Dental professionals understand the importance of maintaining comprehensive insurance coverage to protect their practice and assets. However, when it comes to commercial property insurance, many dentists find themselves either overinsured or, more alarmingly, underinsured.
A real-world example
Colette Johnson.
A dentist in Southern California faced a devastating loss when the building where his office was located -- a strip mall -- suffered a catastrophic fire. Fortunately, no loss of life occurred, but the damage to the dentist’s office was total -- nothing was salvagable. The office and all of its contents needed to be replaced.
To the dentist’s dismay, an accounting of the replacement costs for all equipment and new construction revealed a deficit of almost $300,000 in his commercial property policy. Despite the protection of an inflation guard, the dentist and insurance agent had failed to adequately estimate the value of his property.
Sadly, this California dentist is not the only one who purchased a commercial property policy with the assumption that it would offer adequate protection if needed. Too often, insurance companies fail to ensure that coverage aligns with the evolving needs of dental businesses.
Dental practices have unique features that make them different from other commercial properties. The importance of selecting an insurance carrier that can tailor a policy to fit these needs cannot be overstated.
What to look for in a commercial property insurance carrier
When evaluating whether your commercial property policy offers adequate protection for your dental practice, start by looking at the insurance carrier. Can the carrier offer you a property policy designed for dental practices?
If you are unsure, ask your insurance company the following questions about your commercial property policy:
- What data are used to determine the value of your property?
- Is dental industry-specific data used to calculate replacement values of equipment and structures?
- Is your policy based on the actual value of your current property or on the replacement cost?
To ensure your dental practice’s commercial property policy is the right fit, select an insurance carrier that bases its policy estimates on data from other dental practices instead of an algorithm made up of unrelated businesses in similar locations. For instance, The Dentists Insurance Company (TDIC) insures only dentists and therefore has access to customized, proprietary dentist-centric data used in calculating property replacement value.
Must-haves for commercial property policies
Once you have verified that your insurer can accurately estimate the value of your dental office, make sure your policy has the following key features to protect you from being over or underinsured.
Inflation guard
One of the first things to look for in a commercial property policy is an inflation guard provision. Inflation can significantly impact the cost of replacing or repairing property damaged caused by unforeseen events.
An insurance policy with an inflation guard benefits the policyholder by pacing coverage with inflationary increases. TDIC’s commercial property policies, for instance, have an inflation guard of up to 4% per year. Verifying an inflation guard is included in your commercial property policy can mitigate the risk of being underinsured due to rising costs.
Yearly policy reviews
To make sure your property is well protected, it is essential to have yearly policy reviews. Dental practices evolve over time with new equipment, renovations, and technological advancements.
A stagnant insurance policy may fail to reflect these changes accurately. Regular policy reviews allow for adjustments and updates, ensuring that coverage adequately meets the current needs of the practice.
Replacement value vs. actual cash value
When selecting a commercial property policy, understanding the distinction between replacement value and actual cash value is crucial. Replacement value coverage provides compensation for damaged property without deducting depreciation. In contrast, reimbursements made by actual cash value coverage are based on the property’s current market value considering depreciation.
Opting for a policy that covers the replacement value of property is advantageous for dental businesses. Dental equipment, technology, and specialized tools often depreciate quickly. By securing a policy with replacement value coverage, you can replace your assets with new equivalent items, reducing out-of-pocket expenses in the event of damage or loss.
Noncommissioned sales agents
The presence of commissioned sales agents within insurance companies can create a conflict of interest, potentially leading to recommendations that may not align with your practice's best interests.
To avoid such conflicts, consider choosing an insurance provider that operates with noncommissioned sales agents. These professionals prioritize the specific needs of the dental industry, providing unbiased advice and helping dentists make informed decisions about their commercial property insurance.
The right carrier and policy matter
Securing an adequate commercial property insurance policy is a vital step in safeguarding your dental practice. Avoid the pitfalls of being overinsured or, even worse, underinsured by considering key factors when selecting your coverage. Look for policies with inflation guard provisions, yearly policy reviews, replacement-value coverage, noncommissioned sales agents, and carriers that base their policies on customized data specific to the dental industry.
By partnering with an insurer that understands the unique requirements of dental businesses, you can gain peace of mind knowing that your practice and assets are well protected. Take the time to review your commercial property insurance and ensure it is tailored to your current practice needs and mitigates the potential risks you face as a dental professional.
Colette Johnson is a senior property claims representative for The Dentists Insurance Company (TDIC). She has more than 22 years of experience in the industry. Johnson joined TDIC in 2017.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.
