I’m currently having one of the best days in recent memory as I write this post. Over the past 24 hours our family has:
- Announced a big transition for our family happening in Autumn 2017
- Welcomed our very first niece into our family (congrats Chelsea and Jacob!)
- Appeared on the Twin Cities Collective podcast (find that episode here).
- And had a St Anthony West Smoothie with Soy Protein from Eastside Foods Co-op which is always a win
And so, I’m writing this today with incredible enthusiasm and am so hopeful that this will be a help to you out there who might be exploring insurance for your small business and are simply just buried by information and nervousness about the whole idea of insurance.
So, this is what I want to talk with you about today. I’m putting myself in your shoes and saying, “If I’m a creative or small business owner of any kind, where should I start when it comes to insurance?” Let me cut through the fluff and the advertising and just give you some basics that you can use as you explore the best options for you and your business.
What is Insurance?
That seems like a pretty basic question, right? It is, but it’s an important one because a lot of people define insurance like this: Insurance is something I’m required to have in some cases or should have in other cases that protects my stuff. And while that’s certainly a true statement it doesn’t really get at the essence of what insurance is. And if you and I are to have proper expectations of what our insurance is and why we have it we must come at it with an understanding of what it’s really there for. So, I define insurance like this:
Insurance is a product that one carries so that in the event of a loss they may be put back on equal footing.
Let me unpack that by saying Insurance isn’t something you carry to make money. It’s not there so that if something bad happens you can get “way more money than what that was worth” as I’ve heard some people say. While that sometimes happens it’s not a good way to look at insurance because having an expectation like that will most likely lead to a poor experience when those expectations go unfulfilled. Instead, insurance is there to put you immediately back on equal footing. In exchange for your payment (called a premium) you are getting the peace of mind that you will be put back on equal footing (indemnified) as quickly as possible.
The reason why that should be appreciated is because in most cases should the worst types of negative things (claims) happen for you or your business, most people don’t have thousands of dollars instantly at their disposal. And so, insurance is really about two things in my opinion which help you win as a business owner:
Insurance Helps You Win As a Business Owner
Speed and continuity and winning. Three things that most small business owners love. Three things that help you win. And insurance helps you do it. How so?
Well, insurance keeps you in the game. As I mentioned, since most people don’t have the liquid capital to just plunk down several thousand dollars in the case of a fire or major theft or vandalism or flood, business insurance allows the business to obtain a payout to replace the said damages and get back to work.
As an entrepreneur you recognize that time is one of your most valuable assets and what I love about insurance is it prepares you to save time should the worst ever happen to you and your business. This speeds your game up and allows you to continue win in your market. The same goes for continuity. Small businesses know that when their organization has continuity between the management and employees, between products and consumer, etc that the business at higher percentages. Insurance allows continuity because again it gets you back in the game faster with minimal downtime or interruptions.
So, I want you to think about small business insurance like this: Insurance is a product that a business carries so that in the event of a loss you can get back in the game on equal footing and keep winning.
And because I’m passionate about helping people and also fiercely competitive, that is why I love helping small business owners with their insurance. I get to help you stay protected and win your game.
What Kind of Insurance Do I Need?
The question then becomes, “Okay, what kind of insurance do I need?”
And right off the get go I want to acknowledge something. Traditionally insurance has been seen by our generation as a slimy profession. And I get it. Often I think people have been pitched an insurance package that really doesn’t fit the needs of the consumer/business and so what follows is either huge payments from a bloated policy or when something goes wrong it doesn’t actually include what they need. My desire has always been to change that stigma. I think for creative business owners that I’ve worked with that stigma hangs in the air even thicker. For whatever reason photographers, videographers, wedding planners, artists, bloggers, and others just don’t like dealing with this sector. I get it. And so, my desire as someone whose wife is a wedding photographer is to actually help people in her sphere feel good about their insurance. And so I’ve always taken the approach of educating my clients so they can make the best decision for themselves. So, here are some tips to consider when looking for your small business insurance.
Consider What You Want Covered
Before you ever sit down for a consultation think through your business from all angles (as the owner, as an employee, as a consumer) and ask yourself what you actually want covered. Do you want to make sure your equipment is covered? How about injuries to your employees? How about data breaches or lost computer files? Protection for yourself for bad counsel? Building coverage for that space you lease?
These are all questions that any insurance professional worth their salt will take time to review with you, but I’ve found that it’s best to come prepared having thought through these questions.
Know the Basics of the Kinds of Insurance
I believe most creative business owners are looking at primarily three types of insurance for their businesses (but I’m going to mention four that I think you should consider).
General Liability is the most common type of small business insurance and you could think of this insurance as your “slip and fall” insurance. This is the type of coverage that would help you if you were to damage something or someone by some act of negligence (carelessness basically).
For example, you’re a photographer shooting a wedding downtown and you knock over the candle sitting on fabric that runs up the sides of the aisle and it starts a fire in the building. This is the coverage you would need to help cover that claim.
In my opinion from day one you should be looking at $1,000,000 in coverage under your general liability. The reason is two fold. First, we all know that lawsuits happen more and more frequently and that the cost of said lawsuits are going up and up and up. Recently I read that even baseless claims cost somewhere around $45,000 to settle. Second, many companies you work with as a subcontractor are going to require this anyways. I mention the case of the photographer, but maybe you’re a web designer or a calligrapher or an artist that gets a call from a bigger company to do a contract job with them. In almost all cases those businesses will require your business to show proof of insurance coverage. Since I’ve already stated that business insurance is about winning by providing speed and continuity, being a small business owner that already has this set up helps you win more of these contracts. Rather than waiting for an insurance policy to be issued, having this set up puts you in prime position to take advantage of these opportunities when they arise.
In many cases, especially for businesses that deal with words (giving counsel, publishing content, creating brands, etc) general liability will not be enough. This is where professional liability comes in. Sometimes called Errors & Omissions, professional liability insurance helps to protect you from lawsuits and claims that arise out of things like copyright infringement, bad advice, and more.
For example, let’s say you’re an event planner who recommends certain products or venues or advice to your clients. Well, one day that advice turns out to be negative and the client is very unhappy. If they were to bring a lawsuit against you because they deemed the advice hurtful to them as an individual you would most likely need this type of coverage. I know it sounds rare and somewhat crazy, but unfortunately it’s not as rare and crazy as you think.
Next, your business probably wants to look at inland marine coverage. I know it sounds like stuff you’d need only if you were a boat admiral, but this is actually coverage for your equipment.
For example, if you’re a DJ and one of your turntables gets stolen, you would find coverage not under General Liability or Professional Liability, but instead under this type of coverage.
Almost every business is going to need at least some inland marine coverage and so I encourage you to definitely bring this up when you consult an insurance professional.
Finally, a quick note on an oftentimes overlooked small business insurance need: Life Insurance. You might be thinking why in the world would I need life insurance?
Well, I’m going to just touch on the need for life insurance for business under one circumstance: Partnerships.
This is a post in and of itself, so all I’ll say here is that if you are in a partnership agreement you need to talk both with your lawyer and with your insurance professional about life insurance in case one of the partners were to pass away. This will keep your business in the safest long-term position possible and ensure the speed and continuity needed to keep your business afloat even if tragedy were to ever hit.
How Much Should My Insurance Cost?
I want to talk to you about how much your creative small business insurance should cost, because I know that as a business owner you constantly need to be thinking about your bottom line. So let’s cut to the chase.
Small business insurance, just like personal insurance, can vary due to a number of factors. In fact, in recent years the insurance industry as whole has made the pricing models that they use even more complex to the tune of thousands of variables.
To be perfectly honest, a lot of times, your insurance agent doesn’t even fully know why your insurance costs what it does. And, total transparency here which might get me some flak from insurance professionals– I hate it. I love the theory of complex pricing that helps people get priced as people and not as groups of people (like why should you pay out the nose just because all other 20 year old men are terribly irresponsible), but I hate that when it comes to increases and such we don’t always have the knowledge to help our clients figure out why because the equation looks like something out of Einstein’s classroom.
But with all that said, generally speaking if you are a solo-preneur running a business with under $1,000,000 annual revenues I would say you shouldn’t be paying more than $1,500/year for your insurance. Now, one caveat… the biggest variable here will be how much equipment you need to insure under your inland marine. If you have $30-75k in equipment (think videographers) then you certainly could exceed this total, but for web designers with a couple computers, or photographers with $10-20k in equipment I would say you should budget between $500-1500/year for insurance.
Where Should I Look For Insurance?
I’m still a believer that the most value can be delivered to your business through an individual insurance professional. I know, I know, I have a skewed perspective, but I try to balance that out by personal experience.
My wife owns businesses and we’ve done the online thing. It’s great, it really is, if you know what you’re looking for and how to read long boring documents that have legal jargon.
But, if you really want to know what you’re getting, I would recommend finding a professional that you trust; someone who values you more than as just a [small] business with a premium number attached to your forehead; someone who will actually take the time to listen to you.
Maybe your family already knows the insurance agent who services your auto and home and life insurance? Check with them. Lots of agents can do business insurance too.
Or, if you don’t have a solid personal relationship with your current agent, I’d love to talk with you. Use the contact form here to reach out.
*Disclaimer: The following material is meant to be educational/informational only and is broadly speaking some of the things that you should consider when thinking about insurance for your small business. It is in no way intended to replace the information that a personal insurance professional can review with you for your specific situation. Again, if you don’t have an insurance professional that you love working with I would truly count it a privilege to earn that respect. Contact me here.