Insurance is a necessity for veterinary practices of any size, but it can be difficult to know which types of insurance and which premium levels are a good fit for your practice. Not enough insurance can keep you awake at night fretting about the next disaster that might or might not strike. Conversely, you can purchase so much insurance that it bankrupts the practice.
Ultimately, insurance boils down to risk management and the level of risk with which you are comfortable. You have to find a balance between purchasing enough insurance to provide peace of mind, while also leaving money in the bank.
“Fifty years ago, not as many horses were hospitalized and veterinarians provided [primarily] basic care,” said Andy Clark, DVM, MBA. “As the veterinary industry changes, there are more risks.”
Professional insurances are those policies directly related to the veterinary medicine profession; they are designed to protect you and the practice as a whole. There are four types of policies that fall within the professional insurance category:
Professional liability insurance, also known as malpractice insurance, covers a veterinarian and the practice in the event that a medical error is made.
Professional extension policies, also referred to as bailee policies, are a second type of professional insurance. “In the event an animal in your clinic gets loose, runs in the road and gets hit, that’s not malpractice—it’s care of custody and control,” Clark said. This policy covers incidences that are clearly not medical errors or malpractice, but which can occur accidentally when an animal is under your care.
Veterinary license defense is a relatively new insurance that has become increasingly necessary. “There has been a huge rise in the number of incidences where people get really upset about something and want to ‘punish’ the veterinarian for an unfortunate outcome or a financial issue that has nothing to do with malpractice,” Clark explained. “Five years ago, the client would have gone to the state board of examiners in a case like this and you wouldn’t have needed a lawyer.” A veterinary license defense policy does not cover fines that might be levied, but it pays the expenses associated with hiring a lawyer to defend one’s veterinary license.
Student liability insurance is the fourth type of professional insurance. “A lot of experience (for students) is gained in private practice,” Clark noted. “It creates some risk for a practice trying to help a student, but if that student makes a medical error, there is a big problem.” Fortunately, student liability insurance is rather inexpensive to carry.
While professional insurance addresses policies specifically related to veterinarians, there are several other types of insurance that are applicable for any type of business, including veterinary practices.
Some business insurances are a necessity and others are optional, based on the size and scope of the practice and your tolerance for risk. Commercial auto insurance, property insurance, employment practice of liability and personal insurance are essential for all businesses.
Clark urged practice owners to also consider data breach insurance, board of directors and officers coverage, flood/ disaster insurance and an excess liability (umbrella) policy.
“If you have a lot to lose, large umbrella policies cover all other policies and extends the coverage cap,” he said.
In addition to policies that cover you as a veterinary professional and the insurances that protect your business in general, it’s equally important to consider health, medical and life insurance.
Health insurance is important because it allows you and your employees to receive timely medical care that can improve your general well-being. With the implementation of the Affordable Care Act, every individual is obligated to carry health insurance, although only businesses with a specific number of employees are required to extend health insurance benefits to their employees. To learn more about the mandates included in the Affordable Care Act, visit www.healthcare.gov.
Medical insurance plans are not limited to routine health care. Supplemental medical policies can provide coverage that includes disability income insurance; term life and AD&D insurance; hospital indemnity insurance; long-term care; and dental.
Although life insurance is often thought of for individuals, it can also protect a business from financial loss, liabilities or instability in the case of the death of a business owner/partner. Whether providing necessary short-term cash or keeping operations going until things settle, life insurance can be invaluable in maintaining the business you’ve worked so hard to build.
It can be overwhelming to sort through the policies available.
Begin by considering your practice clientele. Are you caring for racing stables with stallions valued at $60-$70 million, or are you treating backyard pets?
“Look at the kind of horses you’re working on,” Clark emphasized. “If you’re working on backyard pet horses, it’s not any less important, but less valuable.” This doesn’t mean non-performance horses are any less emotionally cherished, it simply acknowledges the monetary difference between these animals. “For animals, insurance only covers what [the] animal is worth and is not extended to pain and suffering,” Clark added.
Unfortunately, there is no simple formula that can be used to determine how much insurance you should purchase. Clark urges veterinarians to be practical. “I think about how comfortably I sleep at night,” he said. “I talk to people who lay awake thinking about disasters that can happen.”
It’s equally important to fully understand each policy and how small changes to the daily work process can impact premium costs. Worker’s compensation is one premium that can be controlled. “Worker’s comp has an experienced modification rate that is based on a multiplier,” Clark explained. An experienced modification rate comes into play once an employee is hired and the rate increases when sprains, strains or injuries occur. For a simple illustration, assume your worker’s compensation premium is $1,000. When an experienced modification rate of 1.5% is factored in, the premium paid is actually $1,500.
“A lot of vets are unaware that they even have an experienced modification rate,” Clark said, “and that it’s something that can be managed when you file all the paperwork properly and provide training on how to prevent injuries.”
Understanding the details of a policy is also critical for property insurance, especially as it relates to disasters. “Unless you have flood insurance, your EquiManagement.com insurance doesn’t cover flooding,” Clark explained. In the event of a tornado or other weather disaster that damages the practice, your insurance will only cover repairs to the property and the loss of equipment.
“It’s naïve to think that you’ll only need to cover the cost of the loss of the building,” Clark said. “It is going to take months to rebuild and what else will keep you going?”
Loss of income policies provide a source of income while you’re rebuilding to keep the practice running.
With the rising costs of equipment needed to diagnose and treat injuries and diseases, it’s imperative you know how your equipment is covered.
“A digital X ray machine can range from $30,000-$90,000,” Clark noted. “When it comes time to put it behind a horse’s leg and you cross your fingers, hoping it doesn’t get kicked or otherwise damaged, that may be an indicator you need insurance. Hope is a terrible strategy.”
Resources are available to help you decide the type and amount of coverage that makes sense for your practice. “You can go around and buy insurance through different agencies, but there are some quirks with the veterinary industry,” Clark concluded. “The American Veterinary Medical Association (AVMA) provides an overview of all kinds of insurance available to you.” Visit its website at avma.org or www.avma.org/PracticeManagement/Insurance/Pages/default.aspx to specifically view information about insurance. Resources are available to help you decide the type and amount of coverage your practice needs.