Small Business Big World
New episodes every Tuesday discussing the challenges, adventures and fun of being a small business owner. Each week we'll delve into various small business topics, from real-world DEI considerations to selling your business, using video to market your business, unique benefit offerings for your employees and so much more. Curated by the crew at Paper Trails.
Small Business Big World
Big Insurance Mistakes Small Business Owners Make
Commercial insurance isn't just about ticking boxes; it's about safeguarding your business's future. This week on "Small Business, Big World," we sit down with Derek Stevenson from Varney Insurance to dissect the essential types of coverage every small business needs and mistakes that they make. From general liability and property insurance to workers' compensation and EPLI, Derek provides a comprehensive guide to securing your business against unforeseen setbacks.
Derek and I discuss the often-overlooked exclusions in property insurance policies that could leave your business vulnerable. As our world becomes increasingly digital, we uncover how this shift impacts insurance underwriting and risk assessment, offering practical advice for staying ahead. Cybersecurity is no longer optional; it's a necessity.
In this episode, we offer actionable tips for business owners to safeguard your operations. This is one not to miss!
This is Small Business, big World, our weekly podcast prepared by the team at Paper Trails. Owning and running a small business is hard. Each week we'll dive into the challenges, headaches, trends, fun and excitement of running a small business. After all, small businesses are the heartbeat of America and our team is here to keep them beating. Welcome to Small Business Big World, our weekly podcast discussing all things small business. This week, I'm joined by Derek Stevenson Welcome, thank you, derek's.
Chris Cluff:With Varney Insurance, we're going to talk about some exciting insurance things, kind of the top pitfalls of insurance for businesses, and certainly I think I've been through them and I'm sure many clients that have as well. Absolutely, but yeah, so quick housekeeping before we get going, don't forget to like follow, share rate review, all those fun things. We are everywhere you are at small business, big world. I would love to chat with you further all over the place. If you have any questions for us or any of our guests, certainly feel free to email us at podcast at papertrailscom. So well, great, well, derek. So talk to me about commercial insurance. Right, we're here. It's an exciting topic.
Derek Stevenson:Yeah Well, you teed it up as exciting, so that had me a little bit nervous.
Chris Cluff:Insurance is not usually at the forefront of excitement, but it's something we all need Absolutely, and that's all of us business owners. We kind of get into it and someone says, hey, you need to talk to an insurance agent. Well, what is that? What is the most common things that small businesses need in terms of insurance, types of policies, things like that Absolutely so right out of the bat.
Derek Stevenson:Probably first and foremost is general liability. Right, that is your slip and fall lawsuits, your very basic stuff. Every single business should definitely have that you know. It protects you from people coming on site getting injured, whether invited or not, I always tell. One of the crazy stories I've seen is two guys breaking into a retail shop, getting cut on the window on their way in and then filing suit and these guys were robbing the place. I mean it's kind of wild. So you never know what's going to come up. Property insurance for your assets certainly huge. And then, as you guys are very familiar with here at Paper Trails, is you know, if you have employees you really need to consider workers' comp?
Chris Cluff:Sure, wait you don't need to consider it, you have to have it. You have to have it, right, that's state law, absolutely, absolutely.
Derek Stevenson:And then you get into a lot of the gray area about independent contractors. Sure, there's some new material out that Maine's published and yeah, those are probably your big ones. And then, if you're driving for work, got to add auto.
Chris Cluff:Yeah for sure. One piece of that workers' comp. I know we have a lot of clients that take advantage of employee practices. Liability insurance that's probably something that should be tacked on to those work comps as well, it should not only be tacked on.
Derek Stevenson:It should really be reviewed a little more. There are certain policies that you can kind of tack that on for a little bit of extra money, but they're not always quite what you want them to be. For a little bit of extra money, but they're not always quite what you want them to be. Epli you definitely want to get first and third party coverage. It's huge. So when you say first and third.
Chris Cluff:What's that?
Derek Stevenson:mean so covering both yourself as well as those that are coming after you. So one of the big examples we use is if somebody comes in and applies for a job, it's not necessarily employment practices, liability for those you employ. It's the same about candidates you're turning away If there's any discrimination if there's any harassment.
Chris Cluff:That's what EPI covers. Yep, absolutely. So. I was at a conference last week and there was a bunch of folks in California there and they said now, because of how crazy things are in California, they're seeing, you know, deductibles for an EPLI $25,000, $30,000, $50,000, depending on, you know, the industry and so forth. So it's certainly important coverage, but, you know, keep an eye on those things. We don't want those claims, right? No, any claims. We don't want any claims. No, absolutely so good. So let's talk about some of the pitfalls. So we've got, you know, we have our insurance, we pay our premiums, which are always too much, right? Yep, forever. Everyone thinks they're always too much for what we get. Yeah, by all means. So what are the? What are some of the common things? You know? You talked about exclusions. What is that? What are what are exclusions and why? Why are they important? I guess?
Derek Stevenson:Yeah, so every policy is going to have some level of exclusions, and exclusions are basically a way for the insurance company to not pay the claim. All right, so it's them taking out risks that they don't want to be a part of. For example, I had mentioned general liability before. In every just about every general liability policy you'll find a professional liability exclusion. Professional liabilities, like design things, it's working with numbers, it's more of the white collar pen and paper.
Derek Stevenson:If you mess something up there, general liability is not going to be covered or is not going to cover that because of that specific exclusion. And so we've kind of seen this cycle now of what we call a hard insurance market. Underwriters are getting really, really strict on their guidelines, everything's being underwritten harder, and my impression of it is, instead of maybe taking a risk to bring on more business maybe six, seven years ago now, underwriters are just walking away if there's any risk, and so exclusions kind of give them this extra layer of protection. The problem is a lot of times they get put in there and nobody sees them, and exclusions can really make or break a policy. Sure, you're paying for something and you may not be covered.
Derek Stevenson:Yeah, and it's this necessary evil. If you're not going to get away, you wouldn't want to pay for a policy that doesn't have exclusions. Some of the things they're excluding, you know. You, for example, chris at Paper Trails, you don't care, it's not, you don't, you don't operate in those grounds and it's fine. For example, you probably have, I bet, in your insurance policy, limitations on what you can do in the state of New York, right, something like that probably doesn't matter so much, but it's in there, and a lot more layers of this are being added on. So I think it's more important than ever before to get in and figure out what your exclusions are.
Chris Cluff:So are exclusions specific to the business or are they specific to the policy? Say, hey, I'm going to have my general liability policy. Everyone in the state of Maine, we're not going to cover flooding anymore. Right, We've had a whole other.
Derek Stevenson:I know floods are a know floods a whole different thing.
Chris Cluff:So that was a terrible example. But you know everyone would say to me you know, we're not going to cover if you drive a red car, we don't cover red cars, right. Or are they going to come in and say hey, derek, you run, you know, joe's pizza shop. You know we've decided that drivers that deliver pizza and red cars drive faster and we don't want to come.
Derek Stevenson:Yeah, so great question and because it kind of goes along in the same aspect of what we're seeing. Carriers, the ones that are actually insuring you, have had these sets of exclusions for a while, right, but they're adding to them and sometimes they are becoming client specific. They are actually excluding things that a client is doing to make sure they're not in those operations.
Chris Cluff:Yeah, I know, certainly the underwriting seems to be more and more stringent. I would say Definitely, for sure. I know, for the first time ever we did our renewal and they asked for my employee handbook. Yep, right To say do you have one of those? And unfortunately, a lot of our clients I know don't have handbooks, don't have a lot of policies, and so that's something that probably they're going to say oh, red flag, right, epli premium just went up, epli, whatever. Just you know. Yeah, you know, deductible just went up because you don't have your policies in place, you don't have your organization, and so, which is hard for a small business, oh, for sure, for sure. What are the more common exclusions that you see Are there? Is there anything specific?
Derek Stevenson:Yeah, yeah. So you know you had kind of gotten into it right away. Flood, Flood is a huge one right now that probably no one in Maine was really talking about, except for very coastal territories. Now we're seeing some pretty major rivers that have flooded. We've seen the coast flood in more than we've expected, more frequent. I would say just about every property policy has a flood exclusion and people don't realize that. And we're getting a lot of calls now from people who say I can't believe I need flood now, but I do.
Chris Cluff:Similarly, earthquake, same idea, it's on there and but sometimes you know the flood has to do with just the groundwater, right. We've For sure We've had a really wet couple of years and you know people have had water in the basements that never had water before right.
Derek Stevenson:Yeah, it's just. It's a thawing that we've never experienced at these alarming rates and yeah, the flood has been a very hot top.
Chris Cluff:I always look at mine and it's always got the terrorism exclusion. If someone comes and blows my building up, it's not covered, which is little to no chance, I guess.
Derek Stevenson:Well, I can make you feel slightly better about that. So the Terrorism Act TRIA is what we call it T-R-I-A basically came about after 9-11. Sure, and it was a way to say you are making an acknowledgement here, knowing I'm either electing or declining terrorism coverage. And to take it one step further, you're only going to be paid on a terrorism claim if the government is declaring it an act of terrorism. Doesn't happen a whole lot. There's been some horrendous events that have happened that weren't declared terrorism. So for the most part it's tough to justify needing that. In many places in Maine for sure.
Chris Cluff:Yeah, it's always interesting to see what you know, what the insurance company wants to take the risk on and what they don't, and it seems like these days they don't want to take the risk on hardly anything For sure.
Derek Stevenson:For sure, and they want control right. The underwriters want to control the risk, know what it is, be able to price it and account for it. You know probably the next biggest one that you're seeing is pollution. Pollution is something you know. We're very environmentally conscious right now as a nation hopefully a world as well and you know if you are causing pollutants to enter a waterway or you know polluting some farmland, something along those lines, it's probably not covered unless you have a supplemental policy.
Chris Cluff:Interesting, and certainly here that seems to be. We hear that in Maine all the time with the PFAS thing. Yep, that's the big hot topic right now.
Derek Stevenson:Great example too PFAS now being added as an exclusion, written right out as PFAS, and it's just you know. Another way to gain control over your risk.
Chris Cluff:Interesting. So certainly you know insurance is important, but making sure that you have the coverage for what you need and what your business needs.
Derek Stevenson:And you don't want to pay for stuff you don't need, right? So it does work both ways, right? You look?
Chris Cluff:at the policy and have a great agent to do so. Good. So other things, you know, pitfalls people fall into in terms of contracts, right? So what sort of contracts are people entering into that they may have issues with?
Derek Stevenson:Yeah. So especially on the small business end, people feel like if they take a contract from someone let's say a subcontractor takes a contract from a GC a lot of times especially you're starting out, you're a smaller business, you're so excited to see that contract. You look right to the dollar sign to see what the pay is going to be. You look at some of the itemizations but oftentimes the insurance section is completely skipped and a lot of times these GCs are trained to kind of mitigate as much of their own risk, oftentimes by direction of these insurance carriers, and you're taking on a lot more risk than you want to when you're entering these agreements. So I think the biggest takeaway I would have is look at that section and don't be afraid to push on it.
Derek Stevenson:You know, the biggest one I see is a lot of these larger GCs with inner city experience and big projects that hire a subcontractor. They want them to carry a $5 million umbrella. Well, that's a massive insurance expense, right, for a lot of these subcontractors, especially those without a lot of credibility, maybe they're just starting out. Push back, don't be afraid to push back. Have your insurance agent push back and think could I possibly do $5 million worth of damage and why do I cover that?
Chris Cluff:Yeah. So it's interesting. I know, as we're talking about this, we had a client just last year. So they did subcontract work for a developer, built a big condo complex, and this was kind of their last hurrah. You know development before they retired and you know they cut some corners and so this homeowners association now is going after them. Well, now, guess what? Guess who they're also going after is all the subs, right, every sub. And you know the sub.
Chris Cluff:We have a client that was the sub and he's like hey, listen, I drew this, I built this to your specs, I did it, you know. Now he's having to go back and show off, you know, show that he did everything the right way and did the work you know in professional work and like manner, and certainly he's had to file a claim on his insurance to help cover those legal fees to defend himself, which is crazy. So you know, certainly understanding those contracts when you're getting in there is important. So what about online? You know, in terms of, you know, exposure, right. So we all you know the world has gone online today and you know it's everyone's making funny TikTok videos. But how does that impact your insurance?
Derek Stevenson:So way more than you'd ever think. So you know, to kind of start off with the grand scheme of things, we were talking about underwriting Way more strict. Right, they're looking into things a lot more. They're understanding operations more than ever. What is going to give you the better look into a business than seeing social media? And a lot of times it can backfire.
Derek Stevenson:We've seen quite a few different examples. I remember very specifically an auto garage shop that was basically hawking, you know, used parts out of the lot as well, and the insurance company said, no, we're not taking that product liability with the parts you're strapping on. These cars are selling as used parts. You know, we see a lot of these landscapers who decide that they want to plow through the winter. You know anything along those lines that you're putting online. That insurance company is going to know and that's okay, because we want to be forthright with our operations and we want to make sure we're covered for things like plowing. But it can backfire and so before you post, I would always kind of go into it with this mentality of an underwriter is going to look at that and what are they going to think. And I've seen some pretty wild scenarios I know I shared with you a little bit. So there's a chuckle starting.
Derek Stevenson:The craziest story I have is a motorcycle repair shop and the guys wanted to create some attention. They had a YouTube channel and at lunchtime they went out in the parking lot and jumped some 50cc mini bikes over some beer cans and that was enough. And you know they weren't on shift. Nobody was there, there were no customers. They handled themselves well from a jumping dirt bike standpoint, but that was all it took for that underwriter to say wait a minute, what is going on at that place? Well, if you're doing it off the clock, you're probably doing it on. Cans were full. We hadn't even drank them yet. So you know we've seen it all. But I would just say you know, caution on there. If you're picking up new operations, try and get in front of it first. Talk to your agent. Don't make the post that we're doing something new or something crazy until you've Well, I mean, it's true.
Chris Cluff:So we're going to add a new line of business here in our business and the first thing, you know, I hired someone. She starts next month. I went and saw my insurance agent and said, hey, okay, this is a new service we're going to offer Yep, does my policy cover it? Does you know, or do we need to change it? Do we need to add something? Because now we are going into more of that professional liability world. Definitely, you know, we're going to start offering HR consulting services and we're going to start being giving you a business, true business advice even more than we do today. So you know, I want to make sure that we're covered in terms of that and certainly I'm announcing to the world that we're going to be doing that because I want the money to come in Absolutely. So you know, we want to make sure that we're ready for that. So, you know, just think about how you do it.
Derek Stevenson:Yeah, you just got to be a little careful. Right, you can still drive attention without red flags.
Chris Cluff:Yeah, it was interesting Similar story. We had a client that did some work for you know a public entity and it was a story because there was some damage and you know they were on the news and their guys were on the news doing repair work, you know, and you and the insurance company saw they were on lifts without hard hats or something like that and I don't think they ended up getting dropped, but I know there was like the Spanish Inquisition and basically the workers' comp company came back and said okay, we are running you through an entire training process, workplace safety, all this other stuff, which in that case probably came out as a positive, but it still could have gone bad Absolutely.
Chris Cluff:Absolutely. Yeah, not even that they were trying to be out there. They just happened to be fixing the problem and they saw probably the underwriter saw it on the six o'clock news, unfortunately, and they kind of get screwed. So that's certainly. That's a really good point for all of us in business. To think about is what are we putting online, and just even with your personal stuff you don't want to put yourself, you know, as do-it-yourself things.
Derek Stevenson:I think about it too in the political atmosphere of how polarizing everything is right now. Think again, you know, in terms of what that underwriter is looking at, right? I always want to think that underwriter may have either side of that spectrum covered. They may be right in the middle, but I don't want to offend them, as they're looking into me, right, and I am all for free speech and do it, and that's great. I'm not going to treat you different, but I can't tell you what's going to go on in that underwriter's brain when they see some of the posts. So yeah, try and keep it pretty, pretty easy going.
Chris Cluff:Interesting. So certainly, you know, in this day and age. We talked about online stuff that flows into cyber right. So have you seen, you know, my opinion probably, is most businesses today need some sort of cyber coverage because we're all doing things online, we're taking payments online, we're doing. You know, we have this exposure in our industry. We have a lot of private data that is potentially exposed and certainly, you know, I think, we have a very expensive, very high deductible cyber liability policy. But you know, certainly God forbid, knock on wood we have an issue, you know. I'm hoping that that helps mitigate some of that a bit. But what are you seeing in terms of, you know, cyber mistakes and people doing and not doing it?
Derek Stevenson:Yeah, so you know a couple of the big things right now is there's still a lot of pushback. At this point, when I'm going to meet with a client, it doesn't matter what they're doing, I am presenting cyber. I want you to at least know about it, know what your risks are, know what your price is to cover those gaps. Then you make the decision right. I'll help you along the way, but it's your decision. Right, I'll help you along the way, but it's your decision.
Derek Stevenson:I'm still seeing a ton of pushback, and one of the biggest factors that we see is people have a lot of faith in their vendors. Whether that be you know their card processing company. Whether it be you know whatever they're using their expense software invoicing, whatever you are sending is probably not as safe as you think. It is Sure, and I have a hard time thinking if we have a major leak, a breach of data from one of these big time processing companies. Yes, they have insurance. It is not enough to cover millions of people. Yeah, they're coming out. There are plenty of ambulance chases out there coming after everyone Exactly, and when that pool dries up, what are you left with? It's a scary, scary thought.
Chris Cluff:Yeah, and I think you know, not even like you said you know the fishing and the vishing and all that kind of crazy stuff that you know we deal with every day. Quite frankly, you know, and I think it's really important to make sure that we're you know, you're covering for all areas of possibility. And let me tell you, folks, the scammers are getting better, right, yeah, yes, and they are taking. You know the firewalls are getting better, you know the technology is getting better, but we are the weak point Right, definitely the person answering the phone, the person checking their email. We are the weak point Right and that has happened too many times to our clients, unfortunately.
Derek Stevenson:I've also found, chris, that you know a lot of times the things people have told me in the past about how they are safe. You know what they have brought in for firewalls, for example. You know, and they think that's covering them. That is now the bare minimum to purchase cyber insurance. One of the big things is invoice manipulation, right? So, chris, you send me an invoice to pay for studio time for podcasting. You leave for the end of the day and a hacker has stole your email. Well then, the hacker emails and says Derek, I'm sorry, but these are the actual numbers. I want you to put it in. I forgot. We just changed our bank last week. Seems mild to me. I go ahead and make that payment while it's gone and in you know units of Bitcoin before we know it.
Derek Stevenson:Right, it's a really scary thing, and the only way that carriers are offering invoice manipulation insurance coverage is with multi-factor authentication. So that's something where, a couple of years ago, people said I'm fine, all my remote users are using MFA multi-factor authentication. So I know we're not going to be. You know nobody's going to get on. Well, now you can't even get the coverage unless you have it. Well, now, you can't even get the coverage unless you have it.
Chris Cluff:Oh, I mean our world, everything you do. I need a text code or an authentication code or, you know, a face ID or something which, quite frankly, has become quite a pain in the ass In some regards. But it's absolutely necessary to make sure that we have that because, like I said, these guys are out there scamming away, they're trying to find the weak link, they're trying to find a way in, and you know certainly I know we've had to go through certain assessments and audits to prove our you know responsibility in terms of that education and requirements that we have. We just went through one yesterday from our bank that our bank said hey, you move money around, you need to have this audit every year to make sure that you're following the rules, you're doing the right things. And actually I haven't thought about this, but I probably should provide that to the insurance underwriter to say, hey, we are following the rules right, yep, so that would be a good one too. But what other types of assessments and things like that are you seeing?
Derek Stevenson:So I would say at this point, everybody should be considering a cyber quote, and there's some really good companies out there that are providing a cyber risk assessment. I love it because I am not an IT guy, right. I just don't know a lot of the stuff that comes out on this assessment. I know the insurance aspect of it, but I don't know. You know your site, host and migration and certificates and things like this, so you're getting a risk assessment just by getting a quote. I'll turn it over to employers so they can see exactly where their vulnerabilities are. You can share it with your IT folks.
Derek Stevenson:If you decide at that point that you don't need it, I'm fine with that too, but let's at least go through that exercise and make sure, because the last thing I want ultimately as an insurance agent, what would be the worst feeling in the world is hey, I'm claiming this, oh wait, I don't have coverage. Well, why not? And I don't want them to suffer from that claim. But if you can, at least on my end, you know CYA cover your own butt. If you can, at least do that and show them I did, I did try, we went through this and you opted not to. Let's be simple, a little better at night.
Chris Cluff:Absolutely so. We've talked about a lot of pitfalls. We've talked about the exclusions. We've talked about different contract issues, websites, online things, cyber. You know, is there any one takeaway that you think you know? When you're talking to a client, pay attention to this, Any one of those, or anything else.
Derek Stevenson:Yeah, I think the biggest tip I would give is kind of going back to the exclusions. The number one thing you can do in your insurance policy is get a digital copy. Push control F when you open it. That allows you to find a word within a document type an exclusion. Sit down and grab a beer and see what it says, because it's a scary path.
Chris Cluff:You really need to advocate for yourself and that's the best way to do it Of course, and I tell clients all the time yes, you have these great advisors, we have great insurance agents, we have great attorneys and accountants and so forth, but you have to take action in your own business as well, and you have to take responsibility for what you're buying and what you're doing and how you're operating. And and it's a lot right Uh, that's getting. I feel like life is getting more and more complicated every day, yep, and certainly this is one of those things. Absolutely Awesome. Well, derek, thank you so much. Derek from Varney Insurance. How do people find you Is there?
Derek Stevenson:Best way to find me would definitely be on LinkedIn. I'm sharing a lot of good content info on there that people can get.
Chris Cluff:Other than that. Look, derek Stevenson LinkedIn Varney insurance. That'd be great, absolutely, and if you can find them on Instagram, let them know. Yeah, good luck, send them a DM, well, good, well, thanks again, and be sure to like, follow, share, subscribe, rate, review, uh, everywhere you get your podcasts or subscribe from everywhere. Again, any questions for us? For Derek, if you can't get ahold of me, can't find him on Instagram, feel free to email us. We're at podcast at papertrailscom and we'll be happy to get you in touch. So thanks, so much everyone.
Chris Cluff:We'll see you again next week, thanks for listening to this week's episode of a small business, big world. This podcast is a production of Papertrails. We are a payroll and HR company based in Kennebunk, maine, and we follow us at at paper trails payroll across all social media platforms and check us out at paper trailscom for more information. As a reminder, the views, opinions and thoughts expressed by the hosts and guests alone. The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast, paper trails does not imply endorsement of or opposition to any specific individual organization, product or service.
