It has been some time since we have looked at the question of insurance. Most programs that I review leave a lot to be desired. I receive lots of mail on this very subject every month, so I have decided to update the original articles that I did on this subject. One of the early issues of my newsletter was also devoted to this very subject. It also included a worksheet to help keep track of coverage.
Disability protection is probably the most misunderstood and, therefore, is the one that is usually not covered or underinsured, using the wrong type of policy. Let me explain what I mean.
First of all, your policy should be a "noncancelable" type that will guarantee you as a chiropractor. This is the most important part of the policy. With this feature, if you were disabled but could teach at a chiropractic university, you would still receive benefits. Many policies do not offer this, so if you went back to work doing "anything," your benefits would stop.
One statement that I usually hear from chiropractors that I work with is that they have heard that disability protection is "expensive." Let's end that myth right now. It's expensive if you "don't" have coverage! The average auto policy charges you around $50 for $1,000 of protection. The average disability policy charges you around $1.50 for $1,000 of protection. It is not expensive so forget that myth and get some good coverage now.
Insurance companies will only insure 50-60 percent of your income. All contracts have a waiting period before benefits begin, usually 30, 60, 90, 180, or 365 days. Which is the best? That depends on how long you can "self-insure" using accounts receivable and assets. To determine an amount, first figure out what your monthly personal expenses are, including rent/mortgage, utilities, insurance, food, clothing, education, etc. From this number subtract what you feel is a realistic number representing accounts receivable and assets that you don't mind liquidating. Now you should have a better idea as to what your "net" needs are. Keep in mind that if your spouse works that could lower your needs, but may indicate that you need protection on your spouse also. Since this will constantly be changing, don't forget to review this coverage at least once every two years, using the same exercise. Most programs are inadequate because they have not been updated.
You should not consider a policy unless it contains a "residual" or extended partial benefit. This eliminates the "all or nothing" way that most benefits are paid. For example, let's assume that you have been out sick and you come back to work but can only put in a partial day. What do you get? Without a residual benefit, the minute you walk back in the door your benefits cease. With residual, you would be paid a percentage of the benefit. If you're out 50 percent, you get 50 percent of the benefit; if you're out 35 percent, you get 35 percent, etc. Now you can understand why I feel it's a must.
There are many other riders that can be added to the policy, "for a fee," but are not totally necessary. Most only accomplish one thing -- putting more commission into the agent's pocket. One such rider is the "cost of living adjustment" (COLA). It increases benefits as the cost of living goes up, but how does it do that? Let's see. We will assume that your monthly benefit is $4,000 per month. You are totally disabled and are receiving benefits. When will the COLA rider kick in? Not until you have been totally disabled for a full 12 months. Most COLA riders increase the premium by as much as 25 percent per year. Let's assume that you have had a policy for 10 years and now you have a disability that runs for a year. At that time your benefit will go up by the percentage of increase in the cost of living. Big deal! You have been paying 25 percent more each and every year for 10 years and that is all you will get? Now you can see why I am not a fan of these riders. They just aren't worth it.
There is a special disability policy designed to cover office expenses. It is "overhead protection." It covers all costs of your office except your personal salary. You only need to purchase this coverage to cover you for one year, or no more than 18 months. In that period of time you will know if you are coming back or closing the office. The premium is tax deductible and this cost is very reasonable. You should not use personal disability coverage to cover office overhead. You can only insure about 50 to 60 percent of your income, so you will not be able to buy enough to cover both.
When was the last time you reviewed the deductibles on all of your insurance policies? Why not do it now? Increase those deductibles on our health insurance. Do you really need that first dollar coverage? How about increasing the deductibles on your auto insurance? It could save you up to 25 percent. Extend the elimination periods on your disability and business overhead coverage. Your accounts receivables should be built up enough now to cover you for a little longer period. By the way, a large accounts receivable is not a good security blanket It could be the beginnings of real problems. Make sure you keep it under control. Increase deductibles on your home owners too. While you are at it, take pictures and a video of your home and your office, including valuables and all the equipment. If you have a claim, a picture is worth a thousand words. In this case, that could be $1,000.
Have a specific question or want a copy of my "must have" list of coverage needed and the best companies to get them from? Then drop me a line and enclose a self-addessed envelope, and I will send it out and answer your questions ASAP. My address is below.
Your comments and inquiries may be directed to:
Stanley Greenfield R.H.U.
12873 Huntley Manor Drive
Jacksonville, Florida 32216
Please include a self-addressed, stamped envelope. Thank you.
Editor's Note:
Further advice on finances is available through Mr. Greenfield's newsletter, Greenfield Chiropractic Financial News, #J-314-C, on the Preferred Reading and Viewing List, page xx.
