Insurance: What You Need and What You Don’t – Episode 229

How do you manage the risk of running a business? Protect your equipment? Your personal wealth?

On this Dentist Money™ Show, Reese and Ryan examine virtually every insurance policy a dentist might need. As a dentist, you have to manage business risks, as well as think about how to preserve your income in case of something unexpected. You may want to ignore it, but insurance can’t be neglected.

On this podcast, Reese and Ryan share their ideas about how to get the greatest efficiency out of the premiums you pay for your practice and income protection insurance needs.

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Podcast Transcript

Ryan Isaac:
Hey Dentist Money Show listeners, this is Ryan. Today on the show, Reese and I have a great episode for you. We talk about one of the most painful things to keep around, but something you’re glad you have when you need it, which is insurance. Talk about where to buy insurance, how much to buy, when to think about cutting back on insurance. It was a great episode. Lots of information here. Thanks everyone for tuning in today. We really appreciate you listening and for the support.

Ryan Isaac:
If you want to have a chat with one of our advisors about your insurance plan or anything else in your financial life, go to dentistadvisors.com. Click on the free consultation button. We’d love to have a chat with you. Thanks again for tuning in. Thanks for listening. Enjoy the show.

Announcer:
Consultant an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host, Reese Harper.

Reese Harper:
Welcome to the Dentist Money Show where we help dentists make smart financial decisions. I’m your host, Reese Harper, here with my trusty old cohost, Sir Ryan Issac.

Ryan Isaac:
And I got introduced. What was that? A G?

Reese Harper:
G.

Ryan Isaac:
I got introduced on a G?

Reese Harper:
For good vibes.

Ryan Isaac:
[crosstalk 00:00:01:13].

Reese Harper:
This little keyboard only has three notes. A C, an E and a G.

Ryan Isaac:
We need a different keyboard.

Reese Harper:
And I want to go to a xylophone, but it’s a little large for a lap toy.

Ryan Isaac:
First, a lap toy for in studio. Well, today, we’ve got a beast of a subject today. This is the subject of subjects as they say.

Reese Harper:
Okay. That sounds like the same as every week. So I’m fine.

Ryan Isaac:
It sounds like every week.

Reese Harper:
You’re not going to intimidate me with your …

Ryan Isaac:
I can’t scare you with my intimidation tactics.

Reese Harper:
Like we won’t be able to cover this. It’s too big.

Ryan Isaac:
So recently, as part of our monthly process, we have this little diddy that we built called the Elements and it’s our monthly financial planning process for dentists. And so if you want to see what we’re talking about, you can go to dentistadvisors.com and just click on the Elements thing and you’ll see one of the subjects we recently covered for all of our clients was the illustrious fun subject of insurance.

Reese Harper:
Yes.

Ryan Isaac:
One of 12 subjects and do you have a favorite, by the way? Do you have a favorite subject that we cover? One you like just feel more close to?

Reese Harper:
No.

Ryan Isaac:
What draws you in?

Reese Harper:
No. it’s like saying like which food group?

Ryan Isaac:
Which child is your favorite? Yeah.

Reese Harper:
Which type of food? The starter, the appetizer, the entree, the dessert, the drinks.

Ryan Isaac:
How do you choose?

Reese Harper:
I like them all.

Ryan Isaac:
You like them all.

Reese Harper:
Which cuisine?

Ryan Isaac:
Yeah. That’s fair. Okay. What would insure, okay, so if insurance was a part of a meal, like a big seven course, what would insurance be? Because I feel like insurance is the thing that’s a pain to have until you need it. So is it like a giant napkin?

Reese Harper:
I think it’s asparagus.

Ryan Isaac:
Insurance is like asparagus.

Reese Harper:
Like you need it. I mean, it’s kind of like you got to eat your broccoli.

Ryan Isaac:
But you’re kind of, while you consume it, you’re a little bit like, eh.

Reese Harper:
Well, like as some people probably like love their broccoli. I’m like, I know I got to eat it, so I’m going to.

Ryan Isaac:
Yeah, that’s fair. Okay, so seven course meal. We’re talking about the asparagus today.

Reese Harper:
[crosstalk 00:03:21].

Ryan Isaac:
although I would choose asparagus over broccoli, most of the time. Depending on prep.

Reese Harper:
Yeah. Well, if it’s olive oil, the sea salt.

Ryan Isaac:
Bacon wrapped.

Reese Harper:
Yeah. Bacon wrapped Asparagus.

Ryan Isaac:
Bacon wrapped asparagus, on the tray there.

Reese Harper:
That’s it. That’s what you throw at anything you don’t want to eat. Throw some cream cheese and some bacon on it.

Ryan Isaac:
Just wrap it in bacon. Yeah. Solves every problem. That maybe, yeah. Anyway. Okay, so all right. Well, …

Reese Harper:
We’re going to give these guys today the primer about insurance, the way we think about insurance in a quick, witty, and in depth way.

Ryan Isaac:
Super entertaining. Yeah, and we’re going to talk about all the things that we kind of reported back to clients. A lot of common questions that came back. I always want to say this though. Every time I mentioned that we spend an entire month analyzing insurance, I think it’s really important to clarify because it is a big distinction in our industry that we do not sell insurance and we do not earn revenue from insurance, but we spend a whole month on insurance to analyze it.

Reese Harper:
To our dismay.

Ryan Isaac:
To our dismay.

Reese Harper:
And to the family vacations that we miss out on.

Ryan Isaac:
Yeah.

Reese Harper:
Yeah.

Ryan Isaac:
There have been large insurance brokers around the country that are like …

Reese Harper:
Yesterday I was meeting with an unknown, I will not go named.

Ryan Isaac:
Yeah.

Reese Harper:
Financial advisor who owns a very large firm that also says they work with dentists and after I talked to him for about five minutes, I realized that was not really the case.

Ryan Isaac:
Okay.

Reese Harper:
They work with an unrelated medical professional to dentists.

Ryan Isaac:
Okay.

Reese Harper:
But he thought, I told him …

Ryan Isaac:
We was just trying to create rapport with you, man. [crosstalk 00:04:54].

Reese Harper:
Yeah.

Ryan Isaac:
I want to be buddies with Reese. How do I do this?

Reese Harper:
Anyway, the comment was made to me that why are you guys not selling disability insurance to your clients? He said, I can’t believe you’re not doing that. Are you crazy? He’s like, you’re missing out on like millions of dollars of revenue this year. If you just sell it, dude, just sell it to them. I was like, he’s like, they’re going to have to get it anyway. And I was like, that kind of logic is a slippery slope, my friend. You know like …

Ryan Isaac:
It’s the gateway. It’s the gateway product.

Reese Harper:
The American Dental Association also sells disability insurance to dentists and in some cases I think it’s a very fine solution. If I were to get paid by Guardian Life Insurance, [crosstalk 00:05:45].

Ryan Isaac:
You would no longer think that.

Reese Harper:
I would no longer be open to thinking that way and it’s quite a critical distinction between me and you and he’s like, I don’t care. Like I started doing it this way and I’m going to keep doing it.

Ryan Isaac:
Just moving on. I was going to say …

Reese Harper:
I’m like well, you get paid on this stuff and think the way we do about it. You wouldn’t develop these ideas. They only are developed because we’re not paid. And so, yeah.

Ryan Isaac:
It is kind of crazy though the chunk of revenue that could be derived from hundreds and hundreds of dentists needing to purchase insurance, and I’ve run into large brokers too. They’re like, wait, you guys don’t capture the revenue on that. That’s a really dumb business idea, but we’ll see.

Reese Harper:
Yeah.

Ryan Isaac:
Anyway, so today we’ve got a few sections here and these are kind of just follow along with what we reported to clients in the insurance rate month and some of the questions that came back. I will say also we recorded almost a 90 minute webinar, a really in depth dive, where I was able to like share my screen and do a lot of stuff too. We ended up talking a lot about whole life insurance on that webinar, if you want to see that.

Ryan Isaac:
If you go to dentistadvisors.com and hover over the link at the top that says education library and there’s a, it’ll pull up a menu, just click on insurance. It’ll pull up webinars. We’ve probably done half a dozen podcasts on different insurance topics, disability and umbrellas and all that kind of stuff.

Ryan Isaac:
So first thing here, I want to ask a couple of questions. Number one, what are the nonnegotiable insurance lines that you just got to carry. You’re a dentist. You better have it. It’s not an option.

Reese Harper:
Well, there’s some that you’re just going to be mandated by law to carry.

Ryan Isaac:
Some are mandated. Yeah.

Reese Harper:
So you have to get health insurance and you have to get auto insurance. You have to have property insurance or you can’t own a house. Like there’s a lot of like property level insurance coverages. Malpractice, you have to. And you also have very little like choice in these markets meaning like health insurers would like you to believe you have a lot of choice but you really don’t have a lot of choice. You have the basically like, you have a choice of whether you want to spend the first 10 grand or not, but after that there’s really not like a choice. It’s like your choices like you have to have it and you get a little teeny bit of flexibility on your deductible.

Reese Harper:
Same thing with like property insurance. You get a little flexibility on your deductible but like you don’t really get a lot of choice in terms of the amount of coverage. Like I tried to apply for a policy on my house, my remodel, the other day, because the standard house policy like replacement value that I was quoted was like $500,000 or something. You know and I’m like I don’t think that’s like updated for today’s like general cost of construction, at least not where I live, because that would like build, that like gets your cement and some of your framing done.

Ryan Isaac:
[crosstalk 00:08:37].

Reese Harper:
And a little bit of like, it maybe gets your garage finished.

Ryan Isaac:
You got your garage.

Reese Harper:
You definitely wouldn’t have carpet at that level. And so like anyway, bottom line is to go from, like basically the right amount of coverage was probably a little more than twice that, maybe a little more, you know, 1.2 to 1.3 would’ve like been adequate to cover like my property, my house. It’s not a big home. It’s just an old house that’s been remodeled and it costs more than what the property coverage was.

Reese Harper:
I had to go through, like it was a massive effort multi-carrier application process just to get an appropriate amount of coverage on my house. Why? Because the choice of options that adequately cover property, like they’re very limited.

Ryan Isaac:
That’s interesting.

Reese Harper:
There’s a very, like the market’s not very diverse because people aren’t actually comparing the replacement value of their property to the policy and going like, well, is it enough? Is it adequate? So these carriers just keep like spitting out policies that are kind of like, well, this keeps our liability pretty low if all we have to pay it back is this much.

Ryan Isaac:
As a third of the cost of the home.

Ryan Isaac:
Hey everybody, here’s a few reasons why you should listen to our next webinar. First of all, the webinar format allows us to teach financial principles in a more interactive way. You get to see live graphics on your screen, sometimes I draw pretty pictures and we have a live discussion that helps explain financial concepts in more detail. You can even send in questions live during the webinar and get an answer and then we always do a Q and A after. So join us next time. Go to dentistadvisors.com/events and sign up for the next webinar.

Reese Harper:
Yeah, they’re just coverage types where you don’t have a lot of consumer choice. They are mandated by law and I just think a lot of people already have that stuff and then there’s some that are like you have a lot of choice in terms of the type of policy that you want and you have a lot of choice in terms of the carriers that you want to use and these policies typically are quite consequential to, and from a risk perspective. I’m speaking specifically around disability insurance, life insurance and the liability limits that you want to have on your personal and business assets, the total liability limits. Those are like quite flexible and there’s a market for them.

Ryan Isaac:
Okay. So non-mandated insurances but that are still like nonnegotiable like you should have them. So I would rank life and disability, disability over life even, but have them both.

Reese Harper:
Why would you rank disability over life?

Ryan Isaac:
Just the data and statistics on disabilities being more financially ruinous than death and more probable.

Reese Harper:
Yeah. It’s like imagine telling your significant other, sorry. I know I was bringing in a significant portion of our family’s household income, if not all of it, in many cases. But I’m going to be laid up here in bed for like the rest of my life because I have a massive, you know, I broke my back. I got a life changing disease. Our expenses actually going to go up.

Ryan Isaac:
And you can’t work because you need to take care of me.

Reese Harper:
And you can’t work because I need you to take care of me and I love ya. We’re still going to have a great life together. Like it’s the most depressing thought you could possibly ever have.

Ryan Isaac:
Yeah. That’s rough.

Reese Harper:
So that scenario, I’ve seen in real life and my own uncle who I was really close to fell off a potato seller while he was working, building a building and landed on his feet and ended up like shattering a lot of the bones and in his back and and in his hips and couldn’t move for years. And after, that he got MS.

Ryan Isaac:
Oh my gosh.

Reese Harper:
So after he healed, just a short time after healing, he got MS, which we’re still wondering if it was related to the trauma that he experienced. We’re talking like decades of bedrest and no income. You know, and just watching that and seeing the real sacrifice that his spouse had to go through to take care of him, the household expenses that went up and the lack of family income. And I mean, it was just a labor of love for 20 plus years.

Ryan Isaac:
So you bring up something I think a lot of people assume incorrectly, which is if I didn’t work, we would clearly cut back and we’d lower our expenses because we know the income is lower and we wouldn’t travel or eat as well or have as nice of cars. But I don’t think that’s, I don’t think the data supports that. And anecdotally, the few cases that I’ve seen of disability, expenses go up, not down.

Reese Harper:
Yeah.

Ryan Isaac:
You’d probably say the same for what you’ve seen?

Reese Harper:
Yeah. I mean, the ones you care about, the ones that are like, Oh yeah. Like, it’s not like the one where you’re like break your arm and you’re back to work in six months. Like that’s a bummer. But it’s like the one where you’re like, Oh, like life changing disease. Like Lou Gehrig’s. You know, MS, in a severe case of MS. Right? Or like disease really is the thing none of us want to have happen to us. It’s an improbable circumstance but it’s so severely devastating.

Reese Harper:
I don’t know. It’s just like scary. It’s just kind of one of those things where you just kind of got to ensure that. I mean, you went to school, you got, as dentists, you got half a million dollars of student loans at a minimum now. You’ve invested your whole life into earning this higher income so you can pay back the student loan debt. I mean, just protect the income as much as you can.

Ryan Isaac:
And we’ll get to that. We’re going to talk about how we [crosstalk 00:14:44].

Reese Harper:
Yeah. Disability, you said number one. Then you said life.

Ryan Isaac:
Life. Yeah.

Reese Harper:
And then I think liability is probably the third. You know you can combine malpractice with umbrella liability insurance and that type of protection.

Ryan Isaac:
Yeah. And that’s if you ever got sued. That’s what would protect your net worth, outside of your practice liability. That’d be like personal liability. It’s called an umbrella policy. It’s surprising how many people haven’t heard of that. I actually had a client email me and say they ran it past their home and auto agent who was the typical person that could provide you with umbrella coverage and the agent was like, Oh I work with a lot of high net worth people. I’ve never heard anyone ever request an umbrella policy to protect their net worth.

Reese Harper:
Yeah.

Ryan Isaac:
And I was like, Hmm. More people should probably hear about that because that’d be the thing that would help you if you got sued. And so, well, we’ll cover that.

Ryan Isaac:
What about, how do you feel about insurance, lines of insurance that a lot of people consider kind of like optional. Let’s say business overhead, spouse life insurance, a buy sell agreement, kids’ life insurance. What’s your advice on those?

Reese Harper:
I wouldn’t rank all of those, those four specifically you just listed, I wouldn’t rank the same. Spouse life insurance to me is probably one of the most critical in that list because I’m like, yeah. If you have you if you have young kids and you’re …

Ryan Isaac:
I’m saying these are the ones that people usually feel like are optional. Like they just [crosstalk 00:16:03].

Reese Harper:
Like in my case thought, like if my spouse died, our household would lose income and we would also lose, like it would require a big expense for me to have childcare full time or me stop working and take care of my kids, which I wouldn’t be able to do really easily right now. So I think it’s an essential one. Like at a …

Ryan Isaac:
I agree.

Reese Harper:
I don’t know that I need, I don’t know, that’s like, you have to decide if it’s the same level of insurance you’d care on your own life depending on the responsibility, the level of your spouse’s income and the percentage of your total household income that that represents. But that one’s a critical one to me. I would not consider that one optional.

Ryan Isaac:
Yeah. I don’t either.

Reese Harper:
A lot of people do.

Ryan Isaac:
Yep.

Reese Harper:
I carry as almost as much insurance on my spouse as well, I should say Barbie, my wife chooses to carry as much coverage on her as I choose to carry out myself and we’ve kind of both realized that’s a critical issue.

Ryan Isaac:
Yeah.

Reese Harper:
And then on the business overhead expense, I also don’t really, that one’s a scary one for me just because while it is optional, it’s pretty inexpensive, and you think about it. I do think that early on in a practices lifecycle like that one’s pretty, that one’s pretty tough to like pass on if you’re don’t have a lot of …

Ryan Isaac:
Infrastructure.

Reese Harper:
If you don’t have a lot of liquidity and personal wealth built up to where, you know, if you really were out of work for, you couldn’t practice as a dentist for 18 months, like you better have some kind of an emergency preparedness plan for another dentist to step in or even to have some cash to get you through that period of time because you’re not only going to be out the income, it’s really you’re going to lose employees that are not going to be able to like come back and work for you after they have had to go find other jobs. You’re going to put yourself in a spot where a lot of your patient base also relocates. I think business overhead expense is pretty critical, and it’s very inexpensive.

Ryan Isaac:
Yeah. It feels like that to me. I’ve heard some disability specialists say that they’ve estimated maybe you don’t have to carry the full month’s expense because some expenses do come down, when you kind of start running a little bit of a skeleton crew, but they’re saying like 75% of your monthly expenses should be covered.

Ryan Isaac:
I think the exception does come into play when you’ve got a pretty solid team of partners or associates who could easily pick up the production Slack. But then now you’re talking about having some kind of formal buy sell agreement, which is where if one of the owners dies or gets disabled and can’t come back to work, then the other owners have an immediate influx of cash through an insurance policy to buy out the other person. And those kinds of like formal agreements really, I think those are really important too. So.

Reese Harper:
Totally.

Ryan Isaac:
Agree with you on those. Okay. So how much is enough? Everyone wants to know, like how much insurance should I carry? Let’s start with disability because that’s the easiest one. I think that’s the hardest one to buy.

Reese Harper:
Yeah. How about you outline the definition for that one? Yeah.

Ryan Isaac:
Yeah. So disability is the hardest one to buy. I say that because you do get what you pay for and there is a lot of differences in the details in the fine print of a disability policy between carriers, but it’s easy to know how much you get because you just want to carry as much as you spend in a month. And most companies will go up to $16,000 per month of benefit, assuming your income qualifies for it. I have heard now lately, over the last year, so there are a couple companies who will go up to $20,000. I think they were just like, man, dentists are spending more money so we’ll increase the coverage.

Ryan Isaac:
But you just want to get your monthly disability coverage up to as much as you’re spending, which requires that you know how much you’re spending.

Reese Harper:
Yeah.

Ryan Isaac:
So that one feels kind of easy to me. The harder one to calculate, easier to buy. It’s easy to go buy term life insurance, but it’s a little harder to calculate because there’s a lot of variables here. So I’ll just explain how we calculate someone’s need, like this is what we reported on for clients a couple of months ago in insurance month. And I guess the caveat here or the disclosure is that this is like a really conservative place to start. We’re basically assuming that the family would have a full like retirement plan, like retirement outlook at the death of a spouse.

Ryan Isaac:
So if you follow our other elements, the total term element, which is like 30 times your annual spending. That’s basically what we’re trying to provide a family if someone passed, so our calculation …

Reese Harper:
We’re trying to say when someone pass, if a primary breadwinner or a spouse passed away, you could do the same calculation, but we’re trying to say we just want to leave people in a spot where work is optional for them at the point a spouse passes.

Ryan Isaac:
Definitely. Yeah. Which is a very conservative estimate for life insurance. So the way we …

Reese Harper:
Yeah. You could also go like, Hey, 10 years from now, we’re going to be out of money.

Ryan Isaac:
Yeah.

Reese Harper:
Like you can choose to do that. We’re just defining the maximum you’d probably, like not just the maximum. A lot of people are like, well, I just want to set my family up better than they ever dreamed, if I die. Well, that’s okay too, like you can be that conservative.

Ryan Isaac:
Sure.

Reese Harper:
And I think that’s great. Like I know people that do that and they’re, you know, I’m like, well, your life insurance needs 6 million and they’re like, I want 10. I’m like, okay. You know what I mean? That’s not like there’s anything wrong with that. You can qualify for that. But we’re defining the maximum to set your family up the same way they’re living now just without ever having to go back to work again and without ever having to worry about running out of money. That would be the definition Ryan’s going to share.

Ryan Isaac:
Yeah. And then the way to calculate that pretty simple is we, the first number we calculate is how much would it take to pay off the house that the family is living in. The next step would be to take however much money you spend per year as a family minus the house payments, because those that would be paid off. And then times that by 30, so let’s just say you were spending 200 a year, but 40 of it was house payments. So you take your 160, times that by 30, and you’d get four and change million, add it to the amount that it takes to pay off your house. And that’s like your first lump sum.

Ryan Isaac:
From that, you can subtract any existing net worth that you’d be able to use. So if you have brokerage accounts or retirement assets already, a practice that you might sell, you can subtract that from the amount, but basically it just leaves a family with paying off the house and having a 30 total term and that’s a really conservative baseline.

Reese Harper:
Yeah, and we generally don’t recommend that people use the full value of their practice to offset that number just because it’s not likely that you’ll sell your practice after you’re dead for the same amount of money. There’s, you know, it’ll be under sales, so maybe you take half of that value on that.

Ryan Isaac:
Yeah. We’re pretty conservative on that too. So that’s like a baseline. And sometimes that is just right for the way people feel about life insurance. But sometimes, it’s too much.

Ryan Isaac:
So I’ll give you another easy way to think about life insurance is every million dollars of life insurance you have, your family could spend about 30, your family could spend, or your family could take about 33 grand per year out of every million dollars and never run out of that million dollars.

Reese Harper:
And we’re saying that because that’s the guaranteed of return you can get on like a 30 year treasury bond.

Ryan Isaac:
Really conservative investments. Yeah. Pretty historically tested. So every million bucks your family can get an indefinite forever lifetime income of about 33 grand. So you can just start adding it up that way. Or you could do it, like Reese, you were saying earlier, just say what are we going to spend in the next 10 years? $2 million. All right. That’s what we’re going to carry. And then at year 10, it’s gone, and they can fend for themselves.

Reese Harper:
Not a bad plan. I mean, …

Ryan Isaac:
That’s okay too.

Reese Harper:
It’s the old Wild West approach. It’s the way they did it in Idaho.

Ryan Isaac:
Like they stored up potatoes and like this is 10 years of potatoes.

Reese Harper:
Like honey, Tom’s here to sell some life insurance. How much should we get? I don’t know.$100,000. All right. Tom, we’ll get a $100,000 please. And that’s what they did. You know, it’s like, there’s no rhyme or reason to it.

Ryan Isaac:
It was what it was.

Reese Harper:
It’s just like, and then people wouldn’t, when you passed away, they weren’t like, man, he was so cheap. He only left us a $100,000. Back in the day, they were like, he left us a $100,000 dollars. What a gem.

Ryan Isaac:
What are you going to do with it? What are we going to do with this?

Reese Harper:
I can’t believe it. What are we going to do? Now they’re like, no more trips.

Ryan Isaac:
[crosstalk 00:24:59].

Reese Harper:
We’re going to be burning through that, like oh my God.

Ryan Isaac:
Six months, it’s gone.

Reese Harper:
My gosh, he was so cheap.

Ryan Isaac:
Yeah.

Reese Harper:
Milton was so cheap.

Ryan Isaac:
Milton and Tom and Mildred, I think is her name in this scenario.

Reese Harper:
Well, I know we only left us $100,000. So typical. So typical of him. I’m just saying, what story do you want to be told about you? Because these are the stories that will be told.

Ryan Isaac:
Like what you hear on the Dentist Money Show?

Reese Harper:
I do.

Ryan Isaac:
Then set up a free consultation. There is no obligation and let’s chat about how we can help you make a better plan for your future. All you do is go to the website at dentistadvisors.com. Click the big green button book free consultation or call us at 833- DDS plan.

Ryan Isaac:
Umbrella insurance that we’re talking about is you just want to carry as much as your net worth is. So if you got two, if you’re worth 2 million bucks, carry an umbrella policy of $2 million. You can get that from home [crosstalk 00:25:58].

Reese Harper:
That would be a maximum. Okay.

Ryan Isaac:
Yeah.

Reese Harper:
Like you don’t need to carry that much because some of your net worth may be tied up in like your business that like …

Ryan Isaac:
[crosstalk 00:26:06].

Reese Harper:
It’s protected by your LLC covenants, you know, for the most part, like it’s not likely that that will be seized by a creditor, but the reason you carry an umbrella is if you get like a, say you kill a very famous dog in a car.

Ryan Isaac:
Do you know any famous dogs by name?

Reese Harper:
Like Will Smith’s favorite dog.

Ryan Isaac:
Favorite dog, favorite dog, out of all the dogs he owns.

Reese Harper:
And he sues you for personal damages, for $5 million, and he’ll come after you for it.

Ryan Isaac:
Yeah.

Reese Harper:
There is precedent both for people being able to access your liquid cash, liquid securities and even garnish wages, your income, to recover their judgment that they are able to secure. And so you want to make sure that you’re at least covering yourself for the type of stuff that you have exposed. Right? Which is your liquidity for sure.

Ryan Isaac:
House.

Reese Harper:
And you know, definitely your primary residence is not something someone could like forcibly, …

Ryan Isaac:
It’d be tough.

Reese Harper:
It’s difficult to forcibly liquidate someone’s equity, but they can actually require that if you don’t have any other assets. So I don’t know, it’s just as a general rule, Ryan’s right. It’s just something you’re going to find that your net worth is quite high and it’s like a lot of it’s going to be driven by business value.

Ryan Isaac:
Yeah.

Reese Harper:
And you can’t really get, in some markets, it’s difficult to qualify for an umbrella policy.

Ryan Isaac:
Yeah. There’s limits to it. You know, there’s a point where your net worth is high enough that, but that’s where estate planning and asset protection through estate planning starts to have a place, is when your net worth, I don’t know. I find that probably the market for umbrella insurance above $5 million is tough to get.

Reese Harper:
Yeah.

Ryan Isaac:
And it’s probably not the most efficient way to do it when it’s that big. So.

Reese Harper:
Yeah. You can, and you know, I’ve got lots of clients with those policies, but it’s like applying for it from a particular niche carrier and it’s kind of hard to get and it depends on the state you live in. And, so anyway.

Reese Harper:
Let’s go on to subject number four.

Ryan Isaac:
Subject four.

Reese Harper:
Which is like, when do I make changes to these different policies? Like how do I know when I should made sure to make a change to my coverage?

Ryan Isaac:
Yeah. Exactly.

Reese Harper:
And the reason I’m highlighting this is because we think that one of the ways you can build net worth really well, since we don’t make money to sell insurance, this is our opinion, but we think you should be adjusting your insurance coverage as your wealth changes. Novel idea, right? Wow.

Reese Harper:
So when you buy insurance, we don’t just say keep the same amount for your entire life and we say buy disability insurance, we don’t say just keep this policy the same for your entire life, until you’re 65 and then quit paying for it. We say look, like life insurance needs to be adjusted. As you get wealthier and you have more savings built up, you can lower your life insurance death benefits. Same thing with disability. As you build more savings up your disability need like declines. Same thing with an umbrella policy. Like if your umbrella policy were quite high, but then you shifted some of your assets into a different entity structure as part of your estate plan, you may not have the need for the same amount of umbrella liability that you had before, or any liability at the business level or malpractice could be reduced or a variety of coverages.

Reese Harper:
So when is the right time, Ryan, to start making adjustments to coverages and what are triggers then people should look at?

Ryan Isaac:
Yeah, and I think that’s great advice as you start nearing like mid peak career towards the end of your career because you really can, we’ve seen it a lot where people have the ability to start backing off insurance coverages, which feels nice. You know, not to have to pay for something that you might not ever use.

Ryan Isaac:
Early career though, and the reason for all this is because insurance tends to be a decision that people make once early on and then don’t really address it unless someone forces them to. Loans are like that a lot too. You kind of just get a loan. You just assume like, yeah, it’s my loan. I’m just paying on it. But the interest rate might be better than it was when you started and you should check on it.

Ryan Isaac:
Insurance is the same way. So some things that would make your insurance change and usually make the need for your insurance to go up would be things like if you are spending more money than you used to, if you had kids, if you got married, when you take on new debt, if your net worth actually decreased for some reason, maybe you had an investment, some liquid investment that went south and your net worth decreased. I mean, these are all reasons why you might need more life insurance than you used to and it’s just worth, I mean that’s why it’s worth a peak at least once a year just to make sure you haven’t neglected something like that.

Reese Harper:
Yeah.

Ryan Isaac:
Those are usually the life events. Where to go get it? That’s kind of like the final thing where people are like, all right, now what? Where do I go shopping? Reese, earlier you talked about the ADA. There are some really great public resources to just go [crosstalk 00:31:11].

Reese Harper:
Yeah. You know what? This is an exceptional moment to hit the E key.

Ryan Isaac:
Yeah, hit the E.

Reese Harper:
E for exceptional advice. What I would say is the exceptional insurance agent is the person who really knows your industry. What I find is I talk to a lot of, I talked to a lot of financial advisors. Yesterday, I talked to a financial advisor who called me and wanted to buy my firm from me, so that was an interesting and I was like, do you know, like that doesn’t work here, right? We’re not selling out. We’re not trying to like …

Ryan Isaac:
Do you want to join us?

Reese Harper:
Do you want to know what our mission statement is? It’s like last forever and fix the problem. That’s basically the mission statement. Our mission statement is a world where people embrace the habits of holistic financial health and live their present lives to the fullest.

Reese Harper:
I told him that and he’s like, nevermind, I can’t buy it. That’s not, I’m not interested in that. It doesn’t align philosophically with my vision, which is make more money as fast as I possibly can.

Ryan Isaac:
And retire.

Reese Harper:
And then retire soon with no work. Anyway.

Ryan Isaac:
Yes.

Reese Harper:
Ryan and I are on a different path.

Ryan Isaac:
Yeah.

Reese Harper:
But this, I was talking to this person, a different insurance agent and you could tell that his advice for a dentist was definitely not based on his understanding of the dental industry. He said, yeah, I worked with a ton of dentists. I work with like 500 dentists across the country and I’m like, Oh wow, that’s a lot.

Ryan Isaac:
That’s a big number.

Reese Harper:
It’s a big ol’ number. Like you clearly have heard of the American Dental Association then, haven’t you? What do you think about their group life insurance and group disability policy? He’s like, huh? I’m like, well, have you heard about the American Dental Association since you’re such a dental specific guy? He’s like, ah, man. That’s interesting. Yeah, what do they have? What do they have? What do they got?

Ryan Isaac:
What do they got?

Reese Harper:
I’m like, well, you ain’t going to get paid no commission on it when you sell it, so you probably not going to be interested. Like, I wouldn’t feel comfortable giving an attorney life insurance purchasing advice because I don’t know the law firm associations. I don’t know the special group contracts. I don’t understand the occupational specific association agreements that have been crafted. Like I would want to know that. And if I were to go like give an attorney advice, I would want to know like what are his options for purchasing coverage because if I’m just trying to add a $500,000 life insurance policy and my association offers that for like nothing.

Ryan Isaac:
Dirt cheap. Pennies.

Reese Harper:
And I have to, either way I got to call somebody over the phone. I got to like do something, some kind of paperwork. It’s not like it’s going to be easy paperwork with one and hard paperwork with another. It’s like it’s a pain either way to apply for insurance. Like I might as well get the one that’s like a fraction of the cost.

Reese Harper:
And the dental, you know, the American Dental Associations life insurance is like a lot less expensive and if you just, it might not be all the coverage that you need, like it might be supplemental because you might want a larger amount of coverage and what they’ll give you.

Ryan Isaac:
Yeah. They have a max.

Reese Harper:
Like in my particular case, like I would want some more. But man, if I was a dentist, I would definitely get my ADA coverage and then I would add my supplemental on top of that because there’s not really a debate about when you die whether someone can pay a claim, like you’re dead, you’re dead, like they’re going to write a check.

Ryan Isaac:
Yeah. Yeah. Term life insurance is easier to shop for because the definition is pretty clear.

Reese Harper:
Yeah. But I do, that does not necessarily apply to all coverages, but I do think there’s some cases when you should go cheap and save money, especially when your budget is tight and we just got off the phone with the new scratch start practice last week who was being proposed buy a family friend to buy a mass mutual disability policy that was quite a bit more expensive than the ADAs disability policy.

Reese Harper:
And so the option, this person only had a tolerance for spending a certain amount of money per month. They had a budget and they just weren’t willing to spend more than that. They’re like, whatever I can get for this, like that’s what I’m going to spend. And I was like, well, I want you to have the most coverage possible for that because you spend 14, it was like almost $14,000 a month, was the personal monthly spending of this dentist. And the coverage they were contemplating for mass mutual was like $4,000. And I’m just going like, you’re going to use all of your discretionary budget to buy this $4,000 a month policy? But if you get disabled, like you’re still toast, like $4,000 barely covers their mortgage and their property tax and basic living expenses wouldn’t even be part of that.

Ryan Isaac:
[crosstalk 00:35:49].

Reese Harper:
And so after that conversation, they were like …

Ryan Isaac:
You got to go cheaper.

Reese Harper:
Well, I’m going to go cheaper and I’m going to get more coverage. I’ll just use the ADAs policy. It won’t cover me under every possible imaginable circumstance, but under most circumstances, it will cover me and I’d rather have more coverage under the most circumstances than less coverage under all circumstances. Because you know, that’s just a better trade off.

Reese Harper:
So when it comes to disability, cost is a factor. When it comes to life insurance, cost is a factor. And I really think people need to like at least explore their association coverage before they just go all into private carriers. That’s my big [crosstalk 00:36:28].

Ryan Isaac:
Yeah. I’m a big fan of that. And you know, I’ve heard that the process of working with the ADA is not too bad actually.

Reese Harper:
Yeah.

Ryan Isaac:
I heard it’s been pretty seamless. So. All right. Any more parting words of advice or wisdom you would give the people? The people want something.

Reese Harper:
I just want to make sure they don’t take away from this that there’s no other place to buy insurance than the ADA. There’s a lot of places to shop. Okay. But I do think that the ADA is something that dentists don’t often consider as much as they should because the ADA is not getting paid as much to sell you this stuff. So if you’re already a member, check it out. If you’re not a member of the ADA or you’re a specialist, like the AAO has the same coverage benefits with New York Life. They have some group policy, so if you’re an orthodontist, there’s some association contracts.

Ryan Isaac:
Yeah.

Reese Harper:
Think about your insurance holistically and if you’re working with a financial advisor who is not thinking about your insurance situation holistically, you’re missing a lot of gaps.

Ryan Isaac:
Great. If you have any more questions about insurance, we’ve probably covered it in a webinar or another podcast. Go to dentistadvisors.com. That bell means go to dentistadvisors.com. Click on the education library and click on insurance in the drop down menu.

Reese Harper:
The G was the education library and the E there was the insurance section.

Ryan Isaac:
Insurance sub menu, and eventually we will build a website that automatically dings one of those bells when you click on the right thing.

Reese Harper:
And if you want to go to our Facebook group, it’s all three. It’s a chord.

Ryan Isaac:
Yeah. Dentistadvisors.com/group. Go in there, post some questions. Everyone, thanks for tuning in. We really appreciate the support. Thanks for listening and catch you next time.

Reese Harper:
Carry on.

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