Dr. James F. Peddie never thought he'd become the poster veterinarian for insurance planning, but his story illustrates exactly why insurance planning is critical to ensuring veterinarians' financial security when unexpected health issues force them out of the practices they have spent years building.
Throughout his career, which included a 24-year partnership in a large mixed animal practice and a full-time faculty position, Dr. Peddie, a former AVMA treasurer, kept close tabs on his insurance needs. Every few years, he would re-evaluate and adjust coverage to ensure that the amounts and types of insurance were appropriate for each stage of his life and career.
"As your life stations change, your insurance needs are constantly changing. That is why you need to touch base with your agent every couple of years," he said. "The industry is constantly changing, too. You need to keep informed. This is a business decision, and business decisions must constantly be reviewed."
Dr. Peddie had built up a busy private practice as veterinarian for some of the movie industry's leading studios when he discovered firsthand just how critical insurance coverage was. When an immune system disorder rendered him unable to safely work with the large and exotic animals that made up a substantial portion of his practice, disability insurance protected his income while he recovered and transitioned into his next life stage.
"There are going to be these bumps in life's road, and that's where you need insurance," he said.
Dr. Peddie's story demonstrates why insurance is an important component of business planning to ensure continuity and financial stability for sole practitioners and partnerships.
In Dr. Peddie's case, for example, disability insurance provided income protection. Disability insurance helps ease the financial burdens associated with the inability to practice resulting from an injury or lengthy illness, and coverage can be increased as income grows. Further, when coverage is obtained through the AVMA Group Health and Life Insurance Trust, benefits could be paid for the rest of the insured's life, if the covered disability occurs prior to age 50.
While disability insurance can help with a veterinarian's personal financial situation, professional overhead expense insurance is designed to help pay business overhead expenses when a covered illness or injury keeps a veterinarian from practicing for an extended period. It helps keep the doors open so the veterinarian has a viable business to return to.
Eligible expenses include rent, the principal and interest on outstanding debts, utilities, employee salaries, postage, equipment maintenance, and the monthly average of taxes on the practice premises. Benefits do not include salary, fees, drawing accounts, profits, other remunerations for the disabled veterinarian and other partners, salaries of anyone hired after the disability began, charges for professional services of an individual in the same profession as the insured, depreciation, inventory, or income taxes.
The AVMA GHLIT offers two professional overhead expense plans, allowing veterinarians to choose the one that best meets their needs. One plan offers benefits that begin on the 16th consecutive day of a covered disability and run for up to 12 months. The second plan offers benefits that begin on the 31st consecutive day of a covered disability and run for up to 24 months. Monthly benefits range from $300 to $20,000 in increments of $100, up to 100 percent of the disabled partner's share of covered expenses.
Finally, if the disability is career-ending, POE insurance provides a safety net to keep the practice viable so that the disabled veterinarian can sell the practice without undue financial pressure.
The third type of insurance that is important in business and financial planning is life insurance. On the personal side, it can help surviving spouses maintain their standard of living, even while raising and educating children. In this situation, a life insurance policy in the amount of eight to 12 times the veterinarian's current income is recommended.
On the professional side, life insurance is an important element of buy-sell agreements, providing a surviving partner with the financial means to complete the purchase. It can also enable the surviving partner to buy out a spouse or child who inherits the deceased veterinarian's share of the business.
The AVMA GHLIT offers several distinct advantages over other insurance companies.
First, because the Trust is not in business to make a profit, any monies that remain after the payment of claims and operating expenses are returned to participants in the form of reduced future premiums or enhanced benefits. Also, GHLIT insurance is portable and can follow a veterinarian from one job to another.
"'Insurance' is an ugly word. The minute you mention it, eyes glaze over," Dr. Peddie said. Nonetheless, he said, it is important "to review policies every other year—and to have professional help in doing that." To facilitate the review process and provide veterinarians with assistance in evaluating their insurance needs, the AVMA GHLIT has developed a network of agents specifically to market the insurance program and support participants.
The AVMA GHLIT insurance program is underwritten by New York Life Insurance Co. For more information and full descriptions of the plans—including eligibility, rates, renewal provisions, exclusions, and limitations—or to find a GHLIT agent near you, visit www.avmaghlit.org or call the Trust office at (800) 621-6360.