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

177 | General Liability Insurance & Subcontractors: What Most Business Owners Are Never Told

• Erin Gray | Wealth Coach, Former CFP and CFO

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In this episode, we break down how subcontractor choices affect your insurance costs, why certificates of insurance (COIs) matter more than you’ve been told, and how being named as additional insured can protect both your business and your cash flow. 

In this episode we cover:

  • What “additional insured” actually means (in plain language) and why it matters
  • How missing or incorrect COIs can cause subcontractors to be reclassified as payroll during an audit
  • Your real options when a subcontractor doesn’t have their own coverage
  • Simple quarterly checks that prevent end-of-year audit shocks
  • The questions you need to ask your insurance agent and your bookkeeper
  • How to regulate your nervous system so you can ask these questions calmly and clearly
  • Stepping fully into the CEO role without abdicating financial oversight
  • Turning insurance and policy reviews into repeatable, low-drama operating habits


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From my soul to yours,

Erin

Erin Gray:

Today we are going 3D. I'm getting specific, super specific about subcontractors and your insurance. Specifically, general liability insurance, what you need to know and communicate with your insurance professional so that you can bypass a recent conversation that I had with a client. She wasn't the first client that I have had this conversation with. And because of this, that means it's probably occurring and happening more frequently than I'm aware of, or it's probably happening in the collective because I know I've had several conversations with clients regarding this. I've had several conversations with just business owners that I've talked to in the wild about this. So it's happening out there in our relationships with our insurance professionals. And it's something that I want to educate you on so that you are aware. So let's dive in. Okay, promise you can fade out the music here, and I'm gonna invite them to the workshop and then I'm gonna start teaching. I want to invite you to come hang out with me this Thursday, January 15th at 10 a.m. Mountain Standard Time. I'm gonna be hosting a workshop all about feminine leadership, educating you on the power of play, having fun in your life, more ease. You can click the link in the show notes to join us, and I would love to see you there. Okay, so 2025 was like one of those years that I decided, you know what, I'm just gonna be more bold. Like that is one of the things I actually want to embody. And now 2026, I'm like, you know what, just like what do you call it? Like take off the gloves or like let's you know, let the roof come completely off. Like, I feel so protective of my clients, of humanity. And I will be honest, the human in me gets a little irritated and agitated when a client tells me something that one of their advisors has told them and or hasn't told them, I should say. I feel this like in my body. And you know, I I've really sat with this and thought, like, Aaron, is this something that you want to be? Yes, it is something I want to be upset about because this is something that I want to have changed. Yes, we don't need to make change from anger and frustration. And also it's like, you know, the conversation that, and I'm gonna share with you here in a second, but the conversation that I have with my client was just like, I didn't know. And it's like, and I told her, I'm like, yeah, and you're not supposed to know. Like, how are you supposed to know? Like, that is the job of your insurance agent. So I'm gonna dive into what actually occurred, and then I want to share with you the questions that you need to be asking or just the education piece that you need to be aware of so that you can address this with your insurance agent. So we were having this conversation about, and I'm talking specifically about general liability insurance, and I'm talking about whether you have subcontractors. So, as a business owner, when you carry general liability insurance and you have a subcontractor that comes and does work for you, theoretically, you and when I say should, I don't like using that word, but like best practice, let's use that word. Best practice is you would tell your subcontractor, hey, subcontractor ABC, you're doing work for me. You need to carry your own insurance, and you need to tell your insurance agent that you are going to name my company, XYZ, as an additional insured. And then that ABC company is going to give you a certificate of insurance that names you as the additional insured. And when you pay your general liability premiums, you are going to pay pennies on the dollar if they do that. If they do not do that, then what is happening is you are going to pay insurance on your subcontractor like they were an employee. And when I talked to her about this, you know, she shared with me like her frustration that like she wasn't told this. And I agreed, like this is sadly, like this is part of business, you know. We we don't learn this in school. We don't typically learn this like as we're like talking to our, you know, friends about our businesses. Like, this isn't something that I've noticed that business owners talk about. And so if you don't learn it before, then typically what happens if you don't have a good insurance professional teaching you this information and is aware of this stuff, you learn it through experience. So either you already have the knowledge already, you have a stellar insurance agent, or you don't know this and you don't have a stellar insurance agent and you learn it through doing. So this isn't, I want you to understand that if you are in this position, it is not because you are being ignorant, it is not because you are stupid, it is not because you should have known. Like, I want you to remove the blame and the shame with this because I think a lot of women, and I've even talked to men that this has happened too, that they blame themselves. Like they should have known better. And it's like, how? How were you supposed to have known? Like, this is where we think like we should, you know, learn, know how to treat ourselves so kindly and lovingly. It's like, how? Because we didn't have parents to do that for us. So who was supposed to teach us? So I want you to really first and foremost, like, drive home. This isn't your fault, right? And it is our responsibility. So now that we know, right, think about like that we assume that professionals are going to think of all the things and anticipate everything. And I always advise my clients that you have to advocate for yourself, right? Educate yourself, empower yourself. And even still, let's just be honest, like that's part of just life. Like, even if you do educate, even if you do learn all the things, sometimes things just get missed. And it's how what I think is the biggest thing is how you respond to what is occurring and how you bounce back, is what actually matters. So I want to kind of dive a little bit deeper so that you understand this. And I want to be really clear. I'm not an insurance professional, I'm not a finance professional, I'm not an attorney, I'm not all the things, right? I just have 20 years under my belt of being in business and advising clients on stuff like this. I've seen a lot, to put it mildly. So I want to reiterate if you have a subcontractor that works for you, you pay a specific rate. Let's just use this. If they do not have a certificate of insured and they are not naming you as an additional insured, you are paying an employee rate. That is typically much higher than it would, is if you required them to carry insurance and to name you as additional insured. Now, if they don't have insurance, this is a business decision. This is a conversation that I had with my client as well. Like you can do one of two things. You can either carry them on as your insurance and you can take on that cost, or you can carry them on your insurance. And this is all you obviously need to have a subcontract agreement in place. Like, let me just say that. Again, I'm no attorney. So all the things, but like, here's what I have done. You always have a subcontract agreement in place. You're very specific about what you require for your insurance requirements. And these are conversations like this episode is specifically for you to be like, oh, didn't know that. Let me go have this conversation with my insurance agent. Oh, wasn't aware of this. Let me also bring that up with my insurance agent. So you have a subcontract agreement. You're very explicit in your terms of payment and all the things that the attorney drafts for you and your insurance limits. And if they do not have insurance and you decide you want to cover them, obviously you need to have that conversation with your insurance agent. And you can decide from a business decision do you want to cover that in your cost, or you can deduct that from the contract price. That's obviously all those things need to be determined and deciphered between you and your subcontractor. Obviously, maybe you an attorney and you and your insurance agent. So the important thing that I really want you to take away from this is not all subcontractor insurance rates are the same, right? So ask these questions to your insurance agent. And then also something that I wanted to briefly state here is most people receive a general liability audit. Most people are not aware of this. Most business owners are not told that this is what's actually going to happen. So without diving too deep into general liability insurance, if you do have it, typically it is, and I'm generalizing here, it's based off of your payroll and or your revenue. So at the end of a not calendar year, but insurance year, right? So like if you started in April, like in for us, we always renewed every April. So every April or a little bit sooner than that, I would receive an audit. Or actually, I should say a little bit after it was always in May that we would receive an audit. So we would get all the, you know, that would be that one full calendar year. And then I would have the results or the total payrolls and the revenues, and then we would have an audit. I advise clients, if they are getting audited, to be pulling payroll reports quarterly and your PL, which, like for sure, you need to be pulling your PL on a monthly basis, but pulling your PL on a quarterly basis to see where are you in line with your audit. Because if you have, let's just say you have told them your revenue is going to be 2 million and you're already at 2 million and you're halfway through the year, you know, of your audit year, then you are going to owe money, which is fine. It's just knowing that you're going to owe money and you need to be putting money aside, or you need to be emotionally prepared for that versus you get an audit and you're like, okay, now I owe$100,000. And I didn't know that. So really being clear, like having these conversations with your insurance agent. And also like, this is another thing. If you have a bookkeeper, these are bookkeeper things that they need to be also working with you on. And if they don't know this, maybe it's time for another bookkeeper. Again, we don't have to tolerate mediocre support. Okay, so from a nervous system emotional regulation authority figure, like, okay, I'm gonna put now on my coaching hat. And from that place, I want you to know you might not even know the questions to ask, right? If you don't have an Aaron in your corner supporting you saying, Hey, have you thought about this? Oh, have you asked your insurance agent about this? Hey, why isn't your bookkeeper doing this and asking you questions like this? If you don't have an Aaron in your corner, you aren't going to know, probably. I would, I don't want to assume, but you may not know the questions to ask. So give yourself some grace. From a nervous system standpoint, if you don't feel safe to question who you're working with, then we need to do a couple of things, right? We need to support your nervous system, we need to regulate your nervous system and get you to a place where you feel safe to question and to speak up. And number two, maybe we need to find you someone else who is like supporting you, like what might be a better fit for you in a way that you need to be supported and to be treated. You know, one of the things that I would would and do always tell CPAs or attorneys or whomever I'm working with, when I ask you questions, first of all, I always say, like, I'm gonna ask you all the questions. And I'm also gonna ask you, and another question to ask them is what have I not asked that I need to know? Like I always ask that question. And I also ask, if I was your daughter or I was your sister, or I was your wife, or however to make it personal for them, what would you be telling me that you're not telling me right now? Like actually make them think about things that may they may have left out. And so when I tell or work with CPAs or attorneys or bookkeepers or whatever it is, I always say, when I ask you questions, I'm not necessarily challenging you, although sometimes I can, but really what I'm asking is I want to learn and I want to understand where you are coming from. Why are you suggesting that we go this way? Like I want to get inside their brains and understand this stuff at a deep level. And you might be like, you know what, Aaron, this doesn't light me up the way it lights you up, or it doesn't, you know, really like this isn't in my wheelhouse. And I get it. And also, I think this is the part where we have to take ownership and responsibility as a business owner. Because what I have seen is we abdicate this responsibility. We just assume our insurance agent is doing what they're supposed to be doing, we assume our bookkeeper is supposed to be doing, and then I sit down with you and I start asking you questions, and you're like, I had no idea. And it's like, yes, we can't just like until we have trained people, until we have kind of like what I always say, like, you gotta go through a couple of things with me before you get like the errand checkoff, before I like send you on your way and I'm like, okay, you're good to go, right? Like, I don't just hire someone or start working with somebody and be like, oh, they're good. They say they know what they're doing, and then off to the races they go. No, it's like one of those things of like trust and verify, right? So as a CEO, you are the vessel, you are at the helm, you are responsible. And that is a beautiful thing. Yes, you can put people in your corner to help you, but that doesn't abdicate your responsibility for not taking ownership of like, no, the buck stops with me. Like, I gotta understand this because I'm the CEO. Like, CEO of trying to think of like a publicly traded company, like they have to know their stuff. And like that's that is the identity that we need to be assuming no matter what our revenue is. Like, I know my numbers, I know who like is working with me, I know the insurance ins and out, I know the attorney, like you've got to really, really take ownership and the identity of like, no, I know my stuff. And that I think when you look at it from that place, like I think you will feel so much more empowered because when you know, when you are intimate, like I said to a client last week, I'm like, it's time to get intimate with your business and your numbers. And we laugh and it can be totally fun. Like working with me is so fun. It's you know, like we play a lot and we also get down to business and we get some stuff done. But I make it fun and lighthearted. It doesn't have to be this serious matter, which I think a lot of advisors do. But, you know, we were laughing because it was just like, let's get down to business, like let's get, let's get intimate. Like, okay, it's time to really get to know one another. And meaning her with her books and her books with her, right? And so, you know, just just think of it that way of like this is this is a relationship that you have, a relationship with your business, a relationship with your money in your business, a relationship with you and all of the people that support you, and you deserve to know all of the things, and you deserve to understand all of the things. So if you are working with people that don't support you and aren't helping you, and you feel like in your highest, which here you go back to intuition, follow your intuition. Get you someone else that's going to be more supportive for you. And the final thing that I want to say here is that we learn by doing. I think a lot of us, you know, I went to college and I was a good little A student, right? And in school, they don't teach you how to be an entrepreneur, they teach you how to be the opposite of one. And so the best way to learn is you just go do some shit and you get some data and you learn from it and you do it again. And the faster that you can do that, the more data and the the faster that you move along your path. And I'm not advocating for fast, but you get my point. And so a lot of times in entrepreneurship, we learn by doing. There, I don't like to look at it as failure. I like to look at it as learning. And sometimes we learn with time. Sometimes we learn with money. Sometimes we learn after something happened, we learn time and money, right? We can learn, we can learn it through all of it. And what is most important is that you are not shaming yourself and beating yourself up along the way because that is not a helpful thing, right? It doesn't feel good in the body, it doesn't really set you up to like recover, you know, it's just, it's just not a helpful emotion. You deserve to be and to feel love and loved, right, through your journey. So be your biggest advocate. Have some kindness and and some compassion for yourself and be like, you know what? I didn't know, you know, I didn't know the questions to ask, but now I do. And now I'm gonna do differently, right? Like that's the only really thing I think that you can glean or take from when things don't work out the way because you weren't aware, it's not a problem, right? It's just like, okay, now what do I know? What do I want to do differently? And if you're listening to this and you're thinking, hmm, you know, I'm not sure if my insurance agent and I have actually had this combo or we've I've been educated, like, set some time aside to be like, educate me on my policy. Like, go through line by line and be like, what does my policy represent? Like that is always something that I would do every single year, is I would look at the policy, I would ask my specific, I would, I mean, I had so much written information on our policy because I would use that to also train people that I was when I was replacing myself, right? Like ultimately we want to be higher up in that 30,000 foot view so that we have people doing all of this stuff for us. But in order to train somebody to teach them, you know, all of this information, you've got to understand it first. And so I would just write everything on the policy, like so I could understand it. And I would go back and every you know, audit year or renewal cycle, it would give me an opportunity to go back through and understand and become more intimate with the insurance policy. So if you're thinking, hey, I haven't had this conversation with my insurance agent, maybe it's time for you to go have that conversation, right? And if you want someone in your corner who's giving you this 30,000-foot view in a loving, in a supportive, in a fun and playful way, reach out to me. See if we're a good fit for working together. I truly love supporting women business owners along their journey, not just emotionally, but also the intellectually, like I call it the 3D, the knowledge basis as well. Okay, I love you. I am so proud of you. Stay off of the shame and the blame and the guilt bus. Go on over to the empowered and the love and the fun and the joy and the I got this bus. Okay, I'll see you in the next episode.