Insurance for Practice Owners: Covering the Risk You Stop Working

Picture a gastroenterologist who injures his shoulder badly in a road accident. Nothing life threatening. But he can't hold a scope for four months. His endoscopy suite sits idle. The EMI on the tower still goes out on the fifth of every month. Rent goes out. Eleven salaries go out. His home loan EMI goes out. And almost nothing comes in, because nearly every rupee the practice earns depends on his hands. "I had health insurance. I thought I was insured." Health insurance pays the hospital. Nothing pays the practice. This post is about that gap.

What actually stops when you stop?

Start with honesty. Write down what your practice earns, and how much of it needs you personally in the room. In the primer of Rich Doctors Walk Away this is owner dependence. Above 50%, you still own a job.

Then list every bill that keeps coming whether you work or not. Here is a labelled example.

Example: Say a gastroenterology practice brings in ₹22 lakh a month, and about 80% of that depends on the doctor's own procedures and consults. If he stops, revenue drops to about ₹4.4 lakh from the associate's OPD. The monthly bills that keep running:

The clinic shortfall is ₹10.5 lakh minus ₹4.4 lakh, so ₹6.1 lakh a month. Add the ₹4 lakh of personal costs and the family needs about ₹10.1 lakh a month from somewhere. If the clinic reserve is ₹25 lakh and the family emergency fund is ₹24 lakh, that's ₹49 lakh. Divide by ₹10.1 lakh and it lasts a little under five months. After that, the doctor is selling investments or borrowing.

How do you build a simple risk map?

A risk map is one page. It asks, for each bad event, what stops, what keeps running, and what will pay for it. Fill one in for yourself.

Look at the "What pays" column. Wherever it says "reserves, then?", that's your gap.

Do this exercise with your spouse, not alone. They are the person who will be dealing with the bank, the staff and the landlord if you are in hospital. Ten minutes of this conversation now saves weeks of panic later. And redo the map every time you take a new loan, sign a new lease or add a big monthly cost, because each of those quietly makes the "what keeps running" column longer.

Which covers should you discuss with an adviser?

I'm not your insurance adviser, and the products and terms change. These are the covers to put on the table, with the questions that matter for a doctor.

Term life cover. Pure protection for your family if you die. Ask how big it needs to be to clear your loans, including any clinic loans you've signed for personally, and fund your family's living costs.

Disability income cover. Pays a regular amount if you can't work. The key question for a doctor: does it pay if I can't do my own work as a specialist, or only if I can't do any work at all? A gastroenterologist who can still teach but can't scope has lost most of his income.

Critical illness cover. Pays a lump sum on diagnosis of listed illnesses. Ask exactly which illnesses are listed, the waiting period, and how it fits next to your health insurance.

Business overhead cover. Some insurers offer cover that helps pay a business's fixed costs while the owner can't work. Ask whether it is available to you, what it pays for, and for how long.

Loan protection on clinic borrowing. Ask your lender and adviser whether it is sensible for your equipment loans, and compare it with simply having enough term cover.

Questions for any of these:

1. What exactly triggers a payout? Get it in writing.
2. How long is the waiting period before payments start?
3. How long do payments last?
4. What is excluded?
5. How is it treated for tax? (Ask your CA.)

Can you reduce the risk without buying more insurance?

Yes, and you should. Insurance pays for the damage. Your business design reduces the damage in the first place.

• Build the clinic reserve. The book suggests three to six months of cash runway when stable, and at least twelve before scaling. Cash runway is available cash divided by the monthly shortfall you're planning for.
• Fill your personal safety bucket first. Six to twelve months of family living costs, before you invest elsewhere.
• Lower owner dependence. An associate patients trust keeps revenue alive when you can't work. That's the work of getting out of the chair.
• Avoid signing personally for clinic loans where you can. It ties the clinic's debts to your home.
• Leave clear instructions. Who runs the clinic, who signs cheques, who talks to the bank if you're in hospital.

The short version

• Health insurance pays for your treatment. It doesn't pay your clinic's EMIs, rent and salaries.
• List what keeps running if you stop, and work out how many months your reserves last.
• Fill in a one-page risk map and find every "reserves, then?" gap.
• Discuss term, disability income, critical illness and business overhead covers with a registered adviser, and read the payout triggers.
• Lower owner dependence and build reserves so a bad year doesn't become a lost decade. Start with Rich Doctors Walk Away, see our work with gastroenterology practices, and talk to us about growth consulting or a free growth call.