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Your Money or Your Life Insurance?
Be Wary of Overly Expensive Plans
As my friend, Chris Callen, sums it up, “Your health is your wealth and your health is never guaranteed.” No, there are no guarantees, as we’ve all learned. Consequently, we take steps to prepare for the possibility that our best laid plans may or may not come to fruition. Insurance – health, disability, and life – are the safety nets we hope neither our families nor we ever need, but we derive some reassurance in knowing we’ll have a plan should our circumstances change. While the disability insurance plan is essential throughout your career, the life insurance policy is a must during the years in which your financial obligations are significant.
Chris is an independent insurance agent, whose company works primarily with dentists. He finds that one of the biggest mistakes dental families make when it comes to life insurance is not purchasing enough on the dentist in the early years. “Dentists will purchase a million dollar policy and think they are covered. But, like disability insurance, life insurance is purchased to replace income in the event that the unthinkable happens.”
In most cases, the surviving spouse would put the proceeds from a million dollar insurance policy in the bank and live off the interest income, which would amount to about $50-$60,000 a year after taxes. In reality, they will need much more than that to cover expenses and raise the surviving children. When purchasing a life insurance policy, the key is to determine how much your family will need to live on, particularly if the surviving spouse is a stay-at-home parent and they have to pay off school debt, mortgages, and college tuition for surviving children. Chris recommends families consider 70% of the current income as their benchmark when determining the level of life insurance income that would be necessary.
However, Chris emphasizes that dentists won’t need that level of life insurance throughout their careers. “Life is a bell-shaped curve. You start out as a young dentist with a lot of debt, a lot of responsibility, and no money. As your life moves up the left side of that bell-shaped curve, you have a family, a house, a new practice, life insurance plugs the gap and covers the obligations if something happens.
“When you reach the top of the bell-shaped curve, kids finish school, the house is paid off, etc. You can start whittling down the life insurance. Then you start heading toward financial independence. Once you are financially independent, you don’t need life insurance,” explains Chris.
He recommends that most dentists carry between $1.5 and $3 million in life insurance on themselves and between $250 thousand and $500 thousand on a stay at home spouse with kids until they achieve financial independence. Chris notes that many dentists who work with financial planners can become largely debt free within 15-25 years.
Given that the need for life insurance is temporary, dentists should steer clear of purchasing permanent life insurance plans, known as Whole Life or Universal Life. Term Insurance will provide excellent coverage and is very inexpensive. “Purchasing Whole Life or Universal Life insurance coverage means you’ll be paying for it your entire life and long after you need that kind of insurance coverage. If you purchase a Whole Life policy, you’re looking at spending $12,000 to $25,000 a year verses a 20 year Term Insurance policy for the same coverage at $600-$700 a year.”
Keep in mind that life insurance is not an investment and should never be considered one. “You want adequate coverage but you want that coverage at the lowest possible price because your money is always better off in investments. If someone is trying to push insurance as an investment, it’s because they stand to earn a nice commission off the sale, particularly if it’s a Whole Life or Universal Life insurance policy,” cautions Chris.
He also urges dentists to be wary of Variable Life insurance policies and annuities as these have the potential to become very expensive, and they are not guaranteed. “You can end up paying $20,000 a year or more for a policy that could have zero value at a much later date.”
Shop around for Term Life Insurance policies every two-to-five years. Term insurance rates have dropped recently because average life expectancies have increased over the years. Be sure to look for a guaranteed rate as well.
Sally McKenzie is CEO of The McKenzie Company, Inc. a nationwide dental management, practice development and educational consulting firm. Working “on-site” with dentists since 1980, McKenzie Management provides knowledge, guidance and personalized systems that have propelled thousands of general and specialty practices to realize their potential. Sally can be reached directly at 1.877.777.6151
Interested in speaking to Sally McKenzie about your management concerns? Email her at Sally@thedentistsnetwork.net
Interested in having Sally speak to your dental society or study club? Click Here.
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Image & Practice Management Software
Where is it all headed?
In a past issue of The Dentists’ Network, we looked at the steps for evaluating digital radiography systems. We explored the differences between the sensors and phosphor plate systems, focusing on the raw data and suitability of both for different practice settings. Now that dentists have the tools to choose the best system, it’s time to throw out everything we have learned so far! As most practices have discovered after plunging into digital x-rays, the software has as much and often more to do with the user experience with these systems than anything else.
Aren’t They All the Same?
Almost all digital radiography systems come with their own software that allows capture and basic manipulation of the images. While this software is adequate for some offices, it is often under-featured in its ability to perform more advanced tasks, such as applying filters to sharpen or improve the contrast, emailing images directly from the program without the need to cut-and-paste, and incorporating images directly into Word documents with a single click. Also, most of these programs are free-standing and do not directly bridge to practice management software. This is important because most dentists want to link the images to their patient data without needing to re-type the patient info when taking images. Enter image management software.
Image management software is designed to serve a number of functions. It allows an easy method of taking, organizing, and manipulating images. By bridging to the patient record, it permits data to be exchanged without re-typing. And it will act as a central database for all images, including digital-x-rays, intraoral camera images, digital cameras, and scanned photos, slides, and documents.
To Bundle or Not
Probably the most difficult decision that the dentist faces is whether to purchase image management software that is sold by the practice management software company, or to invest in a third-party product. Both have their pros and cons. Most of the major PMS companies have incorporated imaging suites into their offerings. On the plus side, these programs are tightly integrated with the PMS software; the dentist will feel that they are still in the same program even though the databases are usually separate. This is actually preferred. With the constant consolidation that is occurring in the dental technology field, it makes sense to have image stored in a separate database in case the dentist chooses to switch to another program at some point in the future. Also, with the complexity of these various packages, it’s comforting to have the same company responsible for all aspects of the software. In a few cases, it is possible to have the patient chart and thumbnail-sized images all on the same screen; this is not possible when using a third-party program. Also, since three major companies currently dominate the market, dentists used to be relatively secure that the company will not go out of business or stop supporting their software.
That being said…. if you’ve been following my blog the past few weeks, then you know that the image management software has changed dramatically in the past month. Lightyear, a major digital x-ray company, went out of business. Dentrix sold off their image division (Dentrix Image, the ImageRayi sensors, and the ImageCam intraoral camera) to Dexis. And, Kodak sold their entire Health Imaging Division, which includes PracticeWorks, Softdent, and Trophy, to Onex. While nobody knows for sure how these new developments will affect end-users in the long run, it’s safe to say that many of the image programs will go through some changes over the next year or two.
Even without the recent news, this option of bundled image software with the practice management software may not always be the best. In most cases, the image software is significantly more costly than the third-party programs. Many of the image programs sold by the PMS programs are modular: a dentist would have to purchase separate modules in order to be able to image from digital radiography, intraoral cameras, digital cameras, and scanners. The cost of the fully-loaded image suite from the PMS company is often more than the PMS program itself! Another concern is that some programs will only capture images in a proprietary format, requiring time-consuming conversion utilities if standardized format, such as JPEG, are needed. Finally, the compatibility of the software with digital radiography systems is more limited with the PMS systems. Most are compatible with 8-10 different sensors, while average for the third-party programs is 23-25.
Now you still may be wondering how you can afford to pay the associate a regular percentage of compensation plus 10 to 25 percent in bonuses and still make a profit. Rest assured the math works as long as you calculate the breakeven point correctly. That’s because the costs associated with increasing an associate’s compensation through a bonus program should only be based on the associate’s regular compensation plus their variable expenses. The other fixed costs, such as salaries, are kept constant and are part of the breakeven point calculation. If you opted to increase the associate’s overall base compensation percentage, you are increasing compensation from the first dollar they generate. This approach will eventually erode your associate’s profit margins.
As dentists move towards the chartless practice, there are many systems that must be evaluated to find the best choice for that practice. While most offices will spend most of their time evaluating the hardware choices on the market, the software is often the most important component and dentists should not overlook this factor when choosing their imaging systems.
Lorne Lavine, DMD is the Founder and President of Dental Technology Consultants. Dr. Lavine holds two prestigious certifications, the A+ Certified Technician designation and the Network+ Certified Professional. These designations demonstrate proficiency in computer repair, operating systems, network design and installation. Dental Technology Consultants provide dentists a full range of services relating to the implementation of technology.
Dr. Lavine can be reached directly at 1.866.204.3398.
Interested in speaking to Dr. Lavine about your technology concerns? Email him at Drlavine@thedentistsnetwork.net
Interested in having Dr. Lavine speak to your dental society or study club? Click Here.
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