September 3, 2013
This is a busy time when many dental practices are being purchased, startup practices are opening, and many offices are remodeling or just refinancing their business loans. Whether obtaining a loan to purchase a practice or refinancing an existing loan, your lender will require insurance for collateralization. Most lending institutions require several types of insurance coverage to be in place to protect their interest if you should die, become disabled or experience physical damage to the office. The best- and least expensive- way to satisfy the bank is by purchasing Term Life Insurance, Business Loan Protection and a Business Owners Policy which insures your office in case of physical damage.
WDIA highly recommends that you begin the insurance application process prior to or early on in procuring your loan. The underwriting for these policies takes time, and you would want the policies approved before your loan is finalized.
Business Loan Protection Insurance
Many banks require you to collateralize disability insurance for your loan, but WDIA believes that your personal disability insurance should not be used as a collateral assignment. A less expensive Business Loan Protection (also called Business Reducing Term) policy should be used instead. Business Loan Protection is a disability policy that would specifically make your monthly loan payments for you should you become disabled. Even if your bank does not require disability insurance, WDIA believes having the coverage is worth it for your piece of mind.
Term Life Insurance
Term Life Insurance has no cash value, and so it is very inexpensive. Simply put, if you should die, your beneficiary receives the set benefit amount. Your family should be the beneficiary of your life insurance policy, NEVER the bank. When you collaterally assign the bank to your policy, they are insured that they will be paid only the amount remaining on your loan. The rest will go to your family.
Business Owners Policy
Purchasing a Business Owners Policy is also a must for protecting you in case of damage to your property due to fire, water damage, etc. This policy also covers you for general liability as well as providing a loss of income protection if you are unable to practice while damage to your office is being repaired. The bank will require that you name them as an additional insured on your policy until you have paid off your loan. If you are doing tenant improvements to your office space, you may need Builders Risk coverage which covers property and materials on-site during the build out.
Because WDIA works only with dentists, we are very familiar with the loan process and can help ease some of the stress that can accompany obtaining a loan. WDIA already has working relationships with the banks and lenders that most dentists are using, as well as the practice transition teams they are utilizing.
For more information on practice loan insurance and property/liability coverage, contact WDIA at (206) 441-6824 or 800-282-9342.