Your Insurance Broker Can Save Your Business
By Cliff Ennico
www.creators.com
"I'm just starting a small service business. Even though I've formed a limited liability company (LLC) to run the business, I know that I still need insurance. But what kind? I've spoken to at least three insurance brokers about my needs, but their advice so far has been all over the place. Do you have any suggestions?"
First of all, congratulations on realizing that you still need insurance even though you form a corporation or LLC for your business. A lot of people don#146;t know that #150; they think the corporation or LLC will be enough to protect them from legal liability. But it's not true #150; even with a corporation or LLC:
you are still personally liable for negligent acts or omissions you yourself (as opposed to your business partners) commit;
you are still personally liable for any business debts and obligations (such as your lease, or a bank line of credit) that you personally guarantee; and
your business assets (as opposed to your house and other personal assets) are 100% exposed to business creditors, lawsuits and other liabilities.
Self-employed people often don't treat the insurance profession with the respect it deserves. I know some agents are extremely aggressive in their sales tactics, but sometimes it's for your own good. Let me tell you how my insurance broker saved my business . . .
When I first started my law practice, I made an appointment to speak to my insurance broker about malpractice insurance #150; I had always worked for large law firms that provided this coverage, and didn't know the first thing about it. My broker obtained quotes from several companies, met with me to compare the policies, and together we picked a coverage plan that I felt gave me the protection I needed at a price I could afford.
As I rose to leave her office, my insurance broker said "Sit back down, Cliff. We're not done yet. I'm not going to let you leave this office until you sign up for disability coverage."
A little taken aback, I responded "Hold on, I know that's fairly expensive coverage. Do I really need it? After all, I'm just practicing law #150; as long as my brain functions and I#146;m not in a coma, how can I really be disabled enough not to work?"
"Simple. You're going to spend a fair amount of time working out of your house, right?"
"Right."
"But you're not going to see clients in your home, right?"
"Right."
"So when a client wants to meet with you, what are you going to do?"
"Meet them at their office, or at a local restaurant or diner if they don't have one."
"And how are you going to get there?"
"I'm going to drive, duh . . . "
"Okay. So let's say you break your right foot."
"No problem. I can still practice law."
"But how can you drive a car without your right foot?"
She had me there. We looked over some disability policies, and I signed up for the cheapest coverage, as I still wasn#146;t convinced I needed it.
Fast forward five years #150; a sweltering hot day in July. I live in a fairly windy part of town, and all of us in the neighborhood have developed creative strategies for keeping the covers on our backyard barbecue grills from blowing away. Mine was extremely low tech #150; whenever I finished grilling I placed a 35-pound rock on top of the grill cover. That sucker wasn't going nowhere.
Now, I can't tell you how many hundreds of times I removed that rock from on top of the grill, done my grilling, cleaned the grill, and replaced the rock . . . all without incident.
Not this time.
Maybe my hands were a little greasy, maybe I was momentarily distracted, but when I grabbed the rock this time it slipped out of my hands and fell five feet . . . onto my bare right foot.
Dear readers, please trust me that you do not know the meaning of pain until you drop a 35-pound rock on your bare foot from five feet up. I was rushed to the local hospital emergency room where they repositioned all the bones and put me in a plaster cast . . . for six weeks.
Did you know you can't drive a car without your right foot? For six weeks I was totally incapacitated. Oh sure, I could work on the computer, but I couldn't meet with clients, mail documents out, or perform just about any of the clerical chores that come with a corporate law practice. That disability policy sure came in handy . . . and my broker got a huge gift basket that Christmas.
A good insurance broker is one of your key advisors when you start any kind of small business. Listen to what they have to say. And beware of falling rocks . . .
Cliff Ennico (
cennico@legalcareer.com
) is a syndicated columnist, author and former host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at
www.creators.com
. COPYRIGHT 2008 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.
