Posted by Amy Carbone on May 24, 2023 9:00:00 AM
If you are the owner of a dental practice, chances are you either have a Business Owner’s Policy (BOP), or you need one. We tell our clients to imagine a BOP being like a homeowner’s insurance policy for their practice. Just like a homeowner’s policy, it covers a lot of ground, so it’s good to have a basic understanding of what’s included and what’s not.
Say your business is growing, and you have multiple locations. Congratulations! Bigger business comes with more considerations. BOP gets even a bit more complex, as you must address the needs of your various dental office locations. This is when it helps to have professional guidance. Most practice owners get the coverages they have because of a bank requirement or a landlord requirement. But that doesn’t mean that it’s the right kind of insurance or the right amount.
Today we are going to take you through a few of the common questions that come up around insurance needs for multiple locations. If your practice is adding locations, make sure to read this article, or to share it with a colleague!
BOP Insurance Q&A
1: What Is the Basic Setup of Your Business Owner’s Policy?
Even if you’re not an insurance expert (which you don’t need to be), you should be aware of your coverage amounts and features. We think every solid policy needs to include general liability and property coverage.
2: Can One Business Owner’s Insurance Policy Cover Multiple Locations?
Great question! If you have the same business entity owning say, two, locations, then they can be on the same policy.
3: How Does General Liability (GL) Work in a Multiple BOP Situation?
Let’s begin with a refresh on what general liability insurance covers in the first place. For example, if someone were to slip and get hurt in your office and then pursue legal action that’s when your general liability insurance may kick in. A starting point for coverage amounts may be $2 million of coverage per occurrence and $4 million in aggregate. If we were to add an additional office (or offices) you should consider an umbrella policy to cover the additional location(s).
Don’t go by these numbers, though, because every situation is different. In any event, when you add locations, you need to expand your liability coverage by adding umbrella coverage. If you can obtain an umbrella policy for higher limits, you should consider it.
4: How Does Property Coverage Change in a Multiple Office Situation?
That depends on your situation – do you own your new building or is it a rented space? If you own your space, you will obviously need to add building coverage. If you’re a tenant in a rented space, you may not. If your lease requires you to cover the improvements and betterments then you would need coverage to include the permanent fixtures in the space like cabinetry, countertops, walls, and items you generally can’t take with you if you were to leave as a tenant.
How much equipment do you have? Equipment is anything that you could pack up and take with you to a new space. This may include dental chairs, dental equipment, supplies, computers, and waiting room furniture to name a few. Your BOP needs to cover these items for all your locations. Sometimes you may have loans on different pieces of equipment, and you may need to prove to the lender or equipment company that you have replacement coverage in place to protect these exposures.
5: What Should I Know If I Am About To Start a Buildout in My New Location?
This is a big question that may exceed the scope of this article (but we’ll get you started here anyway!). At a minimum, you should work with an insurance professional to assess how extensive the plans are for your buildout. Depending on the extent of your buildout you may need what’s called a ‘Builder’s Risk policy.’ Talk to your builder, or contractor about the coverage, and if they don’t provide it then your insurance professional may be able to help you obtain coverage.
Are you making cosmetic changes to the space, or structural ones? Will your space be vacant for more than 30 days? Will the construction take longer than 90 days? These are some of the triggers that may alert you to consider Builder’s Risk as opposed to BOP.
If you’re planning a buildout and need to secure Builder’s Risk coverage you will want to have separate General Liability (GL) coverage. Builder’s Risk does not include General Liability like a BOP does, so you will need a separate GL policy until your practice opens, at which time you will secure BOP coverage.
What we want to emphasize here is that a BOP covers property and general liability once the construction is completed, while the Builder’s Risk covers property during the build out and does not include General Liability coverage. Make sure you get experienced advice around this.
6: How Does Business Interruption Work for Multiple Locations, and Is That Covered by My BOP?
Business interruption, just like any other insurance coverage, requires a qualifying event to kick into action. Within a BOP, a covered loss would be an event that involves physical damage.
One example would be if a building was destroyed due to a tornado. In this case, BOP would provide coverage to rebuild the building, funds to purchase replacement equipment and would include a provision providing coverage for financial loss due to the inability to practice in the physical location under the business interruption section of the policy. Coverage expenses may include staff salaries and other ongoing expenses. Business interruption coverage is defined by length of the interruption and has a standard per day limit. Let’s say one of your locations is closed because of a water damage restoration and you know you will be impacted for a week. Often coverage is designed with a standard daily monetary limit. If the coverage is triggered by a covered loss the doctor can use the standard daily benefit amount at their discretion for what they need – whether it’s rent, or salaries, or anything else.
Let’s say you have an actual sustained loss, and one of your locations would be closed for a longer period. The insurance company may require you to provide prior year profit and loss statements and other financial documentation to assess your reimbursement needs.
The key take-away here, though, is that for business interruption to be triggered in a BOP policy – whether it’s for a single location or for multiple locations – their needs to be a covered loss that is preventing you from having your office open to see patients.
7: How Is Workers’ Compensation Impacted in a Situation Where I Have Multiple Office Locations?
If all your locations are owned by one business entity, then you are covered by one worker’s compensation policy. Remember, your worker’s compensation coverage is a separate policy from the BOP.
By the way, if you are adding locations and adding doctors, keep in mind that employees (even doctors) will be included in workers' compensation because it is based on payroll audits. Owners and officers can elect to be excluded from coverage. Often the determining factor is whether the doctor’s health insurance would cover any injuries they sustain at work or if these types of instances would not be covered.
8: How Are Coverages Like Employment Practices Liability Insurance (EPLI), Data Breach, and Cyber Insurance Affected?
Any time your business expands, so does your risk exposure. The short answer to this question is that all your coverages – whether for EPLI or Data Breach, will need to be reviewed and commensurately adjusted to cover multiple locations, multiple employees, and increased potential for data breaches.
9: What Does My Umbrella Policy Cover?
On a commercial policy, your umbrella policy covers your general liability. An umbrella provides an extra layer of liability protection to help pay for costs that exceed certain liability policy limits. Purchasing additional umbrella coverage for General Liability may prevent you from having out of pocket expenses if your claim exceeds your liability policy limits.
10: Should I Keep All My Insurance With One Carrier?
It really depends. Sometimes people have offices in different states, and there are different coverage limits for different states. We work with our business owner clients to find the right fit for them. From an administrative standpoint, reasons to consider keeping it all under one carrier would be to streamline billing and the potential claims process. That said, your optimal risk mitigation should drive the choice of carrier, not necessarily the ease of administration.
Business Owner’s Insurance Policy Tips for Dental Practice Expansion
Review your coverage annually with an experienced insurance specialist. Managing multiple locations can get complicated. It’s important to sit down once a year with your insurance professional and review your coverages. How much would it cost to rebuild your space in the event of a total loss? What new equipment have you added this year? Should you consider an umbrella policy? Does it make sense to consolidate certain policies under one carrier?
All these questions can be answered within the context of a comprehensive review to adjust your coverage accordingly and put you in a better position in the event of a loss.
About Treloar & Heisel
Treloar & Heisel, an EPIC Company, is a financial services provider to dental and medical professionals across the country. Our insurance and wealth management divisions assist thousands of clients from residency through retirement. We strive to deliver the highest level of service with custom-tailored advice and a strong national network.