Let’s face it. Thinking about, let alone discussing insurance, is about as much fun as paying your taxes. But when it comes to protecting your assets, it can be one of the most important discussions and decisions you can make.

So, what do you have to have?

Business Structure

The first step at looking at how best to protect your assets is to understand your business structure, be it an LLC (Limited Liability Corporation), S-Corp (Small Business Corporation with special tax advantages), or C-Corp (standard corporate filing status). The easiest of these is the LLC, where all you need is a tax ID or EIN (Employee Identification Number). This is something you should have set up even before opening your doors. Because the minute you open your doors, you and your business are liable, and there is no coverage for prior acts.  This also includes having an outside contractor work done. According to Colorado laws, if an outside contractor is working on your property doing repairs, construction, installation, etc., and gets injured you could be liable.

It's like buying a car, getting into an accident, and then getting insurance. There is no carrier in the world that is going to cover that accident, or anything related to that accident, such as medical bills, lawsuits, etc.  The same is true for health, home, and your business.

I’ve seen so many business owners, me included, who start a business with rose colored glasses on, excited about changing the world, providing a service or experience that exceeds what your previous company or boss offered.  And then you find yourself consumed with all the details and challenges of running a business. The rose-colored glasses come off, you’re overwhelmed by escalating costs, and then, something goes wrong. The next thing you know, someone’s coming after your assets and BOOM – you find out you don’t have the right – or adequate coverage.

This is where understanding what your business does and the services it provides, including if you have or plan to hire staff, becomes really important.

For example, if you’re a consultant, i.e., giving advice, be sure you are looking at professional liability. This helps protect having someone go after your personal assets in the event they sue you for misrepresentation, or trademark or copyright violations.

If you have a brick-and-mortar business, your landlord will require insurance. Be sure you have this in place before you take the key. The minute someone sets foot on your property – whether your own it or not – you are potentially liable. This includes contractors, painters, plumbers, etc. who are working on site to help get you ready to open your doors. Don’t assume their insurance will cover any injury or loss. If you are paying them, you could be potentially liable.  Worse yet, if you don’t have commercial/business insurance, they can come after your personal assets. It’s what lawyers get paid to do – and I think we all have better things to do with our money than line a lawyer’s pockets.

I hear it all the time, “I have an LLC and it doesn’t have any assets,” (i.e., a professional consultant who works virtually and only owns a cell phone and computer). Even if  the LLC doesn’t have assets there can still be a judgement against you; a judge can tell you to liquidate personal assets if you are found guilty.

What You Need to Have

The base standard in today’s environment is $1M per occurrence and $2M in aggregate or total losses over the course of a policy year. But think about what things cost and if someone (or several) gets injured, ends up in surgery, and with ongoing medical issues, how quickly that can add up.

Don’t get me wrong. I’m not suggesting emptying your profits for some rare occurrence. But make sure you and your insurance agent have a clear understanding of what you do, the potential risks, what assets you have, and what is in your best interest.

Additional Options

While $1M/$2M covers pretty much any business, it might be prudent to look at going up to $2M/$3M, particularly if you have assets.  Most importantly, think about what you can afford to lose and then make sure you have the rest covered. Another option is to add an umbrella to your policy so you can layer coverage as your company grows, without having to re-write or do a new policy.

How to find the right insurance broker

Most importantly, find someone who cares and spends the time understanding what you do and is knowledgeable about potential risks and liabilities. A great place to start is with a referral from another business owner(s). Who are they working with, how happy are they with the service, and the insurance agent’s ability to help reduce risk through business wellness checks and other industry knowledge and experience.  

There are agents and companies who will quote and write you the cheapest policy. They do a lot of volume and may have what you need. But do you know your agent, and is he/she readily available when something goes wrong?  Also inquire about annual reviews (this is not a policy renewal, it is a review of your business, any changes, additional risks, etc. that should be looked at and done every year).  

Protecting yourself and working with someone who understands business structures and how they are laid out is critical. This company may not be the cheapest, but they can also end up saving you a lot of money and headaches over the long term. Make sure your agent is vested enough to spend the time to learn about your business, what you’re doing, why you’re doing it, and how you’re doing it.

Regardless of who you work with, your insurance agent should make sure you have the right coverage, not just any coverage, with an understanding of how best to protect your vision, assets, and business.

Tony Martinez is the founder and principal agent of Gypsum-based Cornerstone Insurance & Financial Group. With more than a decade of insurance experience in the Vail Valley, the team brings experience in all industries and in turn, businesses receive an inside track and understanding about insurance challenges, risks, and liabilities, and how best to reduce these with thorough business health checks – all on their time – and for businesses large and small, locally, regionally, and nationally.  The team also brings more than 40 years’ experience in back of the house hospitality, including positions with Gramercy Tavern Culinary Group, Lodge at Vail, Arrabelle, and Beano’s Cabin to be the leading hospitality business insurer in the Eagle County.