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ADA Term Life insurance: More than peace of mind

June 04, 2012

By Karen Fox, ADA News staff

There are other options for life insurance, but none that beat the ADA Group Insurance Plan when it comes to rates and flexibility, say dentists who carry insurance through the ADA-sponsored Term Life plan.

Partners: Dr. Winslow, left, and Dr. Grant

Available exclusively to ADA members, the ADA Group Insurance Plan is one way the ADA is helping you protect your family while growing your practice. Term Life, in particular, can be an asset to your practice. Besides providing income for family or other beneficiaries, many members use it to successfully collateralize loans and fund buy-sell agreements.

Term Life insurance laid the groundwork for succession planning for Dr. Donna Grant and Dr. Maureen Winslow of Norwalk, Iowa. Generations of patients will continue to receive dental care at Norwalk Family Dentistry thanks to preparations that began before Dr. Winslow graduated from dental school.

Dr. Amelia Grabe Lane, who grew up the daughter of a dentist in New Hampshire, used her ADA Term Life insurance to achieve her No. 1 professional goal: practice ownership.

After graduating from Boston University Goldman School of Dental Medicine in 2005, Dr. Lane began working at Chatham Dental Associates in Chatham, Mass. In 2006, she used her ADA Term Life insurance as collateral to purchase the practice.

“Two months after working there, I had a need for life insurance,” said Dr. Lane. “I had an opportunity to buy the practice and the lender required life insurance as collateral for my practice loan.”

As an active member of the American Student Dental Association, Dr. Lane was familiar with the ADA Group Insurance Plan. She had free Student Term Life and bought Student Disability insurance through the ADA plans. “Without the collateral from my life insurance plan, I would never have been able to purchase the practice,” said Dr. Lane. “These days, life insurance is crucial to purchasing a practice because so soon out of dental school, I would never have been able to buy a practice otherwise.”

Dr. Lane

For Dr. Grant and Dr. Winslow, life insurance provided protection for themselves and their families by supporting the continuity of the practice. The plans were put in place while Dr. Winslow was still a student at the University of Iowa College of Dentistry.

“Once we knew that this relationship was a good fit, we put everything down on paper and that became a guide for us to follow,” said Dr. Winslow, who started practicing with Dr. Grant after graduating in 2005. Norwalk is Dr. Winslow’s hometown.

Dr. Grant started her career at Norwalk Family Dentistry in 1992 and bought the practice in 1996. She knew Dr. Winslow’s father, who worked in the Norwalk community, and dentist and student began meeting to explore future plans.

“My husband and I were both from Norwalk, so we knew we wanted to come back here and raise our family,” said Dr. Winslow. “Putting our agreement on paper was the best way to start out. Our goal was a practice partnership, but we had time to see how it worked out.”

With assistance from a third party, they developed a five-year agreement whereby Dr. Winslow would work as an associate for the first year. In year two, they started an escrow fund for Dr. Winslow’s down payment. Part of that included a buy-sell agreement, which specifies what would happen if either dentist died, became disabled or retired. If one of these events occurs, the other partner is required to buy out the disabled or retiring partner’s share in the practice. Or in the case of death, the estate of the deceased dentist is required to sell to the partner. To make sure that funds are available to satisfy the terms of the agreement, Drs. Grant and Winslow purchased ADA Term Life insurance on each other. They also have ADA Disability Income insurance, as required by the agreement to buy out a disabled partner.

By 2010, Dr. Winslow was able to buy in as a full partner. “Having life insurance policies on each other meant that if something happened to Dr. Grant, I would have funds to buy her half of the practice,” said Dr. Winslow. “I would maintain control of the practice, and her family would have security and a way of getting money immediately.”

“That way, there would be no waiting for another dentist to step in,” said Dr. Grant.

“Also, if you lose a partner, the practice loses its worth,” said Dr. Winslow. “Having an agreement in place for succession takes care of the financial obligation if someone were to be gone. It makes life a little easier knowing you don’t have that worry.”

Both dentists say the preparations they made early on smoothed the transition to full practice partnership. “Everything was laid out for us, and we were 10 times further along than we would have been at this point in time,” said Dr. Grant.