E43: The Five Insurance Policies Every Business Owner Needs

EPISODE 43

[INTRODUCTION]

[00:00:04] AW: You’re listening to the Transcend Podcast. I’m your host, Asha Wilkerson, an attorney by training and an educator at heart. This podcast is all about empowering you to build a business and leave a legacy. Here’s the thing, the wealth gap in America is consistently increasing and while full-time entrepreneurship is not for everyone, even a side hustle could change your financial landscape if you’re intentional about using your business to build wealth. I’ve run my own law firm for over 10 years, and in that time, I’ve helped countless California businesses go from idea to six figures. On this podcast, we talk about what it truly takes to build a sustainable business and find financial freedom. Let’s dive in.

[EPISODE]

[00:00:49] AW: Hi, there. Welcome back to another episode of Transcend the Podcast. Today, I’m really excited to talk to you about insurance. I believe that as a business coach and an attorney that you really need to have these three essential types of insurance for your business, and then I’m going to throw in a bonus. So stay tuned.

Alright, so the three types of insurance. The first type of insurance that you need, really, is liability insurance. Now, we should probably all be familiar with liability insurance, because if you drive a car in the United States, you’re required to have insurance and the liability is what happens if your items get stolen from your car. What happens if you run into another car? It protects you. Liability insurance can cover your car, it can cover your property. So as a business owner, you really want to think about having liability in case something breaks on the premises, in case someone breaks in and takes something, and probably most importantly, in case someone walks into your business or eats your food and has an adverse reaction, or they slip and fall. It is really important to have that liability insurance.

Now, let me tell you why it’s also important to make sure that you talk to your insurance agent and understand really what’s covered. Because summer 2020, I had a business owner call me, he was up in Sacramento. And he said, “Hey, I got something going on. During these protests in the streets, people broke into my store. I have a tennis shoe shop and it’s customized tennis shoes. There are no two pairs that are the same or they’re exclusive to try and get and people walked in and they walked out with my shoes.” So I called the insurance company because I have insurance, and they told me that I only had coverage for the windows, basically for the windows, for the structures to the building and not for the items that were taken.

He was totally upset. He’s like, “This is wrong. This is highway robbery. It’s not right.” So you have to go back and look at the policy that you actually paid for and see what it covered. Of course, understandably so, he thought that he was covering his entire business, and so he was really, really upset with the insurance company. But he hadn’t actually paid for the coverage to cover the items.

So what he needed was to make sure that he had structural damage, if there was any damage to the property it would cover, and also the personal property damage or the business property coverage so that when issues were taken, he could be reimbursed for that. According to what he thought, he said he lost about a million dollars in revenue. And at first he wasn’t worried about because he thought he had insurance. And then he was worried because he had insurance, but it wasn’t the right insurance.

Liability insurance is extremely important for you. Think about all the ways that you are exposing yourself to the public, and then ask your insurance agent to tell you what you need and what it covers, and be upfront. Insurance isn’t actually as expensive as we might think that it is. So be upfront with your agent, ask all the questions that you think are silly, and make them explain it to you until you are comfortable and know exactly what you’re paying for.

Okay, number two, workers’ insurance. Now, this covers a few different types of insurance, but the category is workers’ insurance. So workers’ insurance, the first thing you’re probably thinking of is workers’ compensation. If you have employees, you are required by law to have workers’ compensation. If you’re not sure if you have employees, then definitely check out my website and take my class called Before You Hire, so you understand the difference between employees and contractors. Contractors carry their own insurance. Employees, they are covered by your business insurance.

The other thing that you might want to consider if you have employees is employee disability insurance, and you might want to consider this just for you. Even if you don’t think that you can cover it for your workers yet, but especially for you, especially if you are the sole worker in your business, and something happens. Let’s say maybe you’re thinking about having children, maybe you get into a car accident, maybe a health issue, a health issue comes up and you need to take some time off. What’s going to cover that for you if you’re no longer able to actually work in the business and produce income is disability insurance. So take a look at those questions. Figure out how to get started and run the numbers to see how much it’s actually going to cost you per month to set that up for yourself. Don’t just count it out now because you think, “Oh, my gosh, it’s another bill and I’m not going to get sick.” You never know right? COVID hit, we never know. So think about that.

Another thing in terms of workers’ insurance, another subcategory under that is this key person insurance. If you’re in business with somebody else, or you have somebody who is a big money maker in your business, they’re like a vice president, a CEO, or an owner, you can take out what’s called key person insurance. That’s almost like a business life insurance policy, in a sense. It covers the income that that person was making, if they’re no longer able to make it. Usually, that’s because they’ve died or become incapacitated. So what that does is it allows the business to stay afloat. It may also allow the remaining business owner or owners to buy the deceased partners interest in the company. It just gives you some money to be able to continue to run the business and figure out what to do with the business without panicking because now this person who no longer there is no longer able to produce income.

So under workers’ insurance, you have workers’ compensation, you have disability to think about, and then you have key person insurance to think about. 

And the last category of insurance: property insurance. Let me talk to you about property insurance. Commercial property insurance is generally required if you are renting a commercial lease. So this is kind of like your homeowners’ insurance or your renters’ insurance, it will cover the physical assets. That’s what the – it wasn’t a client. That’s what the consultation, the man who called for the consultation should have had was commercial insurance. It covered the building assets and equipment, inventory, tools, furniture, things like that.

If you are running your business out of your home, then you want to make sure that you have homeowners’ or renters’ insurance and tell your homeowners’ or renters’ agent that you are running your business out of your home, so that you can have your business assets covered. For example, I have a home office, I have a physical address, and I have a home office, under my renters’ insurance, I say I’ve got my computers, I’m looking at my printer, I’ve got two printers, I got office supplies, I got some chairs, things like that, that if there was a fire or if there was damage to my house, or if I was robbed, then my homeowners’ or renters’ insurance would cover the business items that are in my house. Now, if I had an office space outside, then I would have that commercial insurance. But you want to make sure again, you have liability, like I talked about first, and then the property damage insurance as well.

And then auto insurance. It talks about that just briefly, but you want to make sure that if anybody in your business is driving around for you, you need to call your insurance carrier and ask whether or not your business needs to have an insurance policy to cover your employees that are driving around, or if you need to require them to show proof of insurance for you. So if you have people going to multiple sites, if you have people making deliveries, even if they’re using their own vehicles, and they get into an accident. If they’re working for you while they’re doing it, then there’s a possibility that you could be responsible for any accident or harm that occurs when they’re on the clock for you.

Again, make sure that you have auto insurance, and also, if I remember correctly from this lesson, I should have learned, for auto insurance, it covers the damage to the car and collision. But I do not think it covers the property items in the car. If I remember correctly, that’s your homeowners’ or renters’ insurance that will cover the items inside the car, maybe your business insurance if you have deliverables inside the car. So take a look at that.

Now your bonus type of insurance. I said I was going to tell you three and it was liability, workers’ insurance and property insurance. The bonus one is thinking about disaster insurance. So that could cover, it could be business interruption insurance. That’s a type of insurance. It could cover flood, theft, building collapse, or city authority incident, meaning if the city says that this building has to shut down or whatever. When businesses were shut down for COVID, that’s something that will probably only be used every so often. But if you’re in a fire zone, then maybe you have to evacuate your business every year and so you have disaster insurance that will cover you for that.

And then the other type of disaster insurance that you could consider is comprehensive crime insurance. If you are in an area where there’s high crime or if you are in an area in a business that is dealing with money, you might want to think about having high crime or comprehensive crime insurance to protect your business from financial loss due to criminal activity.

“Okay, so great, Asha. You told us four types of insurance, liability, workers’, property and disaster. How do I go find this stuff? Who do I talk to?” My recommendation is always to start with your current insurance agent, even if it’s just an auto insurance policy, right? I did that for my business and said, “Hey, do you have business insurance because I’m starting a business?” If GEICO couldn’t do it directly, then they have partners that they work with. And the cool thing about using an agent that you already have, or a plan, branching off from a plan that you already have is that you will probably save money for having multiple policies under the same company.

But if you don’t know where to go, just send me a message. You can DM me on Instagram, Asha Wilkerson, Esq. and I will send you my referral list. I have insurance agents and financial folks that you can reach out and talk to, to get your needs met.

Alright, hope that was useful.

[OUTRO]

[00:10:08] AW: Hey, like and share this podcast. Please let people know that it’s a place where they can come and get information for the business and I will be forever grateful. Ciao.

[END]