Cost of liability insurance

[Divin'Papaw]

I'm currently doing DM for the knowledge development and mentoring with a group of outstanding instructors. Now that I'm getting close to finishing up, I'm having a really hard time finding justification to pay the bucks to be active when I wouldn't even be able to break even. Let's see ... purchase insurance ... pay PADI ... pay your own travel expenses to/from the dive sites ... don't get paid except for maybe an occasional discover scuba, scuba review or tip ... purchase your own gear, and it has to be shop brand ....... where can I sign-up? Are you nuts?!

 

[Dive-aholic]

If you have future plans to go active, then okay. But there may be a time limit on how long you can be inactive before PADI requires retraining. I don't know what that is, though. You'd have to call PADI and speak with someone in the pro certs dept.

Don't forget that once you're a DM the gear you buy (as long as it's used while DMing) is a tax write off. I don't get a whole lot of money as an independent instructor, but the tax benefits the first few years made it worth it.

 

[fisherdvm]

Don't forget that once you're a DM the gear you buy (as long as it's used while DMing) is a tax write off.

It is not a tax write off unless what income you made off scubadiving exceed your expenses in 3 or more of the last 5 years.

 

[ClayJar]

It is not a tax write off unless what income you made off scubadiving exceed your expenses in 3 or more of the last 5 years.

Actually, the 3-of-5 rule is an affirmative argument, not a definition. If you make a profit in three of the previous five years, you don't have to bother convincing the IRS that you're doing it with the intent to turn a profit. They simply accept that to be true.

If you *don't* turn a profit in at least three of the previous five years, that does *not* mean that you cannot claim the expenses. It merely means that you'll have to actually show the IRS that you were indeed acting *with the intent* to turn a profit. If the IRS determines that they believe you were treating diving as a hobby (even one that occasionally makes money), you will be denied the ability to claim the expenses, and if that increases your tax liability, you may owe taxes and penalties.

 

[Jim Lapenta]

Exactly. Last year my DM income doubled over the year before. Now you need to consider the sources of the income as well. Income is not only cash. Professional discounts, free air in exchange for assisting, trip discounts for helping out, all can be considered income if you document the source. The point is to show that you are trying to make a profit. In other words if you show 500 this year,and show 1000 the next, and say 1500-2000 after that you are showing that you are trying.

 

[Dive-aholic]

Actually, the 3-of-5 rule is an affirmative argument, not a definition. If you make a profit in three of the previous five years, you don't have to bother convincing the IRS that you're doing it with the intent to turn a profit. They simply accept that to be true.

If you *don't* turn a profit in at least three of the previous five years, that does *not* mean that you cannot claim the expenses. It merely means that you'll have to actually show the IRS that you were indeed acting *with the intent* to turn a profit. If the IRS determines that they believe you were treating diving as a hobby (even one that occasionally makes money), you will be denied the ability to claim the expenses, and if that increases your tax liability, you may owe taxes and penalties.

ACtually, it's not even a rul or affirmative argument. It's a guideline that a lot of CPAs will use, but there is no tax code that states you must make a profit 3 out of 5 years. There isn't even any code that states you have to show intent to turn a profit in 3 out of 5 years. The IRS may or may not ask for proof if this doesn't happen. It's not a given that they will.

 

[jcscuba]

The concept of tail end insurance is really a rip off. Is a doctor required to carry malpractice insurance seven years after he retires? No. Another thing to consider is your age and assets.
If you are young and don't have much, the likelihood of losing a law suit is negligible. The agency for whom you once taught is going to want a very helpful witness, it will be their lawyers fighting the case. The case sited in the thread of a diver two years later developing asthma, while a possibility, is certainly not in the realm of an instructor's responsibility. If he noticed shortness of breath during the swim test, he should have required a physical from a physician. Now the important question is who offers the same coverage as VB but at significantly lower prices. I'm going to need to renew in June. P.S. the above is just my opinion, the reality is in the society in which we live one can be sued for anything. They don't win the suit they pay your costs.

 

[fisherdvm]

The concept of tail end insurance is really a rip off. Is a doctor required to carry malpractice insurance seven years after he retires? No. Another thing to consider is your age and assets.

You are not required to carry a tail insurance as a physician. But most do. Well documented cases of lawsuits being brought up years after an incident. Example is when a surgical sponge was left in a child's abdomen after an appendicitis. It wasn't discovered until the boy became a man with chronic "stomach" pain. The lawsuit was brought against the estate of the then deceased surgeon. I don't have a choice with my profession, as if I miss a skin cancer that does not get diagnosed till years later - I can still be held liable.

My guess is that tail insurance is likely unnecessary for dive instructors unless you were frankly negligent in reviewing the medical questionairre, ignoring a student's complaint of shortness of breath, chest pain, or other clear warning signs of medical issues ... As I imagine most diving incidences are acute, and does not occur years after the certification.

 

[8thElementDiver]

So, who besides VB offers good liability insurance for dive instructors?

 

[Jim Lapenta]

Witherspoon.