No clinician excited about building a healthcare business wants to consider all the worst ways it could collapse. But if you own a practice or healthcare business with a partner, planning for the worst might be your smartest move.
Running a practice means taking on entrepreneurship’s risk, pressure and rewards. Part of that planning means considering what happens if things go wrong.
- What if you get sick and can’t work?
- What if your business partner decides to walk away?
- What if you lose your license? What if your partner does?
- What if your co-owner dies unexpectedly?
It’s uncomfortable to think about worst-case scenarios. Frank Randall, a financial advisor and founder of MedPro Financials, helps clinicians plan for the worst so that a misfortune doesn’t cause unnecessary harm or financial ruin.
Randall calls this kind of planning a financial “prenup” for your practice. Some policies to consider include buy-sell agreements, disability insurance and business life insurance. These tools don’t just protect you from worst-case scenarios. They protect your income, family, staff and the business itself.
The business version of a prenup
A buy-sell agreement is a legally binding contract that outlines what happens if a co-owner dies, becomes disabled, loses their license or just wants out. It’s not just for big corporations. It’s foundational for any group practice with multiple owners.
“Think of it like a prenup. It forces you to agree up front on what would happen if the business partnership ends for any reason,” says Randall.
For example, if two nurse practitioners co-own a practice and one passes away, the deceased partner’s ownership could transfer to their spouse. A buy-sell agreement funded by life insurance ensures the business isn’t turned over to a spouse who’s not equipped to be a co-owner. With the right agreement, the surviving owner uses the buy-sell agreement to buy out their late partner’s share and retain full control.
Death isn’t the only exit scenario for a buy-sell agreement. What if one partner is burned out and wants out early? What if someone loses their license? A buy-sell agreement defines how those situations are handled. It can even specify flexible terms like installment payments or discounted buyouts.
Key provisions include:
- Death: Funded by a life insurance policy owned by the business.
- Disability: Often paired with a disability insurance policy to enable a buyout.
- Licensing issue: Allows the other owner to buy out at a discount.
- Walk-away agreement: Includes walk-away terms.
Even if you’re in business with a spouse or sibling, you still need a written agreement. “You want to keep the business side separate from the emotional side,” says Randall.
Own-occupation disability insurance
For clinicians, your most valuable asset isn’t your equipment or even your patient base. It’s your ability to work.
“If you lose your ability to practice, your entire income stream disappears. That’s why disability insurance is so important, but most people don’t have nearly enough,” says Randall.
Employer-provided disability insurance typically covers just 40–50% of your salary, which leaves a huge coverage gap. Also, the benefit is taxed as income if your company pays your premium. “If you pay the premium either through work or a personal policy, the benefit is tax-free,” says Randall.
Private policies can close that gap, but the specific language matters.
There are two types of long-term disability insurance:
- Any occupation: You don’t get benefits if you can still work in any job, even if it’s not in medicine.
- Own-occupation: You get paid if you can’t do the specific clinical job you were doing before the disability, even if you go on to teach, consult or run a business.
This distinction is crucial for any clinician whose hands-on work can’t be replaced. “We see a lot of people with policies that sound good on paper, but they won’t actually pay out when it matters,” says Randall.
Personal life insurance
Clinicians are often underinsured when it comes to life insurance. A $500,000 policy won’t replace decades of income or protect the business.
A common setup includes a basic term policy, but that’s usually insufficient. For personal coverage, many clinicians benefit from a hybrid approach:
Term life: Inexpensive and designed to replace lost income for your family
Permanent life: Costs more but builds cash value you can use in the future for retirement, investments or even buying an asset.
Business disability & key person insurance
Another often-overlooked safeguard is key person disability insurance, which covers financial losses if a crucial revenue-generating employee becomes disabled. For clinical practices, that might include a co-founder or a top-billing clinician whose absence would significantly disrupt operations or income. “If one of the key people can’t work, the practice may lose patients or referral volume. This coverage helps bridge the financial gap while the business adjusts,” says Randall.
Key person insurance is especially important for smaller practices where the top one or two clinicians carry a disproportionate share of revenue.
When is it too late to put these in place?
It’s only too late to purchase these policies once you need them. Prior to that, you don’t need to have figured this all out on day one of your practice.
“Most people we work with are a few years into their practice, and they just didn’t get to it yet. That’s totally normal. But if your business is scaling, now is the time,” says Randall.
He also recommends reviewing your policies every few years. As your revenue grows, so do your coverage needs.
“People avoid these conversations because they don’t want to think about bad things happening, but if you wait until you’re sick, you might be uninsurable. That’s when we see people come in, and it’s too late,” says Randall.
Checklist: What to review today
If you’re a practice owner, make sure you ask your insurance agent if you need the following:
- Buy-sell agreement
- Personal and business life insurance
- Own-occupation disability insurance
- Key person insurance
Plan to revisit your insurance needs every 2–3 years, especially as your business grows.
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Disclosure: The primary feature of whole life insurance is the death benefit. All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims-paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 600 DELAWARE AVENUE, BUFFALO NY, 14202, 716-8177109. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. MEDPRO FINANCIALS is not an affiliate or subsidiary of PAS or Guardian. ALLIANCE ADVISORY GROUP, INC is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. CA Insurance License Number – 4128184.
8039252.1 Exp 06/27
