152: How to Choose the Best Insurance for Your Design Firm
Michele 00:01
Hello, my name is Michele and you're listening to Profit is a Choice. With me today is Michelle O'Connor of O'Connor Insurance Associates located in Charlotte, North Carolina. Michelle and I are going to talk about what insurance is why we need it. And we're going to discuss the different types of insurance available. We're also going to discuss when to get insurance and when you use it to make a claim. There are so many different types of insurance and knowing what serves our company best will allow us to make the best decisions to protect the business we're building.
Michele 00:40
Every day empowered entrepreneurs are taking ownership of their company financial health, and enjoying the rewards of reduced stress and more creativity. With my background as a financial software developer, owner of multiple businesses in the interior design, industry, educator, and speaker, I coach women in the interior design industry to increase their profits, regain ownership of their bottom line and to have fun again in their business. Welcome to Profit as a Choice. Hey, Michelle, welcome to the podcast.
Michelle O'Connor 01:11
Hi, Michelle, thank you so much for having me. I'm excited to be here.
Michele 01:14
Me too. Isn't it crazy? Hey, Michele. Hey, Michelle. I met it's kind of weird sometimes to call somebody else by your name, isn't it?
Michelle O'Connor 01:20
It is it is it? I was glad that you have a little bit more of a southern drawl than I do. So they'll be able to differentiate our voices.
Michele 01:26
That's exactly right. And you know, I don't even think I have a southern drawl. I mean, I know I do. But it's funny where I am from is even more Southern. You're in Charlotte, North Carolina.
Michelle O'Connor 01:38
I'm in Charlotte. Correct. But I was raised in western Pennsylvania. And I really haven't acquired much of a southern drawl in all the years, and I've lived here longer now than I ever lived in Pennsylvania.
Michele 01:48
So I grew up in South Carolina, right under Charlotte, 45 minutes south of Charlotte, I think you and I talked about that before. And it is even more Southern in speech than I speak right now. So I've been in Atlanta, I want to say 32 years. And it's funny, when I go back home, they think I sound more northern. And then all of my northern friends or California friends, like you have such a southern lilt to your voice. And I'm like, oh, gosh, you should really go down into the deeper parts of the South because this is not it. But it is I do think it'll be a differentiator. So I think that'll be easy listening for everybody. Michelle, one of the things that I really wanted to talk about, and we're going to get to it in a few minutes is, you're here to talk all about insurance and what it is and why we need it and how to find it in the different types. And I'm, I'm super excited for this conversation, because it comes up everywhere it comes up with my clients, it comes up in Facebook groups, it comes up in networking conversations. And but before we do that, you're also the owner of your own company. And I would love to hear you talk a little bit about your entrepreneurial journey. And what prompted you to start your own agency and, you know, to go into business for yourself.
Michelle O'Connor 03:09
Sure. So I started in the insurance industry working for an insurance carrier. And I was trained by them and transferred to western North Carolina with them. And then I was lucky enough to get transferred to beautiful Charlotte where we've made our home for over 20 years now. But in the meantime, my husband was working for social services. And he was really wanting to get out of that and try something different. So he started working for an independent agent in Western Carolina. And when we moved to Charlotte, it was just the natural next step to for him to open an agency. So he started our agency scratch, which means no clients in the insurance industry, and really just picked up the telephone in our spare bedroom and started making calls. And I stayed with the insurance company a couple of years. And I joined him in 2002. Our agency was opened in 2000. So we celebrated 21 years this year. And it's always an interesting journey as an entrepreneur. I think the last five years, I've probably learned more from a perspective of being a leader. And so my role has shifted into leadership. And that's been really exciting transition for me.
Michele 04:16
oh, you may have to come back and we'll have to have a leadership conversation because that's what we're working on in my private coaching right now. And with my coaches and my designers inner circle, and we're talking about when you own a firm and or an agency and you have people working with him for you. And it is our responsibility to coach and to lead them not to just hire them dump work on them and walk away and it you know, it's so funny that you even say that Michelle because so many people have said to me, especially the more that your company grows, almost 80% 75 to 80% of the work can be somewhat HR related at the higher levels, because you're really It's really about taking care of your people, and your people will take care of your clients.
Michelle O'Connor 05:04
That's exactly right.
Michele 05:05
Yeah, and that is a whole different job description. And many people feel stuck in this, I need to lead my team. And I've never been taught how to how to lead in that way. They were very much self-starters, they moved up through the whole EMF technician, to manager to entrepreneur without ever, kind of maybe having some of that leadership training. And I know when I worked in financial software for 10 years, we went to leadership training, I was a manager of a software development team. And we were sent to leadership training, we were sent to managerial training, we had handbooks and notebooks, and, you know, we practice those things. And I see a lot of that missing, I would say in smaller self-started businesses, because we're so busy trying to get the work out, and not as focus maybe on developing the people.
Michelle O'Connor 05:58
That's so true that it to the point to your point, we have actually over-hauled our you know, quote unquote, employee review process, we're in the final stages right now, to eliminate some of that review. And to make it more of a developmental process and a developmental process from an educational perspective as well, because now I do have a manager and I need him desperately. And he needs to be taught how to be a manager, because he's amazing. But now he needs those extra skills. So where do I find those? What resources do I have available to me as a small business owner?
Michele 06:29
Yeah, that's exactly right. Okay, so just know, when we hang up, we're going to go reschedule and bring you on, because I, I'd love that conversation, I'd love to have it with you. So when we jump in here, let me ask you this, too. We've all just been through the year of 2020, where we've all I know, you may comment that you've been listening to some of the podcasts and I always end my podcast with the comment being prof I, well, the name of the podcast is profit is choice. But then I always say profit doesn't happen by accident, meaning we have to be intentional in our choices in our decision making that lead us there. Did you find anything that you and your husband, your agency had to do and 2020 to make some choices to remain profitable.
Michelle O'Connor 07:15
So 2020 was of course, you know, the year we'll never forget, in so many ways. But last year, at this time, the very first thing we did is start calling all of our business clients, because we wanted just really to check in with them and say, Are you okay, what do you need from us? That was how it started out. And then it evolved into some hard, hard conversations with our clients about things that weren't covered. Because the pandemic is not was not considered a covered cause of loss for loss of years. And I know that's a lot of insurance speak. But basically the restaurants that had to shut down, they didn't have coverage, because they were told to shut down because of the pandemic. So there wasn't an insurance reason for that loss. Those were super difficult conversations to have. So we spent a lot of time on the phone. And we probably worked more hours than I think collectively, we've worked in years, because we were just constantly working and working from home. You know, it was easy to do that. So those were those were some of our harder business decisions. Initially, we stopped everything that we had made, you know, we were making progress on and we had big plans. And then I just took us a couple of months by July, we had recollected ourselves, and we were like, this is not going to be the way this needs to go. We need to ramp up our marketing efforts. We need to spend more time with our people, we need to go ahead and hire the folks that we know we need. And I'm so glad we did. Because on the other side of it now had we not made those choices, we would be in a jam.
Michele 08:35
Yeah, it's true. I had some things that I was building and doing at the time as well. And I just put everything on stop on pause, so that I could serve my clients, and talk to them about how to weather it and how to get through and what the new decision making might look like and all of those things, because in some cases, to your point, we had to make decisions to move forward in some ways that felt contrary to what we were seeing and hearing and thinking or contrary to what we had thought before. You know, and I know that we may or may not get into the depth of it, but I even had some travel insurance things that they considered the pandemic, an act of God and or whatever. And it's like sorry, not covering that or because it showed up in the US at the beginning of January before it was on anybody's radar. You should have known about it and not booked your flight at the end of January. I'm like are you kidding me? Thankfully, most of the airlines stepped down and they didn't want us on their planes right then anyway, so it worked out fine. And they certainly worked around it. But I think it took everybody by surprise in a multitude of ways. I even know I was changing my insurance, which is what we're going to chat on specifically today. And they sent a note and just said you know, we're going to give everybody I can't I think it was a renewal. But they were like, we're going to give everybody an extra month before you have to make that payment. Because we know that, you know, if you're in a position that business is slowing down or something's happening, while you need it, it's also a difficult payment to make when you're trying to keep the lights on, and you're trying to keep your employees. And so I think we all had to make some really hard, difficult decisions in the grand scheme. And I'm just speaking from our industry. So I, you know, I know that there are other industries that have just been decimated, our industry has been very vibrant. And to your point, at the beginning, everything kind of like, Whoa, everybody was like digging their little hills into the sand, pumping the brakes. And then all of a sudden, it was like the floodgates opened. Because people had money to spend on their homes and on their properties that before they would have spent on travel or buying a car or whatever, something else, you know, that money that just would have gone different place. And so I think even more so now than ever, we better have ourselves covered. I mean, I really do, even though I've always thought insurance was important. I've always had it since I started. I think even more. So now people are watching their money, they're watching their dollars. I think with the construction industry booming and going like it is we have a lot of people coming in not fulfilling, not doing. I mean, there's just so many areas open to risk right now that I think the timing of our conversation is super important. Before we jump into all the different types of insurance, I had asked you, if you could share with us what insurance is I think sometimes we don't, we have a preconceived idea of what it is. And we don't really understand maybe the basics of it. And we think that it should do things that it shouldn't like the hard conversations that you had to have. Can you just share with us, Michelle, like what is the basic understanding of insurance and then let's talk about but let's like layer on that, why we need it when we need it in those kinds of conversations. Sure.
Michelle O'Connor 12:09
So the most simplest definition of it is to indemnify you. So to indemnify you for some covered catastrophic loss would be the port part I would add on to that. But indemnify you means to make you whole again. And so that's the goal of insurance is to make you whole again, specifically when you had a covered insurance, you know, claim, which is the magic word there is that it has to be something that is covered. But that's the most simplified definition. And that's across the line, no matter which product you're talking about. That's what the goal is.
Michele 12:40
Alright, so let's break that down. What does it mean to make you whole? Because that, right? Because, right? That can mean different things? And you see now does it mean to make you whole from a depreciated value? Does it mean to make you whole from if you had to go out and buy it brand new, like what does make you home? And I know it varies based on types of insurance. But in general, how what questions should we ask about what level of indemnification if that's the way that you say it? or What does it mean to make you whole in a situation?
Michelle O'Connor 13:09
Sure. So it is very, very dependent on the product and the specific scenario, but just talking in super broad generalities. You know, if you had a fire in your office, and all of your things were destroyed, making you whole again, would mean to purchase the items that you had. Now, every policy has a coverage limit. So you know, if you've chosen 10, but it's going to cost 20,000 to replace the items in your office, then you're still only going to get 10,000. So that's where you having good, and I know that this is something that you pride yourself on helping your clients with Michele, it's making sure those business fundamentals are there, because sometimes you'll ask a client so you know, how much do you have in property in your office and they have no idea. And so we can't figure that out. I don't know what your desk costs, you might have gone to IKEA and bought something really inexpensive. Or you might have gone to a high end designer and bought something that was extremely expensive. So you have to have that information to be able to make sure that your policies are set up properly. So that when you get to the place where you need to be indemnified that you've got the right coverage in place. So that's, that's one of the most important pieces of it.
Michele 14:17
Okay, that's perfect. I know, living here in the south, just a couple of weeks ago, we had some rough weather come through and they were talking about tornadoes. And one of my really good friends is a financial adviser. And one of the things that she went on with her people immediately and said, If you have not done this in the while, take your phone walk around, and they're in that tornado alley in Alabama. And she was like walk around your home and start filming everything, save it to the cloud. If anything happens when the storms come through, it's going to benefit you to be able to go to your insurance company with pictures and videos because there will be things you won't even remember You know, a total loss is one thing versus partial loss. But I know I remember in the back in the day, we were supposed to write everything down in every room, there's no way I cannot keep up with all of that. And even if I had receipts, that's going to be great. But if a tornado hits my office, they're going to be scattered around a 16 mile, I'm not going to be able to go get them, right, I'm not going to have them. So what is it? And what could we do? And I just thought about that, because I think, you know, this is even just a good prompting for me to step back and think, how can I go through the contents of my office, my workspace, take pictures and make note of what would it really take, I mean, I'm sitting here with two huge monitors, I mean, that's $1,000, just for the two monitors, plus the podcast equipment plus the external keyboards, I mean, when I'm looking just at time technology, I've got 1000s of dollars, just in that and iPad, to my ReMarkable 2 and all the things and that isn't even get to anything else, that on my head, the desk and the chairs. And I mean, you're right, it adds up so quickly and made, we don't often think about having to really replace those. So it is a good idea probably to walk around our offices and our, whether it's in our home or in an office building, and take some pictures and make note of that. So that when we look at the indemnify or the make whole amount, we're making it a decision on the amount with the forethought of what it is we really needed to cover. Okay, so having insurance is about making us whole again, when is the right time to use insurance? When do we call and say I need to use whatever type of policy we have. What is the I know there's a threshold, I mean, if it's going to cost me $300, to fix it, and my deductible is 1000, ding, ding, ding, I'm not going to call. I mean, at least for me, from a profit perspective, I'm not going to pay 1000 so that I can have a claim when I could have solved it for 300. So that to me is in the, for the most part, that's pretty, it's a visible thing that we can see. You know, it makes sense. But when we start moving past that, how do we make that judgment call to know when to actually, I guess, use the insurance policy?
Michelle O'Connor 17:17
So that is a great question, because we do get asked that frequently. And everyone, you know, most policies have a deductible. So if we're talking about a property policy that's got a deductible, then you're right, that's an easy decision, it's under the deductible, there's no need to call the insurance company above the deductible gets into something that's way more subjective, because then you got to truly make the decision for you and your business. Now, one of the things we like our clients to do is call us and have a conversation, because you can have a conversation with me without me reporting a claim, because we can talk that through and you can make that decision. So we encourage our clients to do that just good. That's what we're here for is to talk it through. If we had a crystal ball to know, if you were going to have a you know, a tornado next week, then we would probably have a better answer for you. That's the unfortunate part, you don't know what's coming. So the way I usually guide my clients, if it's just above the deductible, then we have the conversation Do you want to report the claim, because now you're going to have a claim for, you know, if you have $1,000 deductible and the damage totals 1500, you're going to have a claim for $500, that paid out 500 bucks. So the more it gets above that, the more likely it is that you should turn the claim in. But then you also need to be smart about your deductibles. If you're not going to turn something in under $2,000, well, then you should have a premium savings and increase your deductible because the higher the deductible, you're taking on more of that, then the lower the premium is. So it's a it is a balancing act for sure. And I think having the conversation with your agents usually the best place to start, because you can talk it through if you've already had claims activity, you're definitely not going to want to turn a claim in, that's only going to net you a $500 payment because you've already got some activity. And then when you look at that, collectively, it could impact your ability to get insurance.
Michele 19:06
Or to even just handle higher rates, right that rates go up then over the year, it could actually end up being higher than the $500 claim that you made when it was a smaller amount. So just really being I think looking at it short term, and then looking at over the long term. What might that do? And how might that impact and not every claim is the same? I mean, there's some things that I think like if I'm even just thinking on the personal side, you know, we had to have a roof for two times we've had to have our roof replaced. One was hail damage. The second was because a tree fell on our house at 3am in the middle of the night. Well there was no amount of us handling that when it broke the ridge beam across the whole back of the house. Insurance and it was huge insurance claim, had to step in. But we have had probably three floods in our house. You know, we had one Just the other day where there's something in the trap of the bathroom upstairs leaked and was coming down through the bathroom downstairs, we just fixed all of that on our own, we call the plumbers on our own, we do whatever we have to do. Because it's not worth that the damage isn't extensive enough to go through insurance. But when I think back even to just the roof and hail damage, in some ways, some of those things are so noted that they don't even hit the claims the same way as a normal use of an insurance policy would so that that's another great reason. And I know that's a homerun, but it's another great reason to call in and have a great agent and talk to them about it. Because they can help you think through Is this a claim you should make? Is it one that you shouldn't could there be more extensive damage once they get in and what they know. And if you take it on your own, you're going to be liable for everything. And just help you think through what your risk is, by doing it either way.
Michelle O'Connor 20:59
Right? Now, the one exception to that is workers compensation. When you have a workers compensation policy, unless you've chosen to have a deductible, you have to report every claim. So every injury that you send somebody to the urgent care, you have to report it. And that gives the insurance company the ability to be involved right from the beginning of it, which is super important in a worker's comp, now you can choose to take a deductible and workers comp most people don't. And most of the folks listening to your podcast probably have lower, you know, rates when it comes to workers comp, they're not up on roofs, you know, where there would be it would be very dangerous. So there's some different levels there. But again, something you can talk through with an agent, we do have a couple clients that opt to take deductibles, they report the claim, but then they're going to pay up to $500. If somebody's got to run to urgent care and get, you know, stitches in their finger or something minor.
Michele 21:51
Well, we do have listeners who are doing installations, and they can easily be 20 feet up on a ladder in a family space. So not quite a roof, but documented close in some cases, right?
Michelle O'Connor 22:02
Absolutely.
Michele 22:03
And certainly their insurance policies are higher. So let's talk for a minute then about some of the different types of insurance. We have business owners policy, these are just some of the ones I threw out to you and my back and forth emails, we have business owners policy, general liability, professional liability, errors and emissions, which is a big one, that our people get hit with the workers comp, all of the different types. Can we just go through and break these down a little bit and kind of talk about on what type of business might need that policy or might need a different policy?
Michelle O'Connor 22:38
Sure, absolutely. So a business owners policy is a policy that combines both liability and property coverage. So a simplistic example is my office space, we have a business owners policy. So if somebody comes to my office space, and they get injured while they're there, then the liability would take over there. And there's other things that the liability policy covers, but just as a broad example, and then the property is going to cover the desks and the actual physical space of the location. So the business owners policy combines both of those things. The professional liability is a really important one, that in depending on the industry, it can be more or less important in the industries that you serve and the industries that we serve, it's been extremely important and that covers your professional judgment. So if you make an error in your professional judgment that's going to come into play that policy depending on what you do can really save you save you a client save you financially as well. So super important. Commercial auto is another one if you have business vehicles that whether or not they're titled in your business, which that's a whole nother deeper dive conversation about how they're titled. But if you're using them for business purposes, you should have a commercial auto policy. So if you are driving to and from a client's house, if you are delivering supplies in your vehicle, if you have employees who are driving your vehicle or their own vehicles, those should all be be addressed on our commercial auto policy.
Michele 24:09
Now, let me ask you this real quick. When I had my business owners policy, we had some of the the auto use under that are there some that also cover it so mine covered everything that I put in it driving back and forth and mine is not a mine at the time was not mine are not business owned there because I don't drive them enough for my business to for that to make sense for me. But I did have some of that covered under business owner. So even if the bigger point here is you need to look to make sure that autos are covered whether it is through a commercial auto coverage or business owners policy that has a writer or something else that covers it. I think what's most important and I know this was a big aha for me 20 years ago, was recognizing two things. The type of homeowners that I had, did not cover me I business inside my home. And it didn't cover it because it was a business. And so that was an important piece in that business owners policy, and then to realize my auto didn't cover my car, in the use of business. Correct. And so therefore, some of us can sometimes think when we're just starting out while I'm in my home, so anything in there must be covered, or I'm using my personal car for business, therefore, it must be covered. And what you're saying to us is, number one, check your insurance policies, because in the majority of cases, that is not the case, correct? That is correct. Okay. So then we would use what we used to lovingly called the BOP, or the business owners policy. So if anybody ever hears that, as a bop, you'll know what they're talking about. But either that, or like you said, the commercial auto coverage for you, or for those that are driving their own vehicles, right, because that's important, their auto insurance is not going to cover their auto, if they have an accident in the course of doing business, for your company, in most cases.
Michelle O'Connor 26:08
So it may if they have it, but you're making a big assumption that your employees carrying it you think people do, it's required by your state, but they may or may not be. So that's one and then also your business will undoubtedly got get brought into it in some way, shape, or form because it was in the course of it. So if they had like super low limits, then that would be a financial impact for you. Because then of course, you're going to get, you know, they're going to come back to you after the fact. And then the other thing too, I don't want to gloss over is what you were transporting, that is a conversation you have to have with your insurance company. Because there's so many different things that interior folks could be transporting. And if they are transporting something that's valuable art piece, versus they're transporting their own materials, those are two totally different conversations. But having an upfront conversation about what that is, is super important.
Michele 27:00
Great. Okay, I just wanted to stop there, because that happens. And I can remember having window treatment installs, that could mean 15 $20,000. And I had things in the back of a big SUV taking it that was a big deal. I can remember when I had a drapery workroom and all of a sudden, you know, all the fabric from an entire house would come in. And I would have to call my insurance carrier and say I need to up my coverage. Because it's not like that, like I knew that on average, I turned and burned certain amount through there, of what we would consider other people's property because they had paid for it. So it wasn't my property in my place of work slash living, it was other people's property in there because they had paid. And that's a difference to when we're looking at our coverages is what is really owned by Michele or by my business and what is other people's property that is spending time in my place of business so that I can then take it to the next place. And we would have to raise and lower my you know, I would get like just special I don't know, is it writers? Is that what it was, or they would raise my limits for a certain amount of time and then go back down as I started getting things back out so that I didn't have to number one carry too low of an insurance coverage or too high, right for just kind of the normal ebbs and flow of my business.
Michelle O'Connor 28:19
Right. And that's such a great point, because those items are not owned by you, they're just in your custody, essentially, for the time being. And if the building burns down, you would want to be indemnified on behalf of your client. So those are really important things to discuss. And depending on you know, if you have an average with your clients, then you probably can leave it but if you have some, like you said extremely expensive coming in, yes, those are conversations you need to be having, and really need to be having them prior to you taking possession of it. Because one of the mistakes I hear our clients making all the time, is calling us after they've done something. And then we can't give them the best guidance that actually would have saved them time, effort, and most importantly money. Because they didn't call us ahead of time, if they would have called us ahead of time, we would have given them different advice and been able to say, hey, let's creatively do it this way. And then that way, you don't have to do X. But if you've already done it, now we just have to deal with what you've done.
Michele 29:17
Right? Or our options are limited. Sometimes we can't be retroactive on something if it happened. So that that is a really good point, that timing of reaching out. And we'll touch on that in a few minutes, Michelle, because I think that's why it's important to have an agent or someone that you can have these conversations with to say help me make sure that I've got what I need in all aspects and when to know when to go higher or lower and whatever we need. Okay, so we've covered a business owners policy, which is the combination of kind of that you said liability kind of general liability, if you will, and what did you say the things that you own primary property, okay, so it's a combination of those two we mentioned just general liability. Did we mention that one?
Michelle O'Connor 30:04
I think we did. Well, and actually that can be separated. So I'm glad you said that. So you can have a policy that is just general liability that would cover you when you were out at a location at someone's home. But most of the time people have enough property that it makes sense to put those policies together, and it can be more economical that way. So it just depends on your specific situation. But yes, you can splice that out.
Michele 30:29
Right? Then we mentioned professional liability. And I have professional liability for two reasons. Number one, for the podcast, right, we're out here, people listen to something even though this is all educational. It's not meant to be instructive. It I don't know anybody's in, you know, business, particularly, unless I'm working with them. And even then they everybody makes their own decisions. So I have professional liability as an educator, and podcaster and a coach, because I'm sharing information, and you just don't know how people are going to use information. And then you mentioned commercial auto, which tie this back to the business owners policy. Let's jump in and chat about errors and ommissions, because I know, some designers have that some don't some builders do, some don't. And it can be an expensive add on or an expensive policy to what they already have. And so I know, I've seen a lot of conversation online of, should I shouldn't I, when should I want when should I and what does it really do for me?
Michelle O'Connor 31:28
Sure. So you know, in my humble opinion, if you choose not to, then you are basically self insuring that aspect. So it can be damaging from our perspective of the client relationship, if you aren't able to financially take care of the mistake you made. So let me back up and talk about a mistake you can make if you're in a client's home and you miss judge, and even the material you mentioned would be a great example, if you miss judge the amount that you need, if you miss judge, the one that the client actually selected, I'm sure there are a number of areas where you can make a mistake in your professional judgment on something like that, for measuring two selection, those would be times where the policy would come into play. And so if you're not able to financially take care of that for the client, if you don't have it, that's what you're setting yourself up for. So if you do have it, and you're able to turn the claim in, then it's a different conversation, because you hopefully can save the client relationship because you were able to financially take care of them when a mistake was made, because you've already made an error. It's already a bad conversation. And we're human, we make mistakes. So I mean, that's most industries, there's not an industry, that doesn't mean professional liability, we carry it, you know, doctors carry it, it's referred to as malpractice on there. And but there's not a human being that doesn't make mistakes.
Michele 32:52
Right, and the errors and omissions piece. I've seen things like giving flat quotes or flat rates and not realizing that there's the whole third floor of the house that you missed, or Oh, my gosh, I forgot this whole section of window coverings, or now the whole floor needs to be redone. And it's not something that would hit under a regular policy, it's a different kind of thing. And so those things can be devastating for small business, it can put some businesses and completely under if if where they're working. And what they're doing is that a higher end and a higher cost than the money that they have saved, or that they have access to in their firm.
Michelle O'Connor 33:38
And unfortunately, it's also your about your reputation at that point as well. Because you don't realize how devastating it could be to your reputation for something like that to happen. And then financially, you can't take care of it. So you've got you know, just multiple problems. So the claims are not as common, but when they do happen, they're devastating. So it's kind of a like, you don't have just like little ones, because little ones most people just are able.
Michele 34:02
Right, right? Oh my gosh, I forgot that one blind order. It's $600. I'll just order another blind and we won. You know, you bring up a good point that usually they're devastating. And I mentioned this to you. Well, before we do that, let me let me move on let's, let's cover workman's comp, and then we'll talk about the timing of because that's where it's going to come into play. Talk to us about workman's comp because I know and this is another area where people go I'm only a business of one or business of two and I'm only doing residential, not commercial. So therefore I don't need and I know that that are most of these regulated by the states that they're in different things that are needed based on the state that you're in.
34:42
A worker's comp is but all of the other items or not, that's up to each individual business owner. So it is state specific. So you do have to know your state guidelines when it comes to workers comp, but I will tell you, regardless of what your state guidelines are, when you hire the first employee, you really need workers compensation. Because if you choose not to have it and your state doesn't require you to have it with that first person, first employee, that employee can still get hurt while they're in the course of your employment, and you're still responsible for them being injured on the job. So not only do you leave yourself open, but as a responsible employer, I just don't find that to be a responsible business owner and employer, that you wouldn't take care of your employee if they're injured while on the job. You mentioned somebody on a ladder, we've had so many claims where people fall off of ladders. And again, you don't just twist an ankle, most of the time, they're devastating, they broken but multiple bones and legs, back injuries, head injuries, it's terrible. It's absolutely terrible. So in even small steps, though, we had a landscaper fall off of a small step stool and get injured badly. So there, you just can't estimate what will happen in the course of employment, if they're driving, there can be car accidents, that would be covered under workers comp. So my recommendation is bullying. Number one, you purchase workers compensation.
Michele 36:06
That is not what we would all here and no normally, and I think that is a great idea. Even when you think about it, for those of us that have had drapery work rooms, it takes one second to sew through your finger. And just to even have to stop and go to the doctor and get a tetanus shot should be covered by the company. And one of the first things they asked you, if you go to any of these places does this did this happen in the course of doing work. And so it is really important to be able to cover that for your employees, we could easily staple ourselves when we're in design you I've seen people just hurt their backs carrying in some of the samples sometimes or pull something and need to you know, go to a doctor for that even if it's simply chiropractor or something, you know, some some pain meds. So we do really have to think about everything, heck and the Northeast with the snow that they've had this year, you could have easily an employee slip and fall trying to get into the doorway or out stepping out of the doorway, and that would still be considered. I know both my sons work in construction. And you know if they do anything on there, that is one of the very first questions that are asked is, did this happen at work? And what do we do from here? So okay, so when when we are going to get that first employee would be the time that we would really need to consider that. Let's talk about these others, then when is the right time to get insurance.
Michelle O'Connor 37:33
So I think everyone has different risk tolerance. And that, you know, some people, risk tolerance for them would mean that they're totally comfortable if they're, if their home burns down, and they don't have any coverage for the $10,000 of office things that they have. They're good with that. But other people that's just out of a question, they don't want that. So then in that case, it's really when you start your business, that's part of it. And we always talk about when you start your business, you need an accountant, an attorney and an insurance agent. But those three people should comprise part of your professional team that you surround yourself with. So that as you grow and as you continue to add employees, are you considering vehicles you're consulting them to make sure at every level that you've got yourself covered and then that's when you have risk tolerance conversations at each of those levels. You know, here's how you can do it if you'd like if you choose not to insure it, then you here's what you would be responsible for. So really out of the gate when you start the business, that's when you should have the conversations. And at that level, the policies are pretty inexpensive. So it gives you a ton of coverage for dollars on the day.
Michele 38:36
Yeah, I know that was one of the first things I did was get a business owners policy because I kept thinking about the fact that I was either going to designers locations, they were coming to my location I was going into people's homes, just dropping a measuring tape on a floor and damaging a hardwood floor could require an entire floor to be done if it couldn't be corrected to make the homeowners happy. I mean it takes a second I mean if anybody's ever had a toddler you know, it takes a second for anything to happen with them. Same thing with insurance and I was fearful of somebody falling when they came and had to go down to my work room or just there were just too many openings for something to happen. All I could think about was I had all if What if I had all of their Scalamandre you know fabric in my car and I had an accident going home from the appointment like who's gonna pay for that right? No, and I either had to have you know, as a profit first gal, I either had to have 1000s of dollars set aside in my company to pay for something or I needed to insure myself against that so that somebody else could help me pay if that were to happen.
Michelle O'Connor 39:48
Such a good point how I mean having the cash in reserve such a good point, because if you don't then the then the best option is to insure it because it's so inexpensive.
Michele 39:58
Because the last thing I want to do I always have to close my whole business because I didn't make a smart business decision to protect what I'm building. That's the way that my attorney talks about all the time. She's like, Michele, we're just protecting what you're building. I think insurance is the same thing as saying I'm going to, you know, one is saying I'm going to protect it legally. One is I'm going to protect it, if you will, financially, in some ways, the accountants protecting it another way financially, we if Why would we go through all of this, if somebody could take it away, not intentionally, but in a moment because something happened, whether it was an intentional act or not, I'm saying drapery work rooms, there was one just recently where there was a fire, and it burned a large portion of the building. And now even if it didn't burn fabrics, you get smoke damage everywhere. I've seen work rooms that flooded. I've seen design centers that flooded or something happened or a pipe burst or any kind of thing. And we always think it won't happen to us, you know, I would have never told you and all my life. But at 3am when it wasn't rainy, and wasn't windy, and an 80 year old oak tree would land on my house, I wouldn't have told you. We had just had that tree check two weeks earlier about the arborist who said it looked fine. But nobody knows what the root system looks like. So you know, again, you don't know when they that's the whole reason that it's an accident is we didn't see it coming and didn't know that it was going to happen.
Michelle O'Connor 41:26
Hey, so I'm so glad you brought up flood insurance, because we should just quickly throw this out there. Flood policies are separate policies. So they are not built into your business owner policy. They're not built into your homeowners’ policy. They are separate policies. So unless you have purchased and paid premium for a flood policy, you don't have it. So that is such an important point. Because in the south where we live, there have been some terrific rainstorms where the ground can't literally soak the water out fast enough. So homes that have not been in a flood zone businesses not in a flood zone have gotten to an excess.
Michele 42:02
Jessa got hit with that the last couple of years, some of the Midwest has been hit with heavy flooding over the last five years. Same kind of thing.
Michelle O'Connor 42:09
It's very unusual, but it is definitely something that needs to be considered and thought about long and hard. Because if you're going to ruin all the fabric that you have in your workroom, it's devastating, and you're not going to get that turn, you know, be able to have coverage on your business owners’ policy for flood.
Michele 42:26
Okay, so are there any other major types? I know when I kind of came at you in my email, and we first are talking, I'm like, boom, boom, boom, boom, boom, is there are there any that we've missed, or that we haven't talked about that we need to consider in this conversation Michelle?
Michelle O'Connor 42:40
There's a few that are getting a lot of discussion that I've seen in lots of different business owner forums, what employers practices liability, and it's EP Li is the short term for it. But that is when you have employees, that is protecting your employer decision. That's what employers practices. So it's
Michele 43:02
So it's almost like professional, it's like profit, almost like professional liability, but from the employer side affects?
Michelle O'Connor 43:08
So that that's helping you if someone sues you, because they believe that they've been fired because of discrimination. If there's the sexual harassment claim, and they don't believe that you handled it properly, those are the types of things that that policy is taking. Okay? So very, very important in our litigious society to make sure that we've got ourselves covered as an employer. And then the other one is cyber. And that has been in the news probably about once a week, where, you know, target gets all of the credit cards stolen, and all the information stolen. So cyber liability protects your business against that attack and that specific one. So it depends on what you're collecting, what information you're collecting of your clients. But if you're storing credit cards, if you've got personal identifiable information, which his birthday, social security number, name, address, of course, that you can plug those all together, if you're storing any of that in the cloud, on your computer, wherever you got it stored, then you have the possibility of the cyber liability ahead.
Michele 44:11
That is an add on, I think it seems like when I got my insurance policy, they asked if I wanted to add that on. Yes!
Michelle O'Connor 44:17
I can see that in depending on the volume of clientele you have and how long you keep your files, you know, you have more or less of a risks for those things. So and even recently, insurance agents have been to hacked to try to get into the insurance carrier systems are it's insane what's going on with some of that stuff and how much does business owners we have to do to protect ourselves to avoid that from being an issue, but certainly having the coverage is the ultimate way to protect yourself.
Michele 44:45
Okay. So that's a lot of different types of insurance, and certainly not every business needs every single one perhaps and maybe they do. And even if we just think back if they based on what they store, they might need cyber if they haven't employee they might need that, which then means they need workers comp, they might need errors and emissions, if they're out dealing with especially large scale design, that they cannot make up an error or an admission on their own out of their budgeted funds that they have, they might need professional liability if they're giving somebody a professional opinion of what should or shouldn't be done. And then, of course, the general liability and business owners policy for their office space. And if somebody trips and falls, plus the commercial auto, if they are driving their car, that's a heck of a lot of injury. have to say budget for all of that, I mean, that, that's a lot of insurance.
Michelle O'Connor 45:42
It is. And it really depends on the size of the business, how to budget for that, because, you know, if you're just getting started, the budgets going to be a lot smaller than when you're 10 or 15 employees. And because the workers comp rates are going to be more, certainly your business will have scaled, and so you'll have a lot more assets that you're trying to protect. So unfortunately, I don't, I can't really give them a good or you a good budget.
Michele 46:07
It's not the straight percentage or anything.
Michelle O'Connor 46:10
No, not at all. But it's the conversations and having them beforehand. So as you're getting started trying to get your business off the ground, and you're doing your research and putting your business plan together, that's a good time to reach out to an agent and just start to even get some ballparks because they can give you ballparks off the top of their head without an in depth dive so that you have some figures to say, Okay, here's where I'm at, it's going to be 1000 for this not 5000, or whatever. So you've kind of got some budget ideas.
Michele 46:37
And then we can start building out that financial plan to allow for that. And I think that's one of the reasons it is so important. When we you know, from the things that I teach on my side, is making sure that we know what the expenses are, these are expenses to the company. But these are expenses that I'm telling you, the cost of having the insurance is negligible compared to the cost of the claim, right, and when it's time to make that claim. So really making sure that we're protecting ourselves, we're saving for it for those deductible amounts, making sure we have a savings account that has some money in it so that we can actually pay those deductibles. Because you're in trouble. If you can't do that, I mean, you're going to have to pay it. Just so many things, creating a budget, knowing that when we even create our pricing, our pricing has to make sure to the homeowners or to those that we're serving, that there is additional that there is enough in that billable rate that will cover the overhead expenses of the firm so that we can do what we need to do to run well. You know, one of the scarier ones that we you know, we don't even have time to even get into. But I want to bring it up for people is the whole workman's comp conversation because even if legally in my state, I don't need it, if I bring in X number of subcontractors who they don't own need it. But now I've got like 10 or more subcontractors, and nobody needs it, I now need it, because they don't have it. And so this is this, that's an add on, I mean, you got to look at every single person that's working with and for you, in most states, because again, independently from my understanding, they might not need it. But collectively, if we're all in under an umbrella, we we might
Michelle O'Connor 48:16
Right and then more importantly, so where that what really comes into play then is a contract. And that is another conversation. But it is such an important piece of this is that if you're going to hire subcontractors that you have a subcontractor agreement in place, and that it's very clear that they have to carry workers comp, and that you are collecting a certificate of insurance from them, that shows that they're carrying workers comp, so that kind of has to be lock, stock and barrel. And an attorney can help you with that with the guidance of an insurance agent to make sure that that's what it should be. Our folks that have those in place and are very diligent about it, don't have issues with them. But you can also collectively, you know, if you're the one hiring them all, then you become the one that's responsible for the insurance. So if you don't have that in place, they can be construed as an employee, and then that's when the state law would come into play. So it's a really slippery slope when you're hiring subs not to have it done correctly.
Michele 49:09
It's different when you know the homeowner is paying the contractor but it is running through your business. There are a whole I mean, that's when you really need to talk to your agent about all types of insurance because there's so many things that are covered and making sure that those agreements are in place. So that you know because people are going to follow the dollar. They're going to follow whoever they paid. So if they paid me as the designer, they don't care about the subcontractor, they're coming back to me. They paid the contractor they're going to go there so they're always going to same with a drapery workroom, they are going to follow who they paid. And so we have to be prepared that if you're taking payment, are you set up legally Are you set up with your insurance to handle any flow down from that payment? Right? Absolutely. Or now in the future? Absolutely. All right. So tell me this, Michelle. How do We find a great agent, what questions do we ask of an agent? Is it better to go with an independent agent? I mean, I know that there are all kinds of things. What how do we start this if we're new to this? Or maybe we just have a general insurance policy, but nobody ever calls to us. They don't talk to us. We're just some random person out there. How do we navigate finding the you in our area that can have a conversation and help us and that we know, is not just trying to sell us the next thing, but really wants to help us work through our risk and our avoidance and our tolerance and all of that?
Michelle O'Connor 50:35
Such a great question. So I'm a big proponent of independent agents, because an independent agent represents many different insurance companies. That's the big difference, when you're talking about an independent, that's what they do. So we represent upwards of 10 insurance companies in our agency, each one of those companies has different things that they're, they're strong, and they're not all strong with all different types of businesses. So it's important that I have the ability to go to the company that's going to match what my client needs at the best price. And if that company can't do it, I can move on. So an independent agent can do that for you. They can do the shopping, if you will for you. So the other question, the questions to ask is such an important point. Because when you hire an agent, you are hiring a professional to be on your team. So you should be interviewing the agent to ask them the questions that you just said, do they do annual reviews? Are those in person? Are they just be the computer? What kind of approach do they take when it comes to insurance and the agent should be able to explain that to them, you know, relatively easily. In our agency, we believe firmly in education. So I believe my goal is to educate you, your goal is to make the best decisions for your business. But you can't do that if you don't understand what I'm asking you or what I'm trying to explain to you. So making sure you know your choices. So that's that's what I would be explaining to someone, another agent may have a different philosophy. But you should be understanding that upfront how that's going to happen, and what's going to go on behind the scenes there.
Michele 52:07
And then one question I also had, I know you and I touched on this earlier, in a prior conversation. Not every agent can necessarily work in every state, they have to be licensed in certain areas. So we do really want to look for somebody who is licensed in the area that we live or the area that we serve where we need the insurance, correct?
Michelle O'Connor 52:29
Yes, absolutely. So insurance is state specific. And so lots of folks don't understand that. So they'll move from North Carolina to South Carolina and think their policies will just get transferred, when in fact, they have to be cancelled in North Carolina and rewritten in South Carolina, because the state laws are different. So the agent has to be licensed in the state that they're doing business. Now our agencies licensed in lots of different states and lots of other agents are as well. But you're absolutely right, making sure that they understand that components super important. It's also much easier to if you do if you're able to put your personal and your business insurance together, it's much easier for you when there's overlaps for the agency to be able to handle those questions and conversations. And a prime example that happens constantly is you know, you go to the dealership and you buy a vehicle, and maybe you put in your business name, maybe you put in your personal name, but that doesn't always clearly go back to the agency. So there's some there can be some jumbled up things there. If you don't have that all in one place.
Michele 53:26
Yeah. And I know that, that we have insurance in multiple places, just number one, we've been in a house for so long, and so many things. And some of the insurance that I need, the insurance carrier that we have for our home doesn't offer it. And so you know, trying to work around all of that.
Michelle O'Connor 53:42
Just one extra point, not necessarily the carrier, but that the agent is the same. Okay, guys, that way, when you call me if the dealership says Oh, she put in her personal name, and I look and you don't have a personal auto policy, I'm going to address that with you right away versus your guy, or somewhere else that could be an issue. e person who's trying to help.
Michele 54:00
So one person who's trying to help us look at all of it, to make sure to make sure that we're covered in all areas and that we are staying consistent. Okay, got it. I'm glad you clarified that. One of the questions I'm going to ask you is how often should we re shop our insurance? Or how often because I know that we've had years where when I went back and re shopped it, it was a big savings for the exact same coverage? How does that process work on either reshaping it talking to the agent trying to get better pricing, because sometimes it just keeps going up, up, up, up. And then if you start somewhere else, you start at the bottom again, no doubt.
Michelle O'Connor 54:34
So it's kind of a double edged sword when you shop it because when you start out with a new company, you are new to them. So if you had had insurance with an insurance carrier, and this is the reason I mentioned if you had insurance with the same company for five years, and you have two years in a row where you have some claims, that insurance company is going to be way more forgiving of you because you've been a client of theirs for a while. So versus if you've got if you're brand new to a company And you have two, three claims, they're not going to be as quick to keep you as a client, they're going to say we've collected almost no premium from them. And so we no longer want to do business with them.
Michele 55:10
Because they don't know your whole history and the fact that you just got hit all at once. Okay, that makes sense. And they really don't care because you haven't paid them even if you pay somebody. Right. So they're not, but I'm just saying, but they're also not willing to go, I can hold on with this person, because they're not like, you know, a claim hog, and they're going to show up with something else.
Michelle O'Connor 55:29
Exactly. But on the other hand, you're absolutely right, the premiums can continue to go up. So if you're working with a good agent, you should be looking at your stuff every year, and you should be having those conversations, the agent should be able to say, Yes, I've seen a rate increase with XYZ, we're going to look at three or four other ones behind the scenes for you, let me get back to you. And let you know, they should be able to help you have those conversations without you haven't to pick everything up and go somewhere else and shop it. So they should be knowing those things. And one of my carriers is super consistent. One of my carriers is hot and cold with things. And we know that so if they are all of a sudden hot with landscapers, and the prices are awesome, that's one thing, but all of a sudden, they don't want them and they go through the roof, then we're coming into the client saying we need to move you, they just shot their premiums through the roof. And we don't know why. So that doesn't make any sense for your business. So you need to have that conversation. One of the big mistakes we see our clients making though, is we offer to do reviews, and they won't take the time to do them with us. And businesses change how good point constantly. So you may be thinking, Oh, we haven't done anything. But in reality, you may have, you know, added some things you hadn't spoken with the agent about.
Michele 56:43
But you know what, Michelle? I think it's even if the business didn't change, the world around us changed. So it may be that I didn't shift, but something around me shifted that now means that my coverage needs to be different. So I think we have to look at it both ways, right? Not just what's happening internally. But what's happening in the world extra definitely great point, like cyber. That's not an internal decision that I did something it might be I've done the same thing I've done for 20 years, but all of a sudden, there's a risk external to my business that I need to be aware of. And I need to plan for. Right, awesome. Michelle, this has been so helpful you actually it made me Just think about some areas in my own business that I want to step back and look at and rethink and that that's always assigned to me that I've had a really great guest on the podcast because I'm like, okay, not that I don't learn something I learned something every single podcast. But you know, some podcasts kind of want to push you into action a little bit more and make you think about things. And you've done that for me today. And I really appreciate that. Tell everybody where they can find you. Where's your firm, your agency hanging out online?
Michelle O'Connor 57:49
Sure. So I am located in Charlotte, North Carolina, we are O'Connor insurance associates. And our website is oianc.com. And it stands for O'Connor insurance associates in North Carolina. But 20 years ago, when we bought that domain, we quickly realized we didn't want to keep saying every time.
Michele 58:09
I hear ya, I hear it well, and we'll have that in the show notes as well. So everybody can get in touch with you. But Michelle, thank you so much for being on the podcast for sharing all about insurance. And I'm excited that you're going to be working with some of my clients and helping us look through that a little bit more. And I hope that everybody in the North Carolina area and surrounding areas that you serve gives you a call. So thank you again for being such a delight and so easy to talk to. And I love the educational aspect of your agency.
Michelle O'Connor 58:40
Awesome. Thanks so much for having me, Michelle. I'm super passionate about insurance. So I hope everybody enjoyed it.
Michele 58:44
And we did. Thank you.
Michele 58:48
Thank you, Michelle, for joining us on the podcast today. As I mentioned, you have really given me some things to dig into and think about and look at for my own business and just to make sure my coverage is adequate. And I know that our listeners feel the same way. Taking care of what we build is so very important are the whys. Why are we doing it? Check out Michelle's website to see if her firm can assist you. I really love helping business owners create strategies to make and save the profits in their company and to ensure that the best business practices are carried out. For more information on how to reclaim your time pay yourself more and grow your team intentionally which is what I love to do. Check out my masterclass which can be found at ScarletThreadConsulting.com/aim-masterclass. You can also find it under the Resources tab. Save the profit you're building in your firm because profit doesn't happen by accident. Profit is a Choice is proud to be part of the designnetwork.org where you can discover more design media reaching creative listeners. Thanks for listening and stay creative and business minded.