Buy yourself the power to be zen.
I will, indeed, financially recover from this - if my insurance policy pays out
A non-exhaustive list of events that would make for an exceptionally bad week at work:
Being sued (or served)
Being audited
Losing a major bid, project, client, or customer (or them not paying you for the work you did)
You or one of your MVPs getting seriously ill
Nightmare fuel.
A non-exhaustive list of events that I’ve heard business owners, solo consultants and CEOs talk about casually without much, if any, real stress:
See above.
Being zen in the face of certain economic and financial danger is an attainable superpower.
It starts by assuming chaos not malice - that protects your own sanity - but it ends with having insurance.
Imagine not having to shoulder the financial cost of a crisis alone.
Before we get started, a disclaimer. While we know more than your average bear, we aren’t brokers, accountants, lawyers or specially trainer or registered in this topic. If you are ever unsure about this topic, it is best to find someone in your region/country who can give you specific advice and, bonus, ensure you are acting legally. DYOR.
The basics of insurance
Unless you’ve worked in a large financial/risk department (or were raised by insurance brokers), you probably don’t know this, but:
All businesses, even side hustles, need insurance.
No one tells you this when you start working for yourself, so even if you’re working FOR someone else, they might not know it either.
It’s a less sexy more functional side of business, but it’s important.
Insurance will almost certainly save you time, money, grief, stress, and in some countries, keep you from operating illegally.
There’s insurance for everything. There’s insurance for if your email or laptop gets hacked. If your customers don’t pay their invoices. If you get sick. If your coworking space gets burgled. If your client sends you an expensive letter on lawyer letterhead.
There’s even business-themed life insurance that pays your company entity if you die. If you want to protect yourself against it, more than likely there’s a broker out there who will sell it to you.
So, where should you begin?
The first type of insurance you should check out is the one you should already have. The first and best insurance policy to get is the policy that is legally required where you are.
You might be thinking, “No one has told me about any insurance I need to have. Surely they would have told me when I registered my LLC / set up my entity / bought the local tavern!”
No, they won’t always, so make sure you have checked that you are operating legally! While these compulsory insurances seem common, we have never been told about them by government officials when registering companies so best to check.
What is required varies by country but the good news is, in general, because it’s compulsory, it is well priced. Often it is something like coverage for basic liability so you are covered for any small problems, such as damage and accidents when at work.
Once you have the “must have, will get closed otherwise” policies bought, it is time to think about which areas of your business (or yourself) you’d like to cover, and if they’re suitable for your situation.
To make it easier for you think about what is best for you, I broke down some policies we’ve run into in the past - and trust us, there’s more out there.
The business
If the business was a person, what do you need to look after it?
Liability insurance
While we never want things to go wrong, sometimes they do and it's best to be prepared. This covers legal cases brought against the business if something (or someone thinks) something has gone wrong. Often it includes legal cover as well so if you don’t have a lawyer on your contacts list already they can help source one, and help cover the bills. The other benefit here is you can use the limit of your liability insurance in your contracts, meaning that you can never be liable for more than the total covered by your insurance.
Income Protection insurance
If you work with high risk companies, startups for example, this is worth considering. There is a bit of admin work to do here as you have to keep the insurance regularly updated with client details but this protects you from loss of earnings if your clients go out of business. My experience is you are covered for about 70% of the invoice total which, while not ideal, is much better than 0%.
Caveat: This one is expensive. Look at your budget and average amount you charge each client compared to the cost of the insurance. If you have a lot of clients with lower invoices (so one of them not being able to pay would not have a dramatic effect on the business) it may not be needed, where as if you have only a few and the loss of one would be significant, it may be worth it. Another great aid here that helps reduce the need of insurance is to take a deposit from new clients, equal to the value of one invoice. Normally this will be allocated to their final invoice, but it gives you that safety blanket. It also helps weed out those clients who may not be as committed to the contract as you think.
Building/Contents/Equipment Protection
This is down to your specific setup but if you have anything of value, be that the building or equipment in it, or equipment that you carry around with you, I would think about getting coverage. Apple Care is a great starting point. But remember: it doesn’t cover water damage, theft, or loss so if you have a lot of equipment that is expensive to replace have a look at getting it covered, even if it just a selection of the premium items.
You and the team
Coverage for the people that makes the business go
Death insurance
Let’s get the scary one out of the way. This is a simple policy, often aimed solely at senior team members and owners/directors of the company. This helps your business be able to still pay its bills even if you’ve had a significant loss in your leadership. Normally paid as a lump sum, this can help cover what may be a difficult time for the company. Also it gives you a balloon payment to cover losses, such as loss of revenue.
Absentee insurance
This really depends on where you are in the world as for what you need to think about. But first remember that this is different than the cost of medical care - I’m talking about paying your monthly wage/salary/retainer even if you can’t work. If you’re a freelancer or solo consultant, or in charge of a small business, what happens if you can’t do the work? Or perhaps you live in a country where if your employees get sick, you are required to foot some or all of the costs (which is difficult to do if you’re short staffed). That’s where absentee insurance can come in. In some countries, sick pay is covered by the government, while in others you may not get any support at all. If the latter, this is an insurance to consider.
Health insurance
Again this one really varies dependent on location, but even in countries with free health care it can be a really nice benefit for your team, and make you a more attractive employer which is nice come recruitment time. Prices here really vary, as does coverage, but in general you get what you pay for, and if you’re based west of the Atlantic I’d really get the best coverage you can afford.
Personal income protection
Another type of income protection insurance here, which covers you the individual/business owner if you are sick or injured so you don’t risk losing income.
The outside world
The area you have the least (arguably no) control over is the people in the outside world. Sadly, be it malicious or accidental, outside forces can have a significant impact on your business.
Cyberinsurance
With so much work being done remotely and now cloud-based, being protected from hackers, equipment failure or other events is worth considering if, like us, you are selling digital products and knowledge. I’d also keep at least one backup of everything!
Travel insurance
If you are a regular traveler, business travel insurance could protect you from flight delays, lost baggage or any other nasty surprise whilst you are on the road. Most of us have travel insurance but check: are you covered when travelling for business purposes, and does the cover protect you properly if you lost work related items rather than just personal ones?
Insurance is giving your future self the gift of being zen in a crisis.
To be sure this zen arrives, read the fine print of your policy. Insurance companies don’t always have the best reputation, and that’s because they have a vested interest in not paying out if they don’t need to. If you don’t tell them the full truth, that’s a great reason for them to deny your claim. Don’t do that to yourself. Planning ahead ensures you are prepared, so ensure you are insured!
Stay covered out there,
Peter