Part of securing personal and business finances is preparing for unexpected events or circumstances that are outside of an individual’s control. While this is important for anybody, it is especially critical for many in the pharmacy industry.
Many self-employed pharmacists and pharmacy owners depend on having to be at their pharmacy or actively working for income. Illness, business interruptions, or other situations are then able to impact income instantly. Furthermore, pharmacists face unique challenges, including stringent regulations, fluctuating drug prices, changing healthcare policies, and other factors.
Finding strategies to address these and other concerns is essential for creating a secure financial landscape.
Insurance
Health Insurance
Health insurance products, such as a group benefit plan or health spending account, can play an important role in mitigating financial risks.
Group benefit plans and health spending accounts both provide coverage for medical expenses, ensuring individuals are not burdened by unexpected healthcare costs.
Insurance products vary; be sure to choose one that meets your individual needs and to get enough coverage for adequate protection.
Disability Insurance
Disability insurance provides income protection during periods of illness or injury, so that you have a source of income even if you take time off work to recover.
Many pharmacists do not have this type of insurance coverage, and their paycheque would stop completely if you could not work due to illness or injury, potentially causing financial hardship very quickly.
Income protection plans vary, some have coverage through a group benefit plan while others have their own personal coverage. In our opinion, having your own personal coverage offers much better flexibility and is usually cheaper over the long run.
Critical Illness Insurance
Critical illness insurance offers a lump sum payout upon diagnosis of specified illnesses, such as cancer, heart attack, and stroke.
Usually, people who suffer a critical illness are faced with unexpected medical expenses over and above your regular monthly expenses. Without adequate coverage, people are often not able to afford these additional expenses.
Critical illness protection plans vary, most group benefit plans do not offer this coverage. In our opinion, having your own personal coverage offers much better flexibility and is usually cheaper over the long run.
Life Insurance
Many pharmacists are the main income earner in their family. If an unexpected death occurs, suddenly your family would be left without your income and most would be unable to afford the lifestyle they were living while you were alive.
Life insurance plans vary, you can cover short term needs such as business loans or mortgages, as well as longer term needs such as leaving your family a source of income, or to cover funeral expenses.
Business Overhead Insurance
For pharmacy owners, business costs continue, even if you are unable to keep your store open due to illness, injury, or death.
Overhead insurance covers your fixed business expenses such as rent, utilities, and employee salaries in these situations. It can be critical for saving a business from closing permanently.
Liability Insurance
Pharmacists should also consider liability insurance to protect themselves from potential legal claims related to their professional practice. This covers legal fees and damages in the event of a lawsuit arising from alleged errors or negligence.
Emergency Funds
Building an emergency fund is essential for pharmacists and their families. Unforeseen expenses, such as emergency repairs or unexpected medical costs, can strain finances.
It is recommended to keep an emergency fund of 3-6 months that can be easily accessible.
Robust personal and business emergency funds provide financial cushioning so unexpected challenges can be weathered without compromising long-term financial goals.
Investment Income
Investing helps create additional sources of income to supplement, or replace, pharmacy income as necessary.
Investment portfolios should be diversified to mitigate the impact of market downturns.
Pharmacists should carefully allocate their investments across different asset classes, such as stocks, bonds, and real estate. Diversification helps spread risk and protects against the impact of economic downturns on specific sectors.
Business Efficiencies and Structure
There are pharmacy business elements that can be tweaked to reduce the risks of losses. An optimally-managed drug inventory decreases the chances of products expiring or becoming devalued over time.
Your pharmacy’s corporate structure itself can help mitigate financial risks. Incorporating a business provides limited liability, separating personal and business assets to protect personal assets from business debts. Properly structured businesses may also access business loans and credit more easily, for a buffer during challenging times.
Expert Help in Mitigation of Risks
Pharmacists face various financial risks that require careful consideration and proactive planning. Implementing a combination of insurance, taxation, business, investment and savings strategies can help.
Seeking professional guidance for tax planning, accounting, insurance, and business structures provides a substantial advantage. These strategies must be thoughtfully applied and strategically combined, considering various factors, to determine the most effective implementation for optimal financial management.
The Pharma Tax team’s expertise and experience with the pharmacy industry allows us to create comprehensive, tailored solutions to help pharmacists grow their wealth and business safely and sustainably, while staying resilient during challenging times.
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