Message Boards
Today's Active Topics Today's Active Cases Browse Forum Categories My Recent Activity My Messages Private Groups My Marked Threads My Subscriptions
Today's Active Images Today's Active Polls Most Active Topics Global Townie Map Advanced Message Board Search Message Board Terms of Use

We Love to Hate it… But Should We? (Part 2) by Larry Mathis, CFP

Start Discussion More by this author (3)

A detailed account of which insurance policies you should have and how to get the most out of them.
by Larry Mathis, CFP

In last month's issue, Orthotown Magazine featured part 1 of Mathis's article about insurance. In the first installment Mathis focused on life insurance and disability insurance. This month he tackles several other types of insurance you should know about.

Individual Medical Insurance
Just about every dental professional I know carries some sort of medical insurance, whether an individual policy or group coverage. It is my opinion that as an orthodontic specialist, you should purchase an individual medical policy. Even if you are an employee, I strongly recommend you consider purchasing individual health insurance rather than being insured under a group plan. I learned this lesson early in my financial planning career.

My 48-year-old general dentist client, Jim, was insured through his office group plan with his wife listed as a dependent, along with three employees. Jim had a stroke and was never able to return to practicing dentistry. After determining he would not be able to return to work, Jim sold his dental practice for much less than its value was before he had the stroke. One day while discussing the medical benefits with the insurance company, Jim's wife, Nancy, casually mentioned that they had sold the practice. Within a week they were notified that their health insurance was being cancelled. Why and how could this happen? Because Jim no longer owned the practice and he was no longer "employed," his dental practice no longer met the definition of a "group." Jim lost his group coverage. Fortunately the group policy had a clause that allowed him to convert his coverage to what is known as a conversion policy. However, he had to go from a $500 deductible and paying a premium of about $380 a month for himself and Nancy, to a $1,000 deductible plan that cost nearly $1,100 a month just for Jim alone. Nancy was able to purchase a less expensive individual medical plan. After two full years of disability, Jim qualified for Medicare and was then able to discontinue the expensive conversion policy.

Even with disability insurance, this was very a difficult time for Jim and Nancy financially. I personally believe the risk associated with group medical insurance is too high for any self-employed individual.

Remember this about insurance companies – they are in business to make a profit. They can only operate profitably by bringing in more premiums or paying out less in claims. Pay the few extra bucks for individual coverage and protect yourself and your family from a potential financial disaster. If you insist on a group policy, read the policy and know its limitations!

I complain about the high cost of my medical insurance like everyone else does. However, I had back surgery in February of 2003 and before all the write-offs from my PPO insurance plan, the total bills associated with my surgery and post-surgery physical therapy were nearly $80,000, but my total out of pocket expenses were only about $1,500. Like I said, I don't like paying insurance premiums any more than anyone else. I do, however, like the benefits insurance companies provide.

Long-Term Care Insurance
Even if you are young, I'd like you to understand the importance of long-term insurance.

On March 9, 1996, I was discussing the need for long-term care insurance with my mom. I told her that I would like to buy a long-term care policy for her and I would pay the premiums. Her response was, "Larry, I'm not going to need that for a long time." At that time my mom had approximately $150,000 in invested assets, a condo valued at $75,000, she was living somewhat comfortably on her Social Security income, and she was debt free. We discussed the matter briefly, but she was adamant that she wasn't going to need long-term care insurance for a very long time. I couldn't convince her to do it.

She went home that night thinking she wasn't going to need this insurance for a long time. At 6:30 a.m. the next morning on March 10, 1996, I got a telephone call from my mom asking me to come over. My mom was having an asthma attack. I got her into my car and drove a quarter-mile to a fire station. By the time they pulled her out of the car, she had no vital signs, no signs of life at all!

Although the paramedics managed to get her heart started again, they could not get oxygen into her lungs. Her lungs had collapsed and she ultimately went without oxygen for over eleven minutes. Amazingly, she survived. However, she suffered anoxic brain damage and she became severely disabled. She was unable to walk, speak, feed or dress herself.

Within 11 months of her asthma attack all of mom's money was gone, approximately $150,000 and ultimately she qualified for Arizona's Medicaid plan for the indigent. At that time in Arizona, a single person was required to spend down their assets to less than $2,000 in order to qualify for what is called Arizona Long-Term Care benefits (ALTC). So once her financial assets (not including her home and a car) were under $2,000 the state of Arizona paid her longterm care bill, which was approximately $3,500 per month at the time. A couple years later, my mother came into a $250,000 inheritance. Approximately $140,000 of this would be spent on her care, until she again qualified for ALTC. (We were able to legally gift approximately $110,000 to family members.)

Approximately a quarter of a million dollars of my mother's money was spent on her care until all of it was finally gone. A long-term care policy would have paid her over $3,000 dollars per month. I share this story with you to give you an idea of what can happen to a person's life savings with an extended stay in a long-term care facility and to illustrate that the worst can happen when we never expect it.

For married couples it is even more important to plan appropriately in this area, because if one spouse has to go into a care facility with costs running up to $6,000 per month, the surviving spouse is going to be faced with a very uncertain financial future.

For the past nine years Genworth Financial has conducted a survey of service providers across the country. Its recent survey, conducted by CareScout included more than 15,000 long-term care providers in 437 regions across the U.S. According to its research, the national median daily rate for a semi-private room in a nursing home is $200 per day, which is a 3.63 percent increase over 2011. The five-year cost of a semi-private room increased by a compounded rate of 4.5 percent annually from 2007 to 2012. This is especially alarming when you consider that according to Genworth's research; approximately 70 percent of people over the age of 65 will require some level of long-term care during their lifetime.

Now, if you don't have any assets to insure, there is no need for long-term care insurance. However, this type of coverage should definitely be considered for those who are already retired or within five to 10 years of retirement and who have accumulated some significant assets. I suggest people start to investigate this type of insurance at around age 50. Premiums are relatively low at this age and for many people, their children have begun to move out and are perhaps graduating from college, thus freeing up money to pay the premiums.

This type of insurance can vary greatly from company to company. I recommend you work with an insurance agent who knows this type of insurance very well. And be sure to utilize a company that is highly rated by the rating agencies.

In my opinion this type of coverage is very likely to become more expensive as time goes on. In fact, Genworth Financial recently announced several changes that will limit benefits as well as increase costs for new policy owners. Some insurance companies including Prudential, MetLife and others have already stopped offering long-term care insurance and are focusing on more profitable lines of insurance.

Property and Casualty Insurance (Personal and Business)
When it comes to property and casualty insurance I have found that many dentists are underinsured and many are paying too much for the coverage they have. When purchasing property and casualty insurance there are several things you need to pay close attention to.

Be sure your coverage amounts are adequate.Let's say you have building contents worth$200,000, but your contents are only insured for$100,000. Assume your business policy has an 80percent co-insurance clause for a partial loss (this is very common). Also assume you have a $1,000deductible and you suffer a $50,000 insured loss. In this situation, the insurance company would pay the claim as follows:

$100,000 (insured amount) divided by $160,000(80 percent of $200,000) x $50,000 (loss) =$31,250, less your $1,000 deductible leaves you with a check from the insurance company for $30,250. So in this case you suffered a $50,000 loss and only recover $30,250.

It is vital that you update your coverage regularly. Be sure everything is covered. For instance, many people think that items such as dirt bikes and quads are covered under their homeowners insurance.They're not! Be sure your property and casualty agent has an accurate list of your assets to assure you are covered against loss of the asset, as well as any liability associated with owning the asset (i.e., dirt bikes,quads, golf carts, etc.) So when your insurance agent sends you a letter that it's time for your annual checkup, don't ignore it. Pick up the phone and call your agent.

Here are some additional items to consider in regard to your business insurance. Make sure you have business continuation coverage. For instance, if your building burns down, what will you do for income while it's being rebuilt? Business protection coverage could continue to pay your own salary as well as your key employees salaries for up to a year.Other things that you should be sure are covered are employee dishonesty, employment practices liability and employee benefit liability coverage. These are just a few commonly overlooked areas to be sure to discuss with your property and casualty agent.

If you double the amount of coverage you carry,your premiums don't automatically double as well. In fact in many cases you can double or triple your pol-icy limits for a few hundred dollars a year. Re-evaluate your coverage needs annually, if not more often, and be sure you have adequate or above adequate coverage.

Professional Liability Insurance
You should carry a minimum of $1,000,000 of professional liability insurance, and if possible purchase an "occurrence" form policy. With this type of policy you might not have to purchase "tail" coverage like you would with a "claims made" policy. If possible you should purchase a policy that allows defense cost to be paid over and above your limit of liability. For instance,if you had a policy with limits of $1,000,000 and had a judgment against you for that amount, it would be beneficial to have your defense cost paid in addition to the judgment. Also, extend your business umbrella coverage over your professional liability insurance if the carrier will allow you to.

Umbrella Coverage
An umbrella policy is designed to pick up where your other property and casualty insurances leaves off. You should have both a personal umbrella policy as well as business umbrella coverage. This type of insurance is designed to protect you against a catastrophic event and it is relatively inexpensive. This should be a "no-brainier" type of purchase for most dental professionals. Let's ay you get into a car accident and kill someone. $500,000 of liability coverage may or may not be enough and the opposing attorney may decide to go after your personal assets and/or future income.Umbrella coverage acts as an extra layer of coverage to protect your assets and future income. The higher your net worth, the greater your need for this type of insurance protection. However, regardless of your net worth or age, this type of coverage should be dis-cussed with your insurance professional.

When it comes to property and casualty insurance, it's also worth noting that many insurance carriers give discounts when you have multiple policies with them.

This article on insurance is not intended to be all inclusive. My goal is to encourage you to checkout your insurance needs and insurance coverage carefully. An annual update of all your insurance coverage is vital to your financial wellbeing.

We buy some types of insurance with our health and pay for those policies with money. That is in order to purchase certain types of insurance (life,health disability, long-term care), we have to be reasonably healthy or the insurance company will not insure us or may require us to pay a higher premium.Within the last year or so I have had three relatively young clients experience medical issues that could possibly preclude them from purchasing life, health,disability or long-term care insurance ever again.They have crossed what I refer to as the "insurability line." As we approach the "insurability line," either due to our age or our declining health, these type ofcoverage's will become more expensive. Once we cross over the line however, they aren't available to us at all, almost without regard to how much we are willing to pay for them.

Author's Bio
Larry Mathis is a Certified Financial Planner professional. He operates a personal financial planning practice in Phoenix, Arizona, with clients through-out the U.S. Larry works primarily with dental professionals and is the author of Bridging the Financial Gap for Dentists – What Every Dentist ShouldKnow About Managing Money. Larry has spoken for numerous dental organizations, including the American Association of Orthodontists, the WesternRegional Dental Conference and the Arizona School of Dentistry & Oral Health at A.T. Still University.

Larry Mathis is registered principal offering securities and advisory services through United Planners' Financial Services of America - A LimitedPartnership - Member: FINRA, SIPC.
Orthotown Magazine
October 2025
Orthotown Magazine October 2025 Read Current Issue Read Archived Issues
Sponsors
Townie® Poll
When did you last increase your fees?
  
Site Menu
Message Boards Magazine Continuing Education Podcasts Blogs Classifieds News Events Townie® Poll Ebooks Townie Choice Awards
Company Info
Contact Us Advertise With Us Howard Farran DDS, MBA Policies and Agreements
Site Help
Sally Gross, Member Services Specialist
Phone: +1-480-445-9710
Email: sally@farranmedia.com
©2025 Orthotown, a division of Farran Media • All Rights Reserved
9633 S. 48th Street Suite 200 • Phoenix, AZ 85044 • Phone:+1-480-598-0001 • Fax:+1-480-598-3450