousand dollars for workers compensation insurance.

Although different states may have various rates and requirements, insurance costs can easily add up to thousands of dollars each year.

To see how we can save on our insurance expenses let me first ask you a few questions:

1. When was the last time you checked the rate you are paying for your insurance?
2. Are you one of those dentists who have your accountant or office manager takes care of your bills?
3. When you receive an insurance bill, do you ever check the amount and compare it with the last previous bill?
4. When was the last time you shopped around for insurance?
5. Have you been with the same insurance agent for years?

What it comes down to is that we are so busy all the time that we put our convenience ahead of sound financial decision-making. Here I will show you how to save on insurance costs, while using a minimal amount of your time.
 

1- Paying Less For Your Premium

One easy and practical way to pay as little as possible for your insurance is to get 2-3 estimates every year when you are due for renewal. This way you are doing this only once a year for each category of insurance you have. You also avoid having to cancel your other insurances or wait for refunds of prorated amounts. It is both fast and effective.

The only thing you need to do on your part is to keep your eyes open throughout the year for ads you see; talk to your friends or colleagues about their policies. Then determine 2-3 companies you need to get your estimates from.

If you are extremely busy and unable to do this yourself, delegate. Tell one of your trusted staff members that if he can save you more than 10% on any of these policies, you will give him a $50 bonus for each policy or a third of the savings (whichever you prefer). Explain to him that this can add up to $300 dollars, depending on the number of policies you carry. They will go about the task with motivation and find better deals than you ever could.

Deciding to pay your staff separately is up to you; it depends on your payment structure. If you have followed my recommendations on Staff Salaries I think it is a fine idea.

If you are already overpaying your staff, just have them do this as part of their job.

The simplest way to get estimates is to fax a copy of your bill and the main page of your insurance policy to other agents and tell them you are only interested in savings that exceed 10%. Believe me, you will get answers.
 

2- Increasing Your Deductibles

Another way to save on premiums is to increase your deductibles as much as possible. Let me explain by using an example:

Let's say you are paying a premium $150 a month for your business liability insurance. Your liability coverage is $1,000,000 with a $250 deductible.

What if you raise the deductible to $1000 and pay $100 a month instead? Should you do it? The answer is yes, and let me tell you why.

First of all, you save around 30%. Second, if there is a mishap in your office with damages of less than $1000, by not filling an insurance claim you are saving a lot of headaches and money (on your next year's premium). You basically pay for the damage yourself.

As you know whenever you file a claim with an insurance company your premium goes up, sometimes doubling! In some cases they will even refuse to renew your policy! What you need to remember is that you have already saved $500 on your premium, and the difference of the deductible here will end up being merely $250 (only if there is a loss). This is probably less than the amount your premium would increase if a claim to be filed.

Now, what if you don't have any mishap at all? Well, you are going to save $500 tax free! Apply this to all your policies and it will seriously add up. Keep in mind the concept of a few dollars at a time, a few percentages at a time.

I believe premium/risk ratio has to make sense. In other words, what you pay for your premium should be justified by the chance of filing a claim and the amount of coverage. If you are paying $40 a month for an extended warranty (which is a form of insurance) on a device that is worth only $300, do you think it is reasonable?

Insurance should be purchased for two reasons:

1. When the possible loss is significant (whole house, liability...)
2. When the chance of occurrence is high (medical insurance ...)

Consequently, when you change your deductible from $250 to $1000 your risk of loss is only $750! Now you must find out how much extra premium you are paying for this $750 difference.

It is quite possible that you are paying around $150 a month for the $1,000,000 coverage you have and then you pay an extra $50 a month for that $750 difference!!! Tell me, where is the sense in that? 

The same concept may apply to all the insurance policies you have. I never said I am going to save you money on your car or home owners’ insurance, but hey ... why not?!

Next time you get a renewal notice for any of your insurances, obtain new estimates and complete the table below.

Remember, you are looking to save at least 10%. After you select your company ask them to give you an estimate with your current deductible and one with the highest deductible possible, then fill in the following table:

This will show you exactly how much extra you are paying for the difference between the new and the old deductible. I believe in general, retaining a $1000 to $2000 deductible on most of your insurance policies will end up being to your financial benefit.