Your Money, Your Rules | Money Mindset, Money Management, Abundance Mindset, Budgeting, Spirituality

158 | General Liability Insurance Explained: Key Questions, Audits & Agent Insights

• Erin Gray | Wealth Coach, Former CFP and CFO

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Most founders treat business insurance like a checkbox, hoping they never have to think about it again. In this episode, I simplify General Liability Insurance (GLI), breaking down what it covers, essential questions to ask your insurance agent, and how to approach insurance as part of your overall money management strategy. 

In this episode we discuss:

  • Clear definitions of what General Liability Insurance is and what it covers
  • How to vet insurance agents for fit, values and industry expertise.
  • The exact questions to ask about coverage, limits, exclusions, and endorsements.
  • How premiums are calculated 
  • What to expect from annual audits, revenue estimates, and reserve planning.


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From my soul to yours,

Erin

Erin Gray:

I know that insurance isn't the most favorite thing for you to talk about or think about when you actually think about your business. And also it is one of those things that we need to understand. So I'm going to dive into generalizability insurance today. That's it. And I'm going to make it fun. Because I think for a lot of us women entrepreneurs, I think it can feel overwhelming and intimidating. And so you may not necessarily know the questions to ask or what to think about. So in this episode, I'm going to break down the key questions to ask your insurance agent, or if you're looking to get a new one about general liability so that you can be insured properly. So let's dive in. Okay, Ramesh. So then this is where you fade out the music because I'm going to start teaching. Okay. So I want to say first and foremost, like everything, like from this caveat of, well, first of all, let me back up. Obviously, I'm not an insurance agent, I'm not an attorney, blah, blah, blah, all my all of those disclaimers. Okay. But I have, as you know, years and years and years of doing this type of work. So from the 5D, the energetic perspective, we want to be making a decision about insurance from an empowered place, from the assumption that everything is working out and not a fear-based place. And so many insurance agents and companies come from a fear-based place. So I want you to keep that in mind as I'm talking to you and diving into the questions that you need to be asking. Are you wearing your empowered, knowledgeable, assuming everything is going to work out for me hat, or are you coming from a fear-based place? So keep this in mind when you are talking to your insurance agent. Like I call it playing the 3D game, right? A lot of times, most of the time now, I live in the 5D, in the energetic, in the spiritual, in my emotions, in my feeling, in my intuition. And I also know that like the 3D observed world, even though it's not exactly real, it's like what actually is happening is in our mind. But in the 3D world, in the business world, most of these people haven't caught up yet. So I do have to play that game a little bit. So first and foremost is recognizing that, right? Like the three, the business world, a lot of it's still like insurance and attorneys and bookkeepers and banking, a lot of it, credit card companies, like all of that, financial institutions, they still operate from the 3D world. So think about insurance. It's typically required and it makes customers, not that anything makes you do that, right? But like if you're not aware, customers see that you have general liability insurance, and then they feel all warm and fuzzy, even though customers might actually not understand what it means that you're insured. So when I'm talking about general liability insurance, I'm talking about how it covers third-party claims for any type of like bodily injury, property damage, advertising might be in there depending on your policy. So I'll give you an example. Recently, my husband, as I've mentioned, I think I mentioned this on an episode, my husband is starting a tree company business. So because I know all of the back-end stuff, I told him I will help you. So, you know, because he's starting a tree company or business, and let's just use his company as an example. So let's say that he's cutting a tree. God, I'm not talking to you. So just ignore this. But for the example, he cuts a tree and the tree falls and it hits the house. That's considered property damage. Let's say that he cuts a tree and someone walking by and the tree falls on that person, that is considered bodily injury. So that is what I'm talking about with your general liability insurance. It is for bodily injury and property damage. So when most people, most clients that I work with and people that I talk to, they have LLCs. And I don't want to get into the legalities here, but theoretically speaking, an LLC is just a formation or a legal entity or structure to protect you from a personal. There's lots of nuances and things you have to do, but that's the idea behind it. An LLC is separate from you from personal. And this is where I go back to because I have financial knowledge, because I have been in the financial industry, financial planning, I understand the way that certain investment vehicles work. And I don't want to go too deep into this, but it pays to understand when someone tells you, like, oh, well, you know, having an LLC or having an umbrella policy is really going to help you. This is where I kind of wouldn't say kind of, I really have knowledge of qualified accounts and non-qualified accounts and actually understanding how this stuff works. So a lot of times insurance agents might just like spew out information. But the point I want you to get from this is like you got to ask questions and go deeper and make them answer some of these deeper questions because I think a lot of people are just taught in the insurance industry and they may not actually understand how this works. So I'll leave that there for right now. I I might do a podcast on qualified and non-qualified accounts and how that actually works. So, you know, ideally the general liability is going to protect, and I don't even like that word, right? Like that's a very 3D word of like we're having to protect something, but it will protect your business should something, you know, some event happen. And a lot of times insurance agent might be like, well, it'll protect your personal assets too. And that's a whole rabbit hole that we can get into another. But basically, it's going to give someone else, like I said, it's going to give somebody else a warm and fuzzy. And if something does happen, is that you're probably what I've always been told is you're probably going to settle out of court anyways, because they're going to see the amount of insurance you have. So ideally, and I'm just being very general here, is the general liability will help you take care of, protect your business and your personal assets and ensures that basically if something were to happen that the that the person that is having to file the claim against your insurance is going to be taken care of. And because it's we live in the 3D world, you know, what I have been told is a lot of times you have plenty of insurance. Anything happens, you're probably going to settle out of court. It's not going to go to court. So obviously, I'm not an attorney. I'm not an insurance agent, but basically you've got some insurance that will take care of that. So you're not having to come out of pocket. And also, hopefully, your any type of personal assets are not named in any type of incident. Okay. So really, this is what I want to get into is like these are the questions that you need to be asking your insurance agent. First and foremost, with everything, is starting with do you energetically align with them? My experience, you know, when Jason, my husband, decided to start his company, I was like, okay, we need to get these types of insurances. Let me call a couple of people. And one of the people that I called, I was asking her some very specific questions. I already knew the answers, but I was kind of checking to see what she knew. And I just was getting this feeling in my body, not just because she didn't know the answers, but it just didn't feel it felt very transactional. And she was telling me, just submit an application. And I was like, hold on a second. Like, I don't even want to go down that route. Like, first and foremost, I want to connect with someone heart to heart, energetically, make sure we're on the same page. And then I want to look at application process. So I always start with the 5D first. Energetically, do you actually match with this person? Do you want to have a relationship with this person? Because ideally, as you grow, as you scale, you want to be able to have a relationship for an extended period of time because they're going to advise you and they're going to grow with you and they're going to give you things to think about that you might not be thinking about. So, first and foremost is energetic. Do you actually match? And I would call two to three people so you can get an idea of what you feel like, or, you know, zoom or see them if they're local, but zoom them or have a conversation to see if you actually, you know, frequency-wise align. I guess the first question that you would start to ask is asking them if they have clients in your industry that they currently are supporting. If they don't have knowledge of your industry, then they can't provide you proper support and inform you of the questions that you need to be thinking about or common claims so that you are properly insured. Like I've had clients come to me and tell me that they had like a farmer's insurance agent. No knocking on farmer's insurance agent and also like business general liability insurance, you actually need to probably go through an agency where they can go out and they can get multiple different carriers. And they do, like I view an agency or an insurance agent kind of in the same realm of a financial planner, right? Like I thought of it from a 30,000-foot view for my clients. And then I suggested multiple things and then let them be able to make their decision versus like pigeonholing them. Like farmers is typically what I call captive, is they're going to provide you with that type of insurance versus being knowledgeable, knowing about lots of different insurances, business insurances, and then going out and going to different insurance carriers. Okay. So the second thing is asking them, what does my policy actually cover? So understanding what the limits are for your bodily injury, property damage, what are the exclusions? And I know that this can feel like, ugh, you know, insurance. Like I know this might be right up there with bookkeeping. And also the time to understand your policy is not when you're using it. So this is where I say, like, we've got to put our big girl panties, get big boy panties on, and we gotta actually do some of the stuff of the business world, right? Like this is part of taking care of yourself and your business. And I don't think we get to this isn't where we get to just outsource it and be like, so and so my insurance agent is taking care of this. No, like you need to understand these things because as you grow, you want to know because otherwise you're just going to take yourself wherever you go. So it's important that you understand some of this stuff at a very foundational level. The next question is are there any gaps in my coverage that I should be aware of or mindful of? Like ensure that your specific business activities are protected. Like we just reviewed Jason's policy and it said anything that has to do with any type of cannabis was a complete out. So I'm sure a lot of you are not in the cannabis industry. And also, like you here you go back to knowing, like having your insurance agent know your industry and like what is included and what is not included. So um if they can't, if they can't advise you, or I always look at it as if because they have clients in your specific industry, they're going to see claims come through. They're going to see things that you may not even be thinking about as you grow and scale that they can pro that they can advise you on and pro and and mentor you because they already have clients that are, you know, next level. Also, what is the claims process like? Like, know how to file a claim. A lot of times, here's what you ideally want. You ideally want to have an insurance agent who then has a couple or a team, like maybe two or three people. Like one person does billing, one person does certificate of insurances, one person is like your account rep. You know, like your insurance agent is gonna be the person that actually writes your policy. But more often than not, you're probably gonna be paired with an account rep. Um, unless it's a pretty, I don't know, in-depth question. You might go back to the to the main um insurance agent, but they will have uh an account rep that you'll be assigned to that you can connect with. Any type of like audits or you know, the policies get issued, you're gonna have your insurance agent is gonna probably take care of that. But just the, I don't want to say the day-to-day, but like if you have questions, they typically pair you with an account rep. So know how to file a claim. Like, what is the process? Um, are you gonna have like a claims manager that you work with? Or are they gonna just funnel you off and you have to dial a 1-800 number? So working with someone that has a team, I think is important. It shows that they've been in business for some time. They have multiple years in the business. And then, you know, if you've got any issues with certificates of insurance or billing or, you know, claims or anything like that, like you have certain people that you reach out to that can support you. The next question is understanding how your premiums are calculated and ways to save, I guess. Like a lot of times if you have policies, like if you have an auto policy and you have a general liability and you have Inland Marine and an umbrella, all of that, if it's typically covered under one company, you'll get a discount, just like your personal, right? Like if you have your home and your auto, they give you discounts. So depending on the industry, they might rate you or rate the policy off of revenue, like your income and your payroll, or it could just be payroll. So ask about and understand that. Also, ask them, like I mentioned, about bundling the policies or receiving discounts. Because, like I mentioned, you know, if you've got EO coverage and umbrella and, you know, auto and general liability that might go down, the price might go down because you're all at one insurance company or carrier, I should say. Also, you want to ask for general liability, you want to ask about do they do annual audits? I have never met any insurance agent that writes for general liability that they don't do an audit. Most people do not know this. So you need to understand how that works and to also have your insurance agent be on top of it. Like I've had two, two cases where one was the person did not know that they needed to be audited. And so then they made more than what they expected. And when it came to audit time, they owed quite in the six figures of audit money that they hadn't accounted for. Thankfully, he had the cash in the account to pay for it, but he didn't know that. I've also had someone who like their insurance agent just like ghosted them, like issued the policy, and then that's it. Like this is another person who is on your team. They need to be talking to you on a consistent basis. And that doesn't mean to be, that doesn't need to be every week, but quarterly or you know, twice a year, or just you checking in, it's important. Like you, you need people on your team to support you. So understanding how a general liability works so that you're not caught off guard when it comes time to audit time. Also, the question to ask is do they charge for certificate of insurance requests? Some do and some don't. Just ask that question. Also, I don't know if this is the correct wording, but like I always ask, like, are they an over-under policy? So, meaning if you give them a number, a revenue number, and let's say you don't hit it, which I don't, you know, like energetically, I don't want to go down that path. But like, okay, let's just say you don't. Are they going to refund you the premium difference? Or are they only a policy that if you go above it, then they'll charge you. So they're not going to give you the refund. But that is something that you do want to know and you do want to ask so that you do understand what and and like what number do you want to use? Or, you know, when you are planning for the revenue. Also, I always did quarterly reports on the general liability and our well, our work comp we did every month. But on general liability, I would pull a report every single quarter because I would want to know are we in line with our revenue of what we told them and our payroll? Or are we under, are we over? So that more so if we are over, then I wanted to be putting money aside, or I wanted to be um, I think I would put it aside. I don't think I would mail it in. I would put it aside so that when it came time to audit, I had the funds to be able to pay them. So just being aware of how general liability works, how audits work. You know, most insurance agents don't sit with you during the audit. And this is some of the stuff I love to do with clients is like guiding them and helping and empowering them receive more financial clarity on this kind of stuff in your business, you know, like the insurance and the taxes and the bookkeeping, like I call it like all the CFOing stuff, right? And I love to help women in this regard. So if you have been here for a while and you know that this is something that you are wanting some support with, not just, you know, the 3D part of this, but also like the emotional side, right? Like I know that it can feel overwhelming at times. I know that sometimes fear can creep in and that's normal, but having someone alongside you, helping you, mentoring you, supporting you along your journey, um, having someone in your corner that gets it, you know, I've been there, I understand, I know what all of this looks and sounds and feels like, not just in a theory level, right? But like in real live business, I'm here to help you and I'm here to support you. So if that is something that is of interest to you and you would love to connect and see if we are a good fit for each other, all you have to do is just click the link in the show notes and schedule a good time for you and we can have a conversation and see how I can help. So those are the questions that I would ask if I was interviewing either a new insurance agent andor my current one. And then let's talk about the mindset. So I think whether it be bookkeeping or taxes or insurance or talking to your business attorney, like sometimes because we have so many beliefs and feelings around money and what our nervous system feels with money and business, it can feel overwhelming, you know, it can feel a little anxiety-ridden. And I want you to know that you aren't the only woman that experiences this. A lot of women share their sentiments with me of like it feels like a lot. And this isn't something that's taught in business school. It's not taught most times, you know, by the people that you hire. And some of that is because we don't know the questions to ask. And I also think some of it is because some of the mentors, they're they may not be at the place where they actually like really want to teach. And that's nothing bad on them, but I just think that we all deserve to have really fantastic mentors and advisors, people that are in our corner that want to see us grow and want to teach us and want us to learn this stuff so that we can be educated and empowered so we can make good financial, and I'm saying good in air quotes, but like good financial decisions for us and our companies. So I do want to say though that it doesn't get better by avoiding it. Like this is the stuff that doesn't get to be bypassed. Understanding your books doesn't get to be bypassed. Understanding how taxes work doesn't get to be bypassed. Understanding how your insurance works doesn't get to be bypassed. Because here's what's going to happen. If you're not willing to take the time right now to learn some of this stuff, when you grow and when you scale, you are going to have this kind of stuff just at a bigger dollar amount. And learning the lesson in the thousands versus the tens of thousands or one hundreds of thousands is a much easier, I think, less effort way to do it. So I highly encourage clients to take the time to do this foundational work so that you don't have to learn this, like I mentioned at one of my friends, at the $100,000 level. Also, I want you to think about insurance, like I mentioned in the very beginning, from an abundant place. You're assuming you won't ever use it and you have it so if others can just feel warm and fuzzy about it. You know, it's the part of doing business that, you know, when you feel empowered, when you feel knowledgeable in all areas of your money, the more that you are going to become and want to become versed and like versed in it, and also learning the language and understanding how this works. So working with a trusted advisor, like this is also part of self-care. Self-care just isn't getting your nails done, going to the spa, taking yourself on vacation. Self-care is caring for your money, caring for your business, understanding your numbers, understanding how your insurance works and your bookkeeping works. Like that's part of self-care. Like, think about your business as a baby. This is part of caring for your baby. Okay, so I'm gonna leave you with a couple of like action steps to take moving forward of either back to your insurance agent or when you're hiring someone new. First and foremost, I always like to write down my questions that I want clarity on. Second, you know, setting your intention like how I did, you know, after I was already like where my awareness was is I was already past that, right? Like I was on the phone with this lady, this one insurance lady, and I was like, this just does not feel good. So I got off the call, I set the intention. What do I actually want? I want to come from a heart place, I want to be connected. I want to, and I even left the message on two voicemails of like, I want to be heart connected and to get to know you first and see if we're a good fit for each other, and then decide about working together. But I wanted to meet or to talk to someone first before I just started filling out applications. So connecting with someone that, you know, would operate from their heart, not their mind. And also it is safe. And I am giving you permission, not that you need any, but I am giving you permission to ask all the questions. Like the lady that I talked to that I really connected with that I love for Jason's business, I talked to her for 45 minutes before even filling out any application. I wanted to ask her her experience. I wanted to talk about, you know, the business. I wanted to talk about my knowledge, what I would think I would need help with, ask her some specific questions. And she was willing to take the time to do that with me. And that's what you deserve and you also want to have in an insurance agent. So find someone that is going to do that for you. So when you're on the call and you're, you know, ask all the questions, take your notes. Like I have pages of notes that I have. And then also afterwards, you don't have to make a decision on the call. Like give yourself time to absorb what you've learned, what you've discussed, and then to make a decision. You know, I know that insurance sometimes gets a bad rap, and I know it feels boring and intimidating. It can feel this way, right? If we think about it that way. And this is one of those times that like we've got to play in the 3D world, right? We got to play the game. But it is important for you to have someone in your business that supports you and you coming from the energy of empowered and connected and grounded and knowledgeable. Like that is important that you are coming from that energy. So if you want support, you know, creating more confidence with your money, you know, doing some of this CEO stuff, getting all of this CEO stuff squared away, like making financial, empowered financial decisions. I would love to support you. All you have to do is just click the link in the show notes and schedule a call, and we'll see how I can help you. But this is part of business, you know, like part of business isn't just, you know, I think sometimes we want to like just do the parts that are in our minds fun. Also, too, we can make insurance fun. It's it is a thought. But this is the part too that we've got to do. Like, this is the place where we get to put our pants on and we get to say, you know what, this is CEO stuff. I got to take care of this. And you will thank yourself down the road because you will learn what you need to learn. You will be able to ask the questions. You will work with someone who cares about you and your business and will be able to guide you as you grow. Like there's all good, amazing benefits from this. So that's where I would start with the GLI questions. And as always, I'm rooting for you. I believe in you. And I'll see you in the next episode.