Most medical and dental practice owners are diligent when it comes to protecting their physical assets. Buildings, fit-outs, equipment and contents are all commonly insured because they're tangible, visible and critical to day-to-day operations. However, one of the biggest financial risks facing a practice is often overlooked until a major disruption occurs.
Your ability to see patients, perform procedures and deliver healthcare services is what keeps the business running. If that ability is suddenly interrupted by a fire, storm, equipment failure or another insured event, the financial consequences can be significant.
Business interruption insurance helps protect a healthcare practice’s income by covering lost revenue when it cannot operate after an insured event. Let’s explore how the cover differs from property insurance, why the recovery period matters and how underinsurance can leave a practice exposed.
The greatest financial impact following a major incident may not be the physical damage itself. Instead, it is often the loss of income while the practice recovers.
For healthcare businesses, cash flow can be affected almost immediately. If appointments are cancelled and consultations stop, revenue can reduce overnight. Yet many expenses continue regardless of whether patients are walking through the door, such as staff wages, rent, equipment finance repayments, and software subscriptions.
While property insurance focuses on repairing or replacing damaged assets, Business Interruption Insurance helps protect income and place the business in a similar financial position to where it would have been had the interruption not occurred.
For example; a flood damages a practice overnight. Property insurance may assist with rebuilding the premises and replacing equipment, but that doesn't solve the challenge of lost revenue while the clinic remains closed. Business Interruption Insurance is designed to help address those financial consequences during the recovery period.
Many business owners assume recovery ends when the doors reopen. In reality, reopening is often just one step in a much longer journey. The indemnity period defines how long payouts can continue after a loss.
Practices may need time to rebuild patient bookings, replace specialised equipment, recruit staff and restore workflows. That is why choosing the right cover period is critical, as recovery times can vary significantly between practices.
A common issue with Business Interruption Insurance is underinsurance. Many policies are based on outdated financial information or assumptions that no longer reflect the current size and complexity of the practice. If the sum insured is set too low, underinsurance can reduce the amount paid on a Business Interruption claim.
If you haven't reviewed your Business Interruption arrangements recently, consider whether the sum insured, indemnity period and waiting period still align with your practice's current needs and recovery expectations.
For more information about Business Interruption Insurance and other essential cover for medical and dental practices, sign up for our Practice Protected video series. Access on-demand webinars designed to help practices better protect their people, operations and future here.