Types of Business Insurance
Welcome, back everyone today we're gonna be speaking with Jay art over jr's a commercial, insurance agent, and he's gonna be talking about all of the different policies, you need to be aware of as business owners to, make sure you're properly protected we'll, see you in there. Welcome. Everyone today we're gonna be speaking with junior Tovar of Tovar insurance, he's been walking us through the commercial, insurance that, you need to be properly protected for, your business, Junior, thanks so much, for joining us man thanks for having me so, Jerry basically, what we been doing at the course at this point you know the business owners are out of stage where they know they need protection, but obviously you know insurance can be pretty overwhelming, you. Know am i overpaying, and underinsured, how do I make sure I have the appropriate coverage so, what we really want to do is kind of walk them through some of those core, insurance. You. Know packages. So to speak that they need to make sure they're utilizing. To be protected, where. Do you see people traditionally, get started, and maybe some struggles what they ran into yeah so I guess when you when you first get started. If. You end up bringing a space a lot of times your landlord, says you. Have to have insurance and, in the least they'll give you a requirement, and, that requirement had, everything from some, commercial, you know general liability, to, maybe some workers comp it's kind of like the. Landlord kind of dictates, what, you he, wants you to have in order to do business at his property so. The. First thing that's usually the first way it happens with a new. Business that's going to go out and rent a space in. That lease that lease is gonna have insurance, requirements, and that's, where it gets tricky people kind of don't necessarily, know what. Each one of them means how much they should call should it be more should it be less and, I could imagine a lot of people are just going with whatever the bare minimum is the landlord's. Asking, right so yeah because it's a rush situation. Right like think about it like you're at a car dealership and you're about to buy a car mm-hmm and you've, already got all the paperwork done and the financing. And then the car dealer says hey, listen you can't take this car off the lot unless you show me proof of insurance hmm, and so it's a rush situation. In most cases where people signing their lease the insurance, it's kind of the last thing that they do and so. They get it done and you're right they usually get it done cheaply, or minimum. Requirements, and the problem is most of times they never look. At it again unless something, brings it back up and what, typically would bring it back up is it usually when they run into a problem and that's that oh gosh moment exactly.
Yes So the main, thing is a general, liability we. Call that slip and fall right so if you have a storefront. Somebody. Comes in slips, on a puddle falls hurt themselves breaks, something then. Your general liability or, your slip and fall insurance, normally. Covers that but. I tell people all the time and insurance, is kind of there's. Two sides of it there's there's money that pays out okay, so in a slip and fall case your. Fault you left the water on the floor you get sued for 50 grand your. Insurance company, should, pay out, in, order to handle. That claim but, then there's also stuff that pays in okay, and I think this is where business owners need to be a little bit more intentional, right because if you're gonna buy insurance, you. Should ask yourself the question what's in it for me mmm, what if something happens to my business will, this insurance policy paid, me from. A law standpoint, so that I can continue, to run my business so those are the two sides of the insurance what pays out and, what, pays and do those both run through the general liability policy. Most of the times they do and that's where the the Devils in the details right so I have a client who. There. Was a situation in a city up. North where they had a Warner issue right, and so. My client, called and he said hey we had a Warner issue here, in the city it's. The city's fault, the, water's contaminated but. They made me shut my business down for eight days do. I have coverage. That's. A conversation he, and I probably should have had before. He bought the policy, for me luckily he does have, spoilage. Coverage, and some utility, coverage so there will be coverage there but, as a business, owner these are the types of questions you should, asking, before. You buy your policy, to make sure it has which and that's so important because basically, if I'm understanding correctly we know we're describing okay something could happen to the business that's gonna require you, know a big check to be paid out and the insurance company's. Gonna cover that but, in the interim, to you might have actual business losses from your inability, to operate, the business that. Otherwise, are going, on protected. And unless, you're taking, care of the details exactly in most cases in, a lease when you sign a lease the. Landlord, just wants to make sure that you have coverage that's going to payout sure, in most cases right, so the other side of that is you have, to as the business owner understand, what. The risk are in your business and look, and see if those things are line item in, your policy, or if you should add them into the policy, or buy a different policy so, I always tell my business owners like you gotta buy insurance because you have to stop. And ask yourself the question what's in it for me and normally, that gets you into the details a little bit easier I like that a lot thank you I think that's a perfect background in context, on general liability so. I think the next key piece has really workers compensation. All right so as all. The business owners are hiring and bringing on employees, can, you tell us a little bit about what goes into that yeah so workers compensation. Is a, insurance. That employers, have to, have for. Their employees, in the. State of California, okay so if you have a w-2 employee in, the state of California, other, states laws may be a little bit different but in California, if you, have w-2, employees, you are required, to take, workers, compensation, out on those, employees and, workers. Compensation, covers three things it covers. Medical. So, if the employee gets hurt at work it's. Gonna cover their their medical expenses if. They were. To die at work it would pay out some, sort of death benefit, of the employees, heirs depending. On how many kids. They have and all that good and I'm sure that's not quite as much as like a light of a full life insurance. Yet it's, pretty much dictated by, the state, who. Gets what how much they get it's a little if. You have more kids you get more so it's a little bit of a formula. So, it pays like I said medical impes, a, death, expense but.
It Also pays wages, so, in the state of California, if your. Employee gets hurt at work and, he can't work because, of the injury the state, of California, is gonna pay them up to 65%, of, the. Income that you're already paying them, interesting. So you get to take them off your, payroll and the, insurance, then kicks in sixty, four five percent of their income, and that's in the state of California, and is that like specifically, for disability, or is that any sort of qualified, injury it's, a qualified, injury where the, employee can't. Work okay, based. Off an injury that they suffered. At work okay and we don't need to go into the legal units that are just kind of curious so that's that's really so just, to recap so there's. Medical, you know death benefit, and the 65 percent basically. Disability, exactly, and as a business, owner how much you pay in workers, compensation, depends. On what industry you're in okay. Because it's all risk based so our roofer, is going, to pay a higher percentage of their payroll for, workers, comp then, an, office risk. Makes a lot Turney you're a CPA and it's, really it's really important, to know that the insurance is, it's. An auditable policy, which means that at the, end of the year the state of California, is gonna come back to you and. Say hey listen you told, us you were gonna have two. Hundred thousand, dollars in payroll, I understand, did you have two hundred thousand okay if you did great, you paid us what you were supposed to oh you, only had a hundred thousand, okay we owe you some money back okay so here's a check we'll give you money back because you're over or you. Have three hundred thousand, hey you did pay us enough write, us into the check so that's, one of those policies, where it's a little bit more. Important, for business owners to plan, based. Off the fact that that's a policy, that doesn't matter what you pay monthly over the course of that 12 month it's, gonna be audited got it and then to follow up I believe you said that's gonna come directly out of payroll right that comes through the paycheck yeah so what happens is it's a it's a function, of, payroll, okay so you can buy a workers comp policy, separately. From, your actual, payroll, but. They're gonna marry together at. The end of the twelve months got in your percentage. Of workers comp depends, on your industry is. Gonna be a multiplication, of, how much you actually, paint a payroll over that 12-month period okay that makes a lot of sense and then I guess the other piece on that from, a new. Business owner trying to save money of course is since, it's a mandatory policy again, in the state of California, is, there much negotiation room, for workers comp sure they'd be shopping, policies, or is it kind of everything, staying that's a great question, and I think it comes down to to your budget so if, you have a big, payroll, and you're in a very expensive, industry. Then, it makes a lot of sense to look at new carriers, look at new policies, every single, year ultimately. Every policy is the same whether, you buy it from State. Farm or farmers, or all state or Hartford. Ultimately. Every workers comp policy is that same the only difference, is the, rate that, that company charges, you for, that policy, got it okay so it makes a lot of sense for a company who has a ten, or twenty thirty thousand, dollar workers. Comp expense, to annually. Shop. That policy, to see if one company is fifteen. Twenty percent less than the other that's great that's an annual checklist, an exact okay all. Right I think that's awesome background, our workers comp the other ones sticking with employees, so you, know obviously, I hope no business, owners run into this situation but, you know especially. In the state of California, you want to be protected anytime you're hiring employees people. Can, get disgruntled, it happens in his life how. Can the business owners protect themselves from any claims against employees and anything that, may arise in the work environment yeah, so it's very important, to know that any type, of employee. Related, lawsuit. Discrimination. Harassment. Anything. Like that a lawsuit. In which an employee comes. Back to the employer and says you. Didn't treat me right it's. Not covered, by your workers compensation okay. It's, not covered by your general liability. It's, not covered by your Eno your professional. Liability there's, a separate, policy that you have to have or.
An Endorsement, on, one of your other policies, it's called okay EP Li or. Employers. Practices. Liability. Insurance okay, and that's the policy that protects, the business owners from employee. Related lawsuits, okay, and is there any. Sort of shop ability, with that type of solves it yeah absolutely and like I said sometimes you can endorse. A little bit of coverage on to your general liability policy. But, here's a stat that I think is very important, they. Say each. Employer. Employee. To, employer, lawsuit, on, average. Cost three hundred and seventy seven thousand, dollars lobbying settlement. And lawyer. Fees geez so it's important, to have enough coverage there a lot of general liability policies. Will come with 10. Or 15,000. 25,000. An ad or a rider, exactly. But the fact of the matter is is if you, get into an employee related, lawsuit. Situation. On, average, it's gonna cost three hundred and seventy seven thousand. Dollars. State of California, and those lawsuits have been, incremental. E increasing, I mean they're up seventy-two percent over. The last four or five years and. I know California. Kind of has that reputation yeah. Okay so appeal is really, helpful and then actually you alluded to the other one I wanted to make sure we covered for any of the service providers, who are watching you, know insurance that was extremely high of E and no insurance I'm familiar with that one but, I'd love to hear your take on yeah you know is essentially, I. Like. To when I explain, this I like to I, like to tell people it's very similar, to a barber shop because, we're. Used to going to barber shops or beauty salons so if you walk into the barber shop or beauty salon you. Slip down you hurt yourself that's. Gonna be covered by the, general liability but. Once you sit down into that chair and the barber starts, working on you and let's say he's cutting your hair and you slice.
A Little bit of your ear off that's, actually, covered by his professional, liability, okay, so it's more it's important, if you're offering, a service that you search for any. Type of. Coverage that could cover the, type of services, that you provide and, so that you know insurance is the professional, liability exams, that's where that's gonna slip in exactly, and it makes a lot of sense I mean errors no mission like said I have it I think anyone who's providing services should have it at the end of the day you're never intentionally. Making a mistake but mistakes can happen and you want to make sure you're properly protected, absolutely and that's one of the things I think it's all industry, specific, but if you're a service, provider and you. Know that or there's an en ole policy, that covers the service, that you provide you, should look into it, that's a good point so are there certain and. Not to say that we need to highlight. A whole room right now but are there certain professions, that would intentionally, not become well I mean if you think about like a. Clothing. Store got, it okay there's not a lot of you know coverage, there you just start buying and selling goods but. Anytime anytime, you're providing, a service to someone, just. Search, and see hey is there an you know policy out there that could cover the, service that I provide and, I think the biggest thing with insurance, is it's not emotional it's just it's just business right so a lot of times people get attached to oh it, costs this much or I don't want to pay that much or nothing's gonna happen and the, fact of the matter is it's just a great business, practice, to figure out which. Policies, are out there that are. Good for your business and then make decisions based, off of the. Risks that are out there to decide if I'm going to purchase, those policies, or not yeah of course you never hoped that you're gonna be using them but if you do end up needing to be using, them you're gonna be really glad you went ahead and do this the right way.
So The other piece that I think is really important and this one I think a lot of business owners maybe don't understand, fully or maybe it just gets glossed, over is the umbrella policy, how. Important is an umbrella and if, you could give a little context, of what exactly it does yes what umbrella is is I think it's extremely important, I think it's one of the more important, policies, and probably, unfortunately one of the ones that's most overlooked, and, what happens with the number Ella is if. There's anything that, that, happens from a Claim standpoint. That exceeds, one. Of your underlying, policies, so your general life policy. Or, your automobile. Policy, you have a big claim it's gonna cost one point three, or four million dollars, you, only have a million, dollars on your underlying policy, if, you don't have an umbrella that other 300, thousand dollars it's gonna come from somewhere and I tell people all the time claim flow is threefold. It starts. With insurance, that's where claims. Always, start they start with your, insurance coverage if you don't have enough insurance it's gonna kind of trickle down to your assets, and, that's when you start talking about whatever you have saved their retirement, whatever equity you have in your homes things, like that Wow yeah and if you don't have enough assets, then it trickles to your income okay, and in the state of California, your wages can be garnished, for up to 10 years to satisfy, a judgment geez and so that's where the umbral a very low-cost. Way to, bring all your policies together comes from so I mean especially, if you're in a high-income situation. It's almost a no-brainer I mean you definitely want to make sure you're protected there it's, a no-brainer just. Operating, a business yeah be perfectly honest with you because there's so we're, in such a litigious, society that. It. Makes sense to just create, a package, that is going to holistically. Protect, your business god. Forbid there is a claim you let the lawyers do the work and, how important is that because I've actually heard some stories from, a legal side of things that when, policyholder. Has the umbrella, obviously. The insurance, company is a little bit more motivated, to make sure that they're tackling that really quickly and, potentially. I think even settling, sooner so it kind of helps avoid some of those stressors, and. I don't know if that's just anecdotal, information but. Have you happened to see that be the case and yeah I mean insurance, company, is basically a team of lawyers I mean what you're doing when you buy insurance, is, you're hiring a team of lawyers and, in a bank I took a way to put the lawyers lose you have a bank there that's gonna pay out but. They don't want to pay out what they want to do is they want to defend you thinking so therefore the lawyers kind of come in they defend and they try to settle it out which, is why insurances, is so important, it's it's it's a great way to to. Hire a team of lawyers I like having my work that, highlight, you know retainer. Fee or anything like that. But it's super important, to know and understand, the.
Risk That your business is going, to. Provide. Opening, you up to and then, make sure you have the right policies aka, the right lawyers, there. To defend you and if they can't defend you then, you have the bank that's gonna pay the claim that, makes a lot of sense so we've really tackled, all the major insurance, policies, that are available to business owners I think, one of the things that would be really helpful to to enrollees is understanding. The difference between kind of a brokered, agent, and then someone who's with one, of the more traditional insurance, companies, that we're kind of used to seeing on TV can. You kind of walk us through maybe what some of those different dynamics are yeah again. Depending on your business. So. Brokers. Are a little bit different because they, don't represent, a, company, mm-hmm, they kind of sit in the middle between companies. And people that need, coverage, so. What a broker does is a broker will go out and he will talk to three. Or four or five different companies on your behalf as the business owner and try. To use, his expertise. Based. Off of your conversation, with him to configure, the. Best policy, with the guys company at, the best price right sounds captive. Agents the more traditional, State Farm or farmers, or Allstate they. Kind of sit. With, one company where. They really, represent they're, an agent, of that. Brand, got it and so, normally in those situations. Those companies have, policies. That the agent, knows pretty. Well because, he only works with that one policy and. It may or may not totally. Fit your needs it. May or may not be the most cost, effective policy. But. By hiring an agent. That's what a captive, company, you. Basically have an access, if, there's a claim you. Have a person, an advocate the agent who's, gonna be able to really kind of like sit in between, you. And the company and make sure that things are going the way they're supposed to and I've noticed that because I've seen situations where, when. You were operating through a broker maybe. You were able to get you know like you said an independent. Package. So to speak but if. The claim is actually being you. Know requested. Paid out whatever you want to call it. You're then having me work directly with the insurance company, and they're kind of in the abyss so to speak it's more you taking, almost, like a DIY approach as, how you handle, that yeah has that been pretty much the job I mean at the end of the day any good broker a good agent, you, know we we, sell these policies, because we want to make sure that our business owners are protected, and so, whether you have a broker or an agent, the, responsibility, should be on that person. To help in, the event of a claim because that's when you really need them yeah and I think that, agents. Captive agents probably have a little, bit more pool with. Their respective. Company, basic brokers would have across, multiple, companies, but, at the end of the day put the broker or the agent to work make them work for you if there's a claim and help, you get as much out of it as possible, I love that that's a great framework so.
I Think then that pretty much walks people through just. To kind of recap the major ones here we have general liability. I like the example, kind of slip and fall protection, we. Have a workers, compensation, again. There were three I think critical components, of that see, if I can get them with Medicare, death, payout and disability, protection yeah, medicals, excuse me as. Far as the workers, comp goes we, then touched on EPO I which. Is really critical employee. Coverage, more or less p.m. any disgruntled, employees so to speak and. Then we did you know insurance, which was really the professional, liability insurance they. Kind of last but not least was wrap it all under, the protection. Of an umbrella exactly. That's, awesome so I think this certainly. Was helpful for me I'm sure as everyone's going through this this is gonna be a lot of information for, them to digest what. We'll go, ahead and do I'll put together the, worksheet for you guys to all have access to as well it kind of gives those definitions, just so you have that one pager that'll be really helpful but, yeah thank you so much this is awesome information I wanted to add one more thing about the workers, compensation, because I think this is important, and it's often, overlooked. By the business, owner so, what, happens with the workers compensation, policy, is the business, owner is, exclude. From, coverage okay so the workers compensation policy. Only covers the, employees. Of the business it. Does not cover the business owner themselves. Really good to know so it's very important, I think for a business owner to consider life. Insurance, to make sure that they have some sort of health insurance and, actually, to make sure they have some sort of disability absolutely, on policy, because. If they're an employee the employees, have all those things but. The employer is, excluded. Therefore. When looking at workers comp as a business, owner take a second, to think about yourself, decide. Hey do I have enough life insurance make, sure that if you get hurt and you can't. Work are you gonna have to take money out of the business or will you have a disability policy. That, can replace that income and, then, obviously your health insurance make sure your health insurance is what it means to me I'm so glad you brought that up because actually on the financial, planning side when I'm working with clients disability. Insurance is easily. Probably the number one thing that's neglected, and statistically. Speaking we, all have a much higher probability of. Actually running into a disability. Problem, than, a via. Slee a deaf problem, yet, I think so often we have life insurance and laugh disability, insurance and that's a big, mismatch that I tend to see a lot in financial planning so I'm really glad you did ring yeah they say one in four people. Would have some sort of disability crazy. Yeah and because you're a business owner you don't workers comp really, covers work-related. Injuries. But as a business owner you, can buy a policy, for yourself that covers any sick, hurt or, can't work right so if, you get sick if you get hurt you can't work whether it's work-related or, not having. That disability, policy, would help. Help. With your income yeah and as the, owner I mean any sort of disability is going to have a huge impact on the business especially, if it's not even at work you. Can't neglect that I'm so, glad you brought that up yeah that's a big piece awesome. Well again Jared thank you so much I know this was awesome information and, I'm sure really appreciate you joining us man thanks for having me thanks so much again to jr. for the great information on, commercial, insurance, make. Sure you're taking action and we'll see in the next episode.