Exploring the Most Important Insurance for Entrepreneurs

Business brain episode 439 for Wednesday, April 12, 2023. Greetings, folks, and welcome to Business Brain, the entrepreneurs podcast, the show where we take all kinds of things and can give them a look with our business brains to see if there's something we're missing, a new way of looking at it. Sponsors for this episode include Headspace, where you can get 30 days free by going to headspace.com brain30. Talk about a new way to use your business brain. Give it a rest. See what happens. Can be good for you. We'll talk more in depth about that in a little bit. For now, here in Durham, New Hampshire, I'm Dave Hamilton.

And out here in sunny California, finally, I'm Shannon Jean.

Yeah, thanks, man. I'm good. Things are warming up here too. Like, it was cold this weekend in like the 30s, and by Friday of this week, it's supposed to be 80. So I, I think we just skip spring this year. It's just gonna be one of those years.

I'm thrilled to see it. We're going to talk about on our, our casual Friday show coming up in a couple days. We're going to talk about the, the spring and outdoor and how it impacts your thought process, which I'm looking forward to that.

Absolutely. Absolutely. Yeah. Yeah. We got an email from Jeff who now will be entered into our contest because he emailed feedbackusbrain show and we're including his email in the show. He asked, I was listening to your how to monetize your business brain show. Basically giving people advice. I work in technology and I'm commonly asked questions, asked questions on the side. Usually stuff like opinions on enterprise systems, what kind of CRM to use, that kind of thing. Usually these questions are because I'm a professional, but not necessarily in a professional capacity. Like, they're not calling me at my business asking for my opinion per se. It's more like I'm standing in the line at the grocery store and somebody asked me my opinion. Yep, I think we all kind of run into that. He says, do you or should one carry some kind of liability insurance for these situations? So if you're chatting and off the cuff, make some recommendation that turns out to be a disaster, Is that something I should worry about up till now? Jeff says I have not, but maybe I'm taking a risk by doing that. So. All right, let's give.

Good question.

Yeah, let's, let's give our gut reactions, but there are some things that, that we can do in our business capacity that would, in fact Cover these sorts of things and maybe they are a good idea. But in general, I think you, you, you nailed it. Shannon, what was, what was it you said while I was asking, while I was reading his email?

Yeah, it's just, you know, it's a good question. I don't know that you're going to be able to cover yourself based on just casual conversations. I mean, if that, you know, you can get professional liability insurance, but that kind of protects you in your professional aspects.

Right?

It's not a paid customer you're talking about. It doesn't sound like it to me.

Right, right, right. Yeah. Without them being a paid customer, I don't think they have any grounds to win a lawsuit. I was going to say, I don't think they have any grounds to. You like both.

Yes.

Well, but anybody can sue anybody.

I guess so.

Yeah, yeah, yeah, yeah. So.

So I have been, I have lots of thoughts on insurance, most of it bad. But you, I, I do think you, you obviously need a bunch of it as you grow your company. I happen to think the most important insurance you can have is insurance that protects your employees and also protects you as it relates to your employees, your business, your personal, all that kind of stuff. And. But I have been sued by a client and love to go into that a little bit more deeper.

Oh, hey, that means I get to tell you about our sponsor, Headspace. Listen, the last few years have taught us how important mental health is to our overall state of well being and to our ability to, to use our business brains objectively here. We're always trying to really look at things and obviously get at the core of them. That's what we do here on business brain and we can't do that if we're distracted by other things. And this is one of the reasons I really love meditation. And Headspace makes it so easy. Through their guided meditations, their mindfulness practices, their breathing and calming exercises, and so much more, their tools can really help reduce anxiety, boost my mood. The wide range of teachers with diverse backgrounds and areas of expertise ensure there's a teacher and content to help you, whether you're a first timer or have been practicing for years. I love some of their quick ones that I can do in like three to five minutes if I just need a little break to clear my head. Breathe. You're going to love it. Headspace has helped me and more than 100 million people worldwide. And they can help you. You too. Listen up. You do not want to miss this. We've arranged something special for a limited time. All of you can try Headspace free for 30 days by going to headspace.com brain30 that's B R A I N 30. You won't find this offer anywhere else. You got to use our link h e A-S-P-A c e.com brain30 to unlock all of Headspace free for 30 days. This is not something they normally do. Headspace.com brain30 and our thanks to Headspace for sponsoring this episode. So I agree with you, Shannon, that most insurance can be a waste of time. Yeah, but. But I think the first thing I would make sure you do, if you're in a situation like Jeff's. And I'll describe what I mean by that. If you're in a situation where you feel like you have something to lose. Because if, you know, like, when I was starting my businesses, I didn't have a house, I didn't have kids, probably didn't even own a car, you know, like, I mean, you're judgment proof. I was judgment proof because there was nothing to get from me, you know, blood from stones. But, you know, as we, as we grow as people and as our businesses grow, obviously we start having things to lose. And when you're in that position, it makes a whole lot of sense to set up an llc, a limited liability company or corporation. And the reason I love LLCs is because of exactly that. They limit your liability. So long as you are not negligent about things and you're not, you know, intentionally misleading people. If you are, well, then, then you're going to be on the hook. Yeah, but otherwise, it's just your business that's on the hook. And this is why one of my favorite examples of how businesses creatively use multiple LLC is touring concerts. Right. You know, somebody's going to go on the road for, you know, 30 dates this summer, let's say, right? They will set up an LLC in each city, oftentimes one for each date. Even if they have multiple dates in the city, they've got a separate LLC per event. And that means that if someone sues them for any reason at that event, the most that they have to risk again without negligence or fraud factoring into the judgment. But the most that they have to, to lose, or the most that they have at risk for that is the gross receipts from that night's concert.

It's brilliant.

And so, yeah, it protects you from the tour. And setting up LLC is inexpensive in the grand scheme of things. So for our businesses, chances are you probably only need one of them but, uh, but it, it's a smart thing to do. It's fairly simple. Especially nowadays, you can. You do it all online. You really. I've done it without even going through like a service. I've done it directly with states online. Sometimes it. Service can make it a little simpler. But, but we do it.

We do the same thing with real estate. So we own rental properties and each property is a separate llc. And to your example, like your example earlier, your. The liability would be limited to typically to what assets that LLC owned, which would be that particular structure.

Right.

And any insurance that you may have now, you know, so, so my take on insurance is that you, just like you said, Dave, the more you build wealth and assets, the more insurance you need to protect yourself, especially if you have employees out there. And what I said earlier is I think the two most important things are insurance to protect your employees and to protect your business against your employees. And that may sound, you know, like a dichotomy there. But, but hear me out. If your employees are doing things that may put them in the way of getting, you know, hurt or in some kind of situations, you need to have insurance that protects them because people make mistakes.

Sure.

And, you know, may not be intentional, of course, but things happen. And, and whatever you're doing as you grow, especially if you have people working for you out in the field, even if you consider them consultants, the legal system may not. And you need to have a good insurance person on your board of advisors. And that can just be, you know, a casual relationship with someone that understands business insurance that can answer these questions. You know, like Dave and I always say when we talk like accounting, we say, hey, we're not accountants. Go talk to your accountant to get the final word on these things. You need somebody that can do that for insurance for you as well. The second part of that is as you hire more people over the years, there is no doubt you're going to run into situations where an employee disagrees. I'm going to say this nicely, disagrees with perhaps the way they were, something was handled, maybe they were let go, discharged. And so you want a good insurance company in your. On your side of the team to help protect you against that. And it may not be that it's going to cost you a bunch of money to settle some kind of lawsuit, but even just to fight the lawsuit, your insurance company is going to indemnify you and provide legal counsel. And they may provide it, or they may pay and you go get an outside counsel and have an attorney because the numbers really add up quickly and you need that coverage.

Yeah, yeah, it's. Yes. I've also found it depending on the type of work you are doing, your clients may require you to hold insurance that indemnifies them against your mistakes while you're on site or on their behalf. I know I've seen it in my consulting business. If I'm doing work for a, you know, large corporation or something, they almost certainly want some version of that. And I've seen it in my music career where certain venues want the same kind of thing and they, they want you to carry an insurance policy for the night. It's way easier usually to get a policy that covers you for a year at every venue you're doing, as opposed to trying to get one for each night. You'll probably pay two nights worth of it for an entire year. And then, you know, you're ahead of the game and life's way simpler. But yeah, yeah.

And the thing I would, you know, to back to Jeff's question. I don't think you need, you know, insurance. I'm not even sure you could get insurance for casual things like that.

Sure.

But perhaps you should always start that conversation with, oh, hey, I'm not giving you professional advice, but just from a personal standpoint. I like this server. I use this. I'm. That kind of thing.

Yeah.

Could be just the way you phrase it. Oh, I'm familiar with this CRM and I hear from my customers that they really like it. That kind of thing versus giving solid advice. Like, I think you should use this. I think you should do that. The one thing to remember too is timelines are very stretched out and I'll. You know, the only time we've been sued by a client happened years later after we provided the service and their company went under, declared bankruptcy. And I'm sure some, some attorney, I was going to put a spicy adjective.

An expletive in front of us. Yes, attorney, I like this. Yes.

Someone told them, hey, you should go back and look at every vendor that sold you something and sue them because that you went bankrupt and they were part of that bankruptcy. And I think, you know, we had maybe it was a, I don't know, low six figure package that we sold them to do their business and a bunch of creative stuff, software, computers, all this kind of stuff. And so we got named in this larger lawsuit that they were filing against some other people. And I'm sure they just put every single vendor on it. But it eventually got dismissed because it was ridiculous. But But I still racked up, you know, 20, $25,000 in legal fees just to correspond, answer, take phone calls, having to sit in on, you know, court things, all this kind of stuff. And our insurance company covered the entire cost for that. So those things are very important. Insurance is, you know, it should be pretty cheap for you until you build it up and need a lot. But definitely want to have a good insurance person on your side and get good advice to them and talk about what ifs not. Oh, this just happened. Am I covered? No. You want to.

What kind of policy did you have that protected you? Like just general business liability.

Business. Business liability.

Yeah. Okay. Yeah. All right.

And they indemnified us from the get go. There was no fraud. Now if you get like your pointer, if there is some sort of.

Low.

They defrauded me, they lied, this kind of thing. Well, you're going to get in an argument with your insurance company.

Oh, for sure.

You may have to sue your insurance company if there's something on the edge to get them to cover, to offer coverage. And you know, but that indemnification for legal fees is a critical part of any kind of insurance you get. Cause that could be the most expensive thing you have to deal with, especially if you, you know, because there's lots of frivolous lawsuits, but that you still have to respond, you know, and unless you use, you know, chat, GPT or the other website I really like is donotpay.com where you can get AI based legal services. Well, that's, that's going to get you some letters and some responses. But when you need an attorney to start digging through and, and representing your side of things on a call, in a, in a courtroom, you have to have somebody and it's very expensive. So you, you want that coverage.

Yeah. Having.

Ask your insurance advisor.

Yeah. And one last thing. I know that the whole industry of insurance agents gets a negative rap. A lot of people say, oh, they're just, they're out for a money grab. I couldn't disagree with that sentiment more. I have found the right insurance agent can get you everything you need and knows the industry. So having, you know, I've found that having an independent insurance agent, one of the best decisions and one of the most valuable people as part of my board of advisors because they know stuff. And yes, they do get paid on commission, but they get paid on commission regardless of which company you choose to buy from. Right. And they can really help guide you. And look, if they're giving you bad advice, go to somebody else, you know.

Yeah, I think that's, that's important. And I also think there's a huge benefit to your personal life because, yes, you have, you know, great business insurance and you have a great agent. You say, hey, I need an umbrella policy for my life. I need a million dollar coverage. What about my car insurance? Could you look at all this stuff? My homeowner's insurance, all these things. You're going to see a significant, you can see significant savings on your personal insurance costs based on what your business is doing. It's another way to lead that charmed life that we talk about. And that's using your business brain.

Absolutely. Absolutely. Yeah. Hopefully that's helpful, folks. Thanks for hanging out with us. And make sure you send in your questions or your thoughts to feedbackusinessbrain show because that's how you are going to get entered into our drawing to win that MacBook Air this year. Make sure you have a good day. Make sure you send in your email to feedbackusbrain Show. Keep living that charmed life, huh? We'll see you next time.

Hey, I have one more tip for you today before you go. If you want to learn about the most powerful customer service concept on the planet, the next podcast you listen to should be episode 118 of Business Brain, where we first introduce the concept of two tokens. Two tokens will turn your customer service department upside down and change how you solve problems. It's simple, easy to implement and teach, and it will thrill your customers. So have a listen. Search for the number 118 at BusinessBrain show or click the link in the show notes of this week's episode and cheers to your success.