A. Dental practices and businesses such as accountants and solicitors (and others who work on a fee basis) are exposed to expense, turmoil and risk when it comes to absence of their key people.
It can take a long time to build up a loyal client-base and no time at all to lose it, through the absence of a key person.
When considering how your business would fare, it’s prudent to ask yourself 3 key questions.
How long could we keep going?
Just because you or one of your key people is not working doesn’t mean that the bills stop coming in: rent and service charges, council tax, utility bills, equipment finance, telephone and internet costs, professional fees and staff costs.
No doubt the business could probably keep going for a while: 2 weeks? 4 weeks? Longer? How long?
A well-run business may have a contingency fund but, once that is exhausted, who pays the absent person’s proportion of the overheads? Would you look to him or her to continue funding the business overheads even though he or she is not working?
At a time when his or her priority is likely to be keeping the family afloat by paying the mortgage, school fees and so on?
What’s the impact of prolonged absence?
Having worked out that your business could survive for a while, what happens then? Some clients will still come to you and perhaps colleagues will be able to rally-round to provide cover.
But how long before ‘rally-round fatigue’ sets in and people start to resent working evenings and weekends to keep the business viable?
How long before clients choose to go elsewhere because they can’t get an appointment when they want one?
You could choose to bring in a locum to cover for you, or to share your workload with a similar practice nearby on a reciprocal basis. There could be significant costs associated with each approach and these will come at a time when you already have to meet your regular overheads, despite bringing in no income.
A prolonged absence also means that you might be forced into selling your share in the business or even the entire business, at a time when its financial stability is becoming precarious.
Who should we insure?
The people whose absence means the income to the business will suffer are obviously key to this question.
You can choose to insure the main fee earner or all the fee earners. The amount of insurance would generally equate to the financial contribution that each person makes to the overheads of the business.
Some practices or businesses leave it to each individual to arrange his or her own insurance.
Unfortunately, this can mean that each person ends up with a different type of cover and those who don’t get around to it end up with no cover at all.
A ‘group’ policy lets the business or practice control who is covered thereby reducing any business risk and/or unexpected expense if someone falls ill and needs to claim.
It covers all the fee-earners and ensures that they are all insured on the same basis which should prevent difficulties at the claims stage when Dr A’s claim is declined because he or she had bought a policy which is more restrictive than a colleague’s policy.
Most providers will be able to apportion the premiums so that, if the business wants to, it can ‘charge out’ the relevant proportion of the premium to each individual.
Businesses which fail to consider these questions before illness strikes are storing up problems for the future.
And businesses which fail to consider these questions before illness strikes may not have a future.
Our thanks to Lynda Cox of Practice Cover for answering this Q&A. Practice Cover provides straightforward and competitively priced locum insurance and practice overheads insurance to GPs, dentists, vets, opticians and allied health professionals.