You are ready to stop working at the corporate clinic and have been looking for the right private practice to purchase. You’ve received an unexpected call from a practice transition broker who told you about a new listing. You’ll need to move quickly because there is a lot of interest, and this is the perfect opportunity. You are inches away from having a dream you have had since veterinarian school come true.
You organize bank funding and sign a letter of intent. As you review the loan approval letter from the bank you notice a lengthy list of insurance requirements. To make matters worse, some of the insurances, like disability income, if done through traditional underwriting, can take weeks. You didn’t see this coming.
What do insurance policies have to do with your veterinarian practice loan?
For a bank, one of the greatest exposures for default is if you become disabled and cannot practice. This happens more often than you may think. According to the Social Security Department when considering 20 years olds, approximately 1 in 4 of them will become disabled over the course of their career. You want to be certain that you are able to leave a legacy with your practice, even if you have a short term illness.
Each bank will each have their own insurance requirements. Many lenders require disability and life insurance policies, especially if you are borrowing over 1,000,000. If a bank does not require disability and life insurance, that does not mean you don’t have to pay them back if you get hurt or unexpectedly pass away. Instead, it means you or your family will have to pay out of pocket and/or sell the practice.
When weighing the costs, the cost of insurance is less than you think. You can protect yourself and build onto your savings.
Want to see just how affordable insurance can be? Contact Loyall Group today for a fast and easy quote process that will start you on a path to move forward with your practice loan.
The Disability Debate: for Personal or Business?
Often in the middle of obtaining a veterinary practice loan, banks will begin to pressure you to keep moving things forward. They may ask you to use your personal disability and life insurance policies to satisfy their loan requirements.
However, this is not ideal. Those personal insurance policies were designed to take care of you and your family, not your bank. Assigning your personal disability policy to your bank means less savings and retirement security for you and your family in the event of a disability.
Instead, you may consider getting a Business Overhead Expense policy or a Business Loan Protection Rider, in addition to your personal disability policy. Both options are less expensive than personal coverage and are often easier to get approved through accelerated underwriting.
In the event of a disability, your disability overhead expense policy covers your business and keeps it running. You are responsible for not only the rent and lights, but your employees salaries. A Business Overhead Expense policy frees you from worrying about whether these things will be paid for during a disability recovery. If you become disabled for a period of time, the right disability policies can move your focus from stress to healing.
Securing separate coverages, one for you and your family, and one for your business and the loan, is a smart solution. You can pay for both disability policies from the practice and write off the premiums as a business expense, ultimately reducing their net cost of premium.
The Two Core Coverages of a Disability Policy for Veterinarians
Disability income insurance is the most complicated insurance policy to get approved through underwriting. When you begin the process, you’ll want to make sure you have coverages that offer you the best future results.
Take a look at the following core coverages included in a great disability policy:
- Your personal disability policy should have True Own Occupation language in its definition of total disability. This means that if you get too sick or hurt to practice as a veterinarian, you could receive monthly benefits and be able to work in a second unrelated occupation.
- Make sure your disability income coverage covers all or a significant portion of the monthly payment of your practice loan. Take into consideration that whatever your disability income doesn’t cover, you will have to pay for out of pocket.
Get yourself ready to apply for insurance by making sure your medical records and follow-up appointments are up to date. If you are leaving the military and buying a practice, make sure to get a copy of your military medical records. These are often delayed, and medical records are required when applying for insurance.
The Accelerated Underwriting Option in Life Insurance
Almost all banks will require life insurance, especially when you are working with either a local bank or a Fin-Tech bank. There are a number of carriers that now offer instant-issue life insurance. These carriers can make an underwriting decision in minutes versus weeks.
Although this doesn’t mean that you will be automatically approved when you apply, a high percentage are approved. You might also pay a slightly higher premium as a trade off for quick approval. These kinds of policies are ideal when you are days away from closing on a veterinary practice loan. They have saved a number of practice loans from being delayed.
Ideally you will want to apply with a top carrier under their accelerated programs and get a more competitive premium. We have seen approvals in a week under this platform. Look for an insurance firm who has experience working with practice loans and has both these options at their fingertips.
Do you need to get a second policy for the bank if you already have life insurance? You are better off securing a separate inexpensive 10-year level term policy to cover the loan. This keeps your personal life insurance free and you are able to take care of your family instead of using your benefits to pay the bank.
Secure Malpractice Insurance with a Firm You Trust
A lender will want you to show proof of coverage with limits of $1,000,000/$3,000,000.
If you are leaving a corporate practice and need to secure your own malpractice policy, a new policy can be secured within a few days. This usually does not delay the loan process.
Obtaining a malpractice insurance policy with the same insurance firm as your other policies streamlines your path to practice ownership. You’ll be able to connect with a trusted advisor in the future to communicate about all of your policies.
Get to Know Business Property & General Liability Insurance
These are two insurances with many coverages. Within each of these, there are riders and variants that protect you and your new veterinary practice. While at first they may seem intimidating, let’s get to know what each protects.
What exactly do these insurances cover?
- General liability protects your practice when third party losses arise. Property damage, bodily injury, reputation harm, and advertising injury are the most common types of damage this insurance gives peace of mind against.
- Business personal property insurance protects your physical assets at a designated location. This may include the building as well as your equipment, tools, inventory, furniture, computers, and outdoors signs. Business personal property also offers protection from loss of income if a property loss occurs.
- Workers’ compensation protects the practice and its employees from financial loss when a team member is hurt on the job, or sick from a work-related cause. Workers’ compensation is required in all states, except Texas.
- Cyber liability protects your practice from financial loss due to a data breach. This may include loss or damage, extortion, loss of income, and even damages to your reputation.
Does it still seem overwhelming? The good news is that an insurance firm who handles practice loans will make this easy for you. One simple application, completed by you, will yield quotes for all your insurance needs from the top carriers in the country.
Communication is the Fuel for Securing Your Practice Loan
The most important aspect of obtaining a practice loan is communicating with an experienced insurance advisor. In fact, working closely with an advisor could mean the difference between becoming a burden to your family by losing your income, and remaining financially viable even when out of work due to an illness.
Make sure that you review your coverage with your insurance agent at least every other year. This ensures that you are still appropriately protected. You can also verify that you are paying the most competitive premiums.
You Can Obtain a Veterinary Practice Loan. Leave the Insurance to Loyall Group.
Insurance doesn’t have to cause delays in securing your dream practice. Begin by getting familiar with the five kinds of policies you will see at closing. Remember, requirements will differ from one lender to the next, so it is best to find an insurance firm that has experience in practice loans. You’ll want to deal with a firm that has an understanding of bank deadlines, and can work to ensure they are met.
Loyall Group specializes in simplifying the five types of insurance policies needed for a practice loan. Reach out to our team for a fast and easy quote, and start achieving your dream of owning a veterinary practice.
About Jennifer Loyall & Loyall Group
Jennifer Loyall is the founder and CEO, with more than 17-years experience working in insurance and helping healthcare providers across the country satisfy their insurance needs.