From one small pebble, ripples can reach distant shores
Unlike acquiring an existing and established veterinary practice, a de novo is a clean slate, a fresh start, and an opportunity to create the hospital exactly how you want it to be. Everything from your selection of medical equipment to design, culture, technology to standard of care, the freedom to create your vision can be more fulfilling than inheriting and modifying someone else's.
But starting a practice from scratch can seem like a maelstrom from dealing with lenders, landlords, real estate agents, accountants, attorneys, insurance agents, distributors, and the list goes on. Building from the ground up can seem like a daunting task and doubting yourself is a normal feeling. Questions like: will people come? How will I make payroll? What have I gotten myself into? These are all very common and normal questions. We are here to help lighten your load and make the transition to ownership easier. You can do it!
Build your team
People bring their pets to you because you are a trained and licensed veterinarian. You provide a valuable and essential service to the community. But when starting a business, you will be working with and relying upon other people who, like you, provide professional services. Some of those may also have a license and attend to C.E. events just like you, except for a different industry. And just as pet owners want to have the best veterinarian for their pet, it's important to build your team with the best people you can to help you in areas like accounting, architecture, construction, insurance, legal, real estate, etc.
We have a highly vetted network of strategic partners who understand vetmed and can help you!
Understand what you need and when
When working with a lender to build a veterinary hospital, they will typically send you a list of insurance requirements. Aside from appearing complex, it can also seem like you need everything on the list all at once. That is not the case. Let's break down what a lender typically wants and the timeline those insurances are needed:
- Life Insurance: If a lender is providing you the construction loan along with money for medical equipment, inventory and some start-up working capital, they will want to collateralize the loan with insurance. In other words, if you died unexpectedly before the loan was paid off, they need some assurance their loan will get paid back. Some lenders may require life insurance by your loan closing, while other lenders may want proof you have applied for coverage.
- Long-Term Disability: Within 60 days of a disabling event of a practice owner, who is active in the business, revenue can drop by as much as 25%. As revenues are declining and the business scrambles for a relief vet, selling the business quickly may not be viable or even the right move financially. Protecting your income while you are recovering is good for your personal finances and banks may require coverage to help their borrower prepare for an unfortunate event. Like life insurance, so lenders require long-term disability at closing, while others simply want to see proof you have applied.
- Business Overhead Expense (BOE): A business overhead expense policy covers all of the operating expenses of running a business in the event you are disabled and cannot run your veterinary practice. Business overhead expense insurance shouldn’t be confused with personal disability insurance but can be included with personal disability insurance or obtained separately.
- Builder's Risk Insurance: Also known as "course of construction insurance," this is a specialized type of property insurance that helps protect buildings under construction. A basic builder's risk policy also helps protect building materials, supplies, and construction equipment on site. Binding this coverage depends on the type of project and when construction will begin, which most insurers expect construction to commence within 60 days of binding coverage.
- General Liability: This is a type of policy that provides coverage to a business for bodily injury, personal injury and property damage (to a third-party). The coverage aspects apply to the business's operations and products, or injuries that occur on the business's premise. Required at closing on real estate acquisitions or when a leasehold space is obtained.
- Business Income & Extra Expense: This coverage was once known as "business interruption." This helps replace lost revenue and cover ongoing expenses when a business must temporarily close due to a covered event. However, in a de novo veterinary practice, there is no revenue until the business is open. Additionally, business income coverage typically comes with a Business-Owner Policy (BOP), but a BOP is for when you are open for business, or within 60 days of opening the business so it can protect medical equipment that may be arriving since builder's risk insurance doesn't cover most medical equipment. If a lender wants this coverage at the closing for a construction loan, they need to adjust it to a "post-close" requirement to be obtained when you are closer to opening the business.
- Workers Compensation: This policy provides financial protection for employees injured or sick due to work, covering medical expenses, lost wages, and death benefits, while shielding employers from lawsuits. You need to get workers comp once you begin the hiring & training phase of the hospital. Obtaining workers comp months in advance of opening when you have no employees is unnecessary.
The 60-day rule and preventing a financial hardship before you open
One of the keys to understanding business insurance is to know that carrier underwriting appetites are based on your business classification, or your "operational exposures." You are a vet who is opening their first hospital or maybe you already own a hospital and are starting a new location. In either situation, while this new business or location may become a veterinary hospital one day, that may not be the case presently. Right now, your future hospital may be a vacant lot, a new leasehold space with four bare walls or an existing structure in need of a major renovation.
The location of your new hospital, but more importantly, what you plan to do with it in the first 60 days is everything. This is because the insurance companies will classify you based on what they believe you doing immediately after closing or soon thereafter. Here are common coverage scenario's and how the 60-day timeline applies:
- Vacant Building Policy: Insurance companies that insure vacant structures are wanting to provide coverage for buildings with no active business operations for either the policyholder or any tenants of the policy holder. As such, a vacant building policy is not appropriate if the building is under construction or if the building is not vacant. Additionally, if your building is on a vacant building policy and construction later begins, a Builder's Risk policy should be used instead because most vacant building policies have a construction exclusion in their policy.
- Builder's Risk Policy: These can be used for ground-up construction, renovation of an existing structure or building out a leasehold space. When using it for renovation of an existing structure, it is very critical that construction commence within 60 days of the coverage effective date. Many carriers have limiting language in their policy or can deny a claim altogether if the claim is presented after 60 days from binding coverage but construction has not commenced. The reason is that Builder's Risk insurance companies typically do not want to be insuring vacant buildings and if they do, they want the ability to charge more premium to do so.
- Business-Owner Policy (BOP): A BOP is never appropriate for either a vacant building or construction project unless the business will be up and running within 60 days. In situations were you purchase a building that was once a veterinary hospital and only needs fresh paint and a few things that may only take a month to complete, a BOP can be very appropriate. Additionally, with the exception of medical/dental lighting, most medical equipment is not covered by Builder's Risk policies so the BOP should be placed into effect once medical equipment begins to arrive on premise which is usually 60 days or less prior to opening day.
- Classification Specific Underwriting Appetited: Generally speaking, insurers who like to cover vacant buildings, want to charge premium appropriately and not accidentally cover something else like active construction. Most Builders Risk carriers don't want to cover vacant buildings and operating businesses. Carriers that provide Business-Owner Policies typically don't want to cover vacant buildings and construction projects.
- Claim Payment Reductions or Denials: Failure to have the right policy for your timeline could lead to a penalty resulting in a lower settlement or a complete claim denial, depending on the situation and insurance company.
Insurance is routine
If you have read this far you may be thinking insurance is really complex. The truth is that insurance is just routine especially when you have a skilled agent. All of the rules and underwriting appetites mentioned above are pretty easily managed as long as you are very clear with your vision of the project, communicate clearly with your agent, follow up with your contractor for updates and do your part to keep all parties moving together with one goal. Inefficiency may cause problems in any project, but lack of communication will. If you believe your renovation project will start quickly, but later experience delays with permitting or other unforeseen disruptions, just call your agent and have them speak with the insurance company. Free flow communication is a tool of risk management.
© 2026 Vetinsure. All rights reserved.
© Copyright 2026 Vetinsure. All rights reserved.