109 – Ya Gotta Protect Yourself: Tom talks Insurance

Episode 109 Today I’m going to talk about Insurance with all the tips I’ve got for you and I’ve invited two insurance professionals that have provided some really great tips and a couple websites you are going to want to keep track of especially if you have a claim. I’ll introduce you to them a little later.

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Main Event
The exciting topic of business Insurance. Ooh I’m getting goosepimples just thinking about it LOL Well it might not be that exciting to talk about, but if you don’t have it, and even if you do, things can get exciting real fast when someone makes a claim about your business or your business is involved even remotely in doing damage to someone or someone’s property plus something or someone could damage you or your property. You’ll be excited about that too, if someone damages you. Let me tell you about a slang insurance term. “Going bare” is a term in insurance circles which means you have chosen to take the risk and feel like if you do have a claim, it’s cheaper to pay the claim than it is to pay insurance premiums that you may never use. If you feel like that, you are either a giant company who has enormous resources to pay a claim and a giant team of lawyers who are great at knocking down the claim. Or you’re a risk taker that is willing to get wiped out if something goes wrong. Stop and think of which one applies to you. Chances are you don’t have the assets and cash of a giant company or you wouldn’t be listening to this show, so “Going Bare” as a small business is risky business and I’m not talking about the old Tom Cruise movie. Going Bare gives you the unwanted potential to lose everything overnight. I personally don’t want to be in that situation after working so hard for so many years.
Also, the more successful your business is, the more you are a target for lawsuits. Many people feel they can make a claim and you’ll just settle out of court to avoid a long and drawn out legal battle. It doesn’t matter whether the claim is justified or not. If it’s made, you have to deal with it. Having insurance means usually the insurance company has to deal with it and odds are they are much more powerful and able to do it than you are.
Yes, I know they may choose to settle something and pay even if you didn’t do anything wrong and the case was BS, but the outrage you feel over that is not as bad as losing all your assets and possibly being forced into bankruptcy because you refused to pay an insurance premium to protect yourself, your family and your business.
You might say, “Why would I need insurance? I just write books or I just do consulting from my home.” The answer is that all businesses have risk. Somebody could claim your book made their son or daughter commit suicide. Even with all the disclaimers you put in and free speech constitutional rights associated with writing a book, someone could still claim such a thing and no matter how frivolous and outrageous the claim, you still have to defend it and hire a lawyer and spend days in court, etc.
The same with consulting. Someone could claim, your advice ruined their business and they sue you. Even with good consulting agreements that are supposed to protect you….again….if someone claims something…. no matter how crazy,….. you have to defend it. And defending anything costs money and time and emotional turmoil.
Just stop and think of some of the things that could affect a business. Heck, many don’t even involve a malicious or an actually harmed customer. What if you suffered some disaster like a flood, hurricane, wind damage, or lightning damage? It irks me to talk about lightning damage, but I guess I’m taking one for all you screwballs out there and part of the reason I wanted to do an episode about insurance.
My retreat center had a direct hit by lightning. It was so intense it blew right through my surge protectors, blew out my big screen TV, my printers, several computers and several other sensitive electronic devices. About $6000.00 damage in all. I texted Jen my bookkeeper and told her to make an insurance claim. Now, I’m really sick about telling you this next part which was totally my fault. I was too darn busy to read my policy when I signed it and when she filed the claim, we found out I had a $6000.00 deductible OUCH. I had to pay to replace all my stuff. Don’t let that happen to you.
Here’s some other things that could happen that don’t even have anything to do with a customer problem. What if you’re driving to a customer’s home or place of business or you’re simply going to pick up some supplies and you have an accident? And it doesn’t matter whose fault it is. What if someone slammed into you which caused you to run into or even over someone else…even a pedestrian. The damages could exceed your normal auto insurance. I.E you were not at fault at all, but now you’re in the middle of a massive mess.
Let’s take it to a different level. And this could apply whether you have employees or not. Let’s say you have an employee or you accidentally use a copyrighted piece of material and get sued for copyright infringement….hey that’s a federal lawsuit. What if an employee steals something from the business or even your identity?
I knew a business owner once where her receptionist took the business owner’s information and applied for credit cards. She spent a couple thousand dollars before she got caught. Guess what. The police wouldn’t do anything about it unless it was more than I think $3500.00. The receptionist didn’t even get arrested and was free to do it again to her next employer.
What if an employee, contractor or customer gets hurt while on your property or working for you? Yes, there is workman’s comp, but what if any one of them sues for negligence on your part or something like that?
Here’s another issue many partnerships ignore until it’s too late. What happens if one of the partners dies? The company could fold if there’s not enough money to pay someone to do that partner’s duties or to pay off that partner’s heirs which most likely you DO NOT want coming in to try to help you run the business or worse yet, make you miserable because they are both clueless and overbearing. There’s insurance for that.
What if your product hurts someone or at least the person claims it did? Years ago, when I was a freelance charter pilot, I flew a video crew down to Terry Bradshaw’s farm in Louisiana…yes, I’m talking about the former football star for the Pittsburgh Steelers. They were shooting a commercial with Terry for this toy (which was a disaster waiting to happen) It looked like the mortars you see in WW II movies. It had a big spring on a thin rod and a hard-plastic football with a hole in the football from point to point.
A kid was supposed to push the football down the rod to compress the spring and lock the football at the bottom. The kid would push a button and then run out into the yard. After a few seconds delay the football would be shot off the rod into the air where the kid would run out and catch it. The idea was that the kid could practice being a football receiver by himself. OMG, I don’t know all the details, but the toy was immediately taken off the market because when the toy delayed too long the kids would stand over the toy …..kinda like having a misfire with a gun and looking down the barrel to see what’s wrong. The kids would get hit in the eye or head and get hurt badly. You can be darn sure Terry and the toy company had product liability insurance to pay the medical bills and pain and suffering for those kids.
A cute sidebar here is that as the pilot I had nothing to do while the TV crew was filming and I was basically sitting around Terry’s house and his mother happened to be there. I remember that she was the sweetest lady and she was offering me stuff to eat and drink. She had nothing much to do either and she just struck up a conversation with me and what really cracks me up. You know how Superbowl champs and many celebrities are just bigger than life. We’ll Terry Bradshaw’s mom was chit chatting with me and was saying things just like a typical Mom. She actually said to me, “That Terry is so messy. I always have to pick things up off the floor in his room.” Hahahaha I’ll never forget that. I guess they put their pants on ……or leave them on the floor…..hahaha just like us.
Anyway, back to insurance. There are tons of risks a business faces and ignoring them could just be the end of your business AND put your personal assets at risk.
One mistake small homebased business owners make is thinking their homeowner’s insurance would cover their business assets and liabilities. This is absolutely NOT true. You should have a separate commercial policy to cover those things.
It doesn’t hurt to call your homeowner’s insurance agent to discuss your needs and they may have a commercial policy available as an add on or separate policy they can sell you. Keep in mind they probably have loyalty to their brand and they may not have access to, or even interest in pointing you towards a policy that’s actually more suited to your needs.
That’s where the “independent insurance agent” may be of value to you. These people have access to many companies and have the ability to mix and match and create a policy exactly matched to your needs. Don’t get me wrong. I’m not suggesting that the independent insurance agent aren’t just as profit-for-themselves motivated as a major brand agent is. Certainly they want to make money. I’m just suggesting they have more flexibility in finding you something that is more closely matched to your business.
Another big mistake small business owners make is thinking that just because they formed a corporation or LLC, that their personal assets are exempt from lawsuits. Attorneys laugh at this idea. It’s extremely doubtful that small businesses totally toe the line when keeping their business separate from themselves personally. Do they have quarterly meetings with the board of directors and have secretary take minutes and file formal reports? I doubt it. Do they use the same vehicle to take the kids to school as they do to pick up a dog for a dog training business? Probably. It’s very doubtful that virtually any small business owner can keep a sharp attorney from ….and the term is….piercing the corporate veil….which means they go after your personal assets because they claim to the court, you are not “really” a separate entity from your business. ….Chances are they’ll win. So, get some darn insurance.
Get Bopped
A BOP or Business Owner’s Policy can save you some money by bundling different coverages into one policy instead of having multiple policies for each risk, like vehicle, theft, liability, business interruptions, etc. This is a good idea, but still may not be enough depending on your situation.
To get the right coverages without spending a fortune on things you don’t need, you really need to lay out a plan of what you will be doing in the business like where, when and why so your agent can find the right coverage and amounts of coverage without going overboard. You have to balance the right coverage with the premiums. It doesn’t make sense to pay so much in expensive premiums that you can’t make a profit in your business.
You should also revisit your plan periodically to see if you are doing things now that you didn’t anticipate when you first started the business that require additional coverage and maybe you’re not doing things you thought you were going to do, so you can quit paying for that coverage.
Just like I mentioned earlier you really need to pay attention to deductibles. I really messed that up. I could have easily paid the slightly higher premiums for the lower deductible, but since I missed that in the policy, I got hit with $6000.00 all at once. Sure, I could afford it, but what if you couldn’t and the equipment damaged was a critical part of your business?
Want to hear something virtually no one tells you? Your rates could have something to do with your business credit. Many insurers will check that as a risk factor in insuring you. I can only guess people with bad credit are more likely to commit insurance fraud by submitting false claims, or maybe the insurance companies think people that can’t even handle their credit can’t handle their business that well either. I’m sure the insurance companies have tons of data and figures that support poor credit risks are also poor insurance risks. Who knows? They’re certainly not going to tell you their reasoning, but pretty much all of this boils down to the fact, they want the highest premiums with the least risk and you want the best coverage with the lowest premiums. So, keep your credit as good as possible.
I found a great article called 25 mistakes small business owners make and it had tips I hadn’t even thought of that I need to address as my business keeps growing. I’ll have a link to it in the show notes. https://fitsmallbusiness.com/small-business-insurance-mistakes/
Now before I go over some basic terms you should be familiar with, I want you to listen to our first guest insurance professional who will tell you about the risks you encounter every time you get into your vehicle to drive somewhere either for personal reasons or for business.
Joe Kaufmann
Hi it’s Joe Kaufmann over here with Farmers Insurance. I run a full-service agency in St. Peter Missouri. Thank you very much Tom for giving me an opportunity to talk about insurance and educate people which is what we love to do. I want to talk about auto insurance and liability limits. I say nine times out of ten when I’m going over a policy or proposal with someone, I ask them if they know what their liability limits mean in case they were in an at fault accident. They say no. It goes anywhere from your state minimums all the way up to a million dollars’ worth of coverage and what that means specifically is that’s how much your policy is going to pay out if you’re in a bad accident where you’re at fault. Let’s say for example 50,000/100,000 That means your policy will pay up to $50,000.00 per person for medical bills, time off work and things like that that the accident caused and $100,000.00 means that’s what they’ll pay per accident if there is more than one person injured.
We all know with medical bills it can be pretty expensive if you’re in the hospital for any amount of time, you can rack up a pretty heavy bill so if you get in a bad accident and you don’t have the right limits, and you’re just looking for a cheap policy to save money monthly, there’s a good chance that bad accident can cost you thousands upon thousands upon thousands of dollars out of pocket.
For example, you have this 50/100 coverage, you hit somebody, they go in the hospital, they’re in there for three or four days and rack up an $80,000.00 bill and you hope there’s not a surgery involved. That means the policy maxed out at $50,000.00 and there’s $30,000.00 left over they can come after you for. They can sue you and go after any of your assets, they can put a judgement on your house, they can garnish your wages. Also, when it comes to lawyers, they’re going to take those cases for the person you hit all day long and they’ll do it for free because they know there’s a good chance they’re going to win and they get their fee out of what the settlement is.
It’s very important to make sure you do have a good agent to make sure you have the right coverage. Now, if you have debt up to your eyeballs and someone could sue you all day long and they aren’t going to get anything, that’s what the low limits are made for. If you’re a homeowner I do not recommend anything less than 100,000/300,000 and you’ll probably need what they call an umbrella policy which is like lawsuit insurance. You can get it for about $20.00 per month and it covers you up to about a million dollars and helps cover the big stuff.
Feel free to reach out to me with any questions 636-293-9498. I don’t care whether I’m your agent or not, I always like to be a go to source for any insurance questions at all and just want to say thanks again Tom for giving me the opportunity. This is Joe Kaufmann with Kaufmann insurance agency. And I hope all is well. Take care.
Thanks, Joe, for that great explanation on liability limits.
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Terms
Before I introduce our other insurance professional who also has some great tips, I’m going to go over some basic terms you should be familiar with when dealing with small business insurance. This is by no means a comprehensive list. There are hundreds of terms in insurance policies. When you run across them in a policy go look them up and make sure you understand what you are agreeing to.
Professional Liability Insurance: AKA “Errors & Omissions” Insurance This is if you do professional services like consulting, writing, coaching and things like that. You need coverage for negligence or maybe libel or slander, copyright infringement and things that aren’t like building a deck or some type of physical labor.
General Liability Insurance: This is like if a third party gets hurt or injured at your place of business or maybe you are at someone else’s house or place of business and damage a piece of equipment or stain a rug or break a window or stuff like that.
Deductible: This is the amount of the claim you have to pay before the insurance company kicks in. If you had a $6000.00 claim like I had and the deductible was $500.00 I would have only had to pay the first $500.00 of the claim and the insurance company would have paid $5500.00. Because of my dumbness I got diddly squat and had to pay everything.
Rider: AKA “Endorsement” This is a clause added to an insurance policy to modify it in some way. If you have some specific thing about your business that is unique that you want included in the policy it would require a rider to address it so there is no question about it being covered or not.
Exclusion: This is a statement in a policy that specifically identifies a risk that’s NOT covered by the policy. You might see this in a homeowner’s policy that doesn’t cover floods, or aggressive breeds of dogs. In my area we have to buy separate flood insurance and my homeowner’s policy specifically prohibits bite trained dogs so I had to get another policy for my protection dogs. BTW if you’d like to have a family or business protection dog visit https://www.ProtectionDogsElite.com Anyway, make sure you understand what your policy does cover and what it does NOT cover.
Unemployment Insurance: This is a program run by both State and Federal governments to give temporary assistance to people out of work. This is taken care of as part of your payroll taxes when you have employees.
Umbrella Policy: This is a policy that is overtop (like an umbrella) of your other insurance policies and kicks in usually in catastrophic events that exceed the limits of your regular policy and can have different riders and exclusions.
Now I want to bring on an insurance professional who looks at things a little differently than an insurance agent who sells you insurance. She’s in charge of an organization of professionals whose job it is to maximize your claims so you get paid more from your insurance company. Public insurance adjusters are advocates for you the policy holder. Before you decide to engage a public insurance adjuster, make sure they are a member of an organization like hers to ensure they are ethical and capable of working on your behalf.
Nancy Dominguez
Hi. It’s Nancy Dominguez from the Florida Association of Public Insurance Adjusters. Tom asked me to give you some tips on financial recovery for small businesses after an insured loss like a hurricane, tornado, fire, or flood. I’ve been the managing director of https://www.Fapia.net for about 8 years and I’ve been helping policy holders with their claims for almost 30 years.
Here are some valuable small business insurance tips: Nobody ever wants to have to file an insurance claim. They can be complicated, time-consuming and take your focus away from your business. You want to make sure you purchase the right kind of insurance coverage for your small business. Take a look at your insurance policy. Do you know and understand what your limits of insurance coverage are? You don’t want to find out after the hurricane, fire or flood that you didn’t have enough insurance coverage to put your property and inventory back in the place it was before the loss. By then it will be too late. Take a look at your deductible. Many times, small businesses will try to save money by taking policies with high deductibles. This might save you money in the short term, but if you actually experience a loss, do you want to come out of pocket tens of thousands of dollars. In some cases, policies for larger properties are one million dollars or more. Do you know what your out of pocket expense will be? Check your policy and learn what your deductible is. While you’re doing that, go ahead and take a look for any riders or exclusions that have been added to your policy. These will either add or remove coverage. Sometimes it can come as a surprise to a small business owner after they’ve had a loss that an exclusion of coverage was added to their policy. This will result in unexpected out of pocket expenses that can put you out of business. Business interruption insurance is one of the most essential coverages and most overlooked coverages that any small business owner can purchase. It’s the insurance that will protect you in case your business has to close for any extended amount of time after a loss. It’s very important that you take a look at that. Look at your policy now. Are you covered? FEMA reports that over 40 percent of small business owners never reopen their doors following a disaster.
Do you have flood insurance? Floods aren’t covered on your business insurance policy and even if you don’t live in flood zone, this is essential insurance coverage to protect your small business. Most of the people who were affected by the floods following hurricane Harvey did NOT live in a flood zone. You just never know when it’s going to happen to you. Protect your business by purchasing flood insurance. Remember, floods are NOT covered on your standard business policy.
Have a disaster recovery plan in place. Most small business owners have not taken the time to prepare a plan to relocate operations after a catastrophic loss. Every business owner should take a moment and research the steps they should take after a loss. Visit https://www.Ready.gov for more information and important tips for preparing your emergency business recovery plan.
And finally, you should know that there are experts available ….insurance professionals that help small business owners successfully navigate the complicated insurance claim process. It’s common knowledge that you’re not going to get everything that you want from your insurance company unless you fight. You should know who your local trusted public insurance adjuster is. The Florida Association of Public Insurance Adjusters has a geocoded map of our nearly 600 members across Florida and the Nation. We recommend you always choose a member of the Florida Association of Public Insurance Adjusters to assist you with your claim. You can find FAPIA members at https://www.YourOwnAdjuster.com
I want to thank Nancy for those great tips to things we need to pay attention to and where to find help if we are filing a claim.
People Doing Work for You
Before we hang it up on this episode there’s one other topic I want to cover. You need to pay attention to the people and companies that do work and provide services for you. For instance, what if someone stops at your door and offers to clean debris and branches off your roof after a big storm? What if they fall off the roof and get hurt? Guess what. You are pretty much guaranteed to get sued and lose. I don’t let anyone work on my property unless they are an employee covered by my workman’s compensation policy, or if they are a contractor that proves they have the proper insurance in place for the type of work they are doing.
Some services are much more dangerous and carry potentially large amounts of risk than others. Working on a roof or painting above ground level is way more risky than measuring my floors for new carpet. Running lawnmowers, weed eaters and hedge trimmers is way more risky than feeding your cats while you’re on vacation. Etc. Just make sure these people and companies have the proper insurance. I make them give me a copy of their policy and I call the insurance company to make sure the insurance is actually in effect. Sure, they could make me a copy of their policy that they never paid the premiums and the insurance is not good. I doubt they would show me a copy of their cancellation letter.
One last story I want to leave you with. When you are successful some of the bad elements of the world may seek you out to set you up for false claims. When I had my nightclub, a lady ordered hot coffee and had her husband purposely bump into the waitress so the coffee spilled on her. Hardly any coffee got on the lady and it wasn’t scalding hot anyway. She sued me for $5000.00 and this was in the early 80’s. It was just sheer luck that I was telling this to my buddy who owned the bowling alley in town. He said the same thing happened to him a couple months earlier and his insurance company paid the claim. He described the exact incident that happened at my night club. And he exactly described the couple that did it. When I informed her attorney I knew this, the attorney and the couple disappeared and I never saw or heard from them again. I got lucky. But you can’t run a successful business on luck. Pay attention to your insurance concerns. Okie Doke. That’s it for this episode I want to thanks Joe Kaufmann from Kaufmann Insurance and Nancy Dominguez from FAPIA for their great tips.
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