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Why Aspiring Entrepreneurs Need Business Insurance


Ted_Devine_CEO_InsureonConsidering striking out on your own?

If you’re thinking of starting a small business, or have just started one, then you need to know three things, each of which break down roughly into the global, the social and the financial.

The global: Job sectors everywhere are going entrepreneurial. In journalism, for example, the massive disruption of major media means that many writers and photographers (including yours truly) are striking out on their own. I worked for the Chicago Tribune for 16 happy years, and then the layoffs came in 2009. Many of my colleagues have been hit as well, including the Chicago Sun-Times staff photographers — who were all laid off in one swipe on May 30. We have to eat, and for most of us, that means either getting another journalism job — unlikely in today’s media climate — or striking out on one’s own.

The social: Statistics show that the one healthy part of the U.S. economic sector revolves around businesses with 10 employees or fewer. “That’s growing by about 5 percent a year, while over 10 employees is actually shrinking,” says Ted Devine, the CEO of insureon (pictured); his company is a Chicago-based online destination for buying business insurance for professionals in all industries. And for those in the Money Under 30 age range, “They are much more inclined to define their own path and work environment and define their own career. They have no desire to sit in one work environment for 30 or 40 years under one boss. They want to change the world.”

Amen to that.

Ah, but there’s also the financial: Small businesses and entrepreneurs need insurance, but often run into problems when they think that the dude who sold them car or apartment insurance knows exactly what they need. So if you’re starting (or have just started) your own business, you need to think about insurance. Now.

To that end, Devine is an evangelist for making sure young business owners get insured. He comes from Aon, where he oversaw the $5.2 billion Aon Risk Services as its one-time president; he was also CEO of Aon Re, a leading global reinsurance intermediary.

Today, insureon is the largest online insurance agent in the U.S., and for a tech-savvy population, it’s providing a sophisticated online portal for making sure its clients get the business insurance they need. And fascinatingly, many of its employees are under 30, meaning that they can understand the needs young entrepreneurs face. Devine’s team has an average age of 26. As he puts it, “I believe insurance is not rocket science.”

Yet it is necessary. Why?

“When somebody is starting out a web design firm, the last thing on their mind is insurance,” Devine says. “They have an idea, they want to build their business, they want to build up clients, and they need to open a bank account. But going back to the first guy who sold a vase at the beginning of time — all the way back — any business needs three simple things: an idea, money, and insurance.”

To keep it basic, your business probably needs some combination of coverage in these areas. A business owner policy, or BOP, covers equipment such as computers, property and hard goods, with some general liability.

Professional liability E&O (for errors and omissions) covers the kind of mistakes that come when a tech consultant, for example, gives out bad advice, or programs a website that doesn’t work. It covers liability around work. And finally, there’s workers compensation, which protects your employees.

At insureon, the company leverages relationships with 25 different insurance companies to make sure clients can get the coverage they need. That’s important because some companies hate to touch certain kinds of businesses, while another company might love it. What’s more, Devine’s employees are trained to specialize in very specific business types, from restaurants to high tech. In a typical month, 130,000 people visit the site.

Regardless of where you get your insurance, and how, Devine stresses that for any ambitious entrepreneur, the insurance question will arise sooner or later: “If you’re going to raise money with investors, the investor is going to make sure you have insurance. That’s one of the first due diligence questions they’ll ask.”

If you need to learn more about the insurance game, insureon features educational videos on its site. That might well be the first stop to make on your way to conquering the business world.

With your business plan, “Insurance can go any time on the checklist; I just think it’s important to put it on,” Devine says. “It can be at the end of the 90-day launch plan, but it has to be part of the plan.”

Devine cites his own work launching a non-profit, 1 World Sports, which teaches leadership through sports to kids. “The early work of our 90-day plan was around the building of the business, and insurance was one of the last things we did! But to not have it — especially for someone who’s raising money — that would be insane.”

Are you an entrepreneur? What questions did you have when starting out? When did you seek insurance?

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About Lou Carlozo

Based in Chicago, Lou Carlozo is a personal finance contributor for Reuters Money, a columnist with DealNews.com, and a former managing editor at AOL's WalletPop.com. Contact him with story ideas for Money Under 30 at feedbacker@aol.com, or follow him via LinkedIn and Twitter (@LouCarlozo63).

Comments

  1. I hadn’t thought of journalists needing errors & omissions insurance — although, now that you discuss it, I wonder why it hadn’t occurred to me before. I’m aware that self-employed professionals or small business owners in other arenas, like real estate brokers, often carry E&O insurance. It seems logical that web programmers, writers, and others would have this, as well.

    I also know many people who have purchased an “umbrella liability” policy, which is intended to be insurance-of-the-last-resort — the insurance plan that you file a claim with ONLY if every other avenue is exhausted. These plans are often quite cheap, sometimes $100 – $200 a year for $1 million in coverage, since its designed to be a plan that you’ll hopefully never need to use!

  2. Man another expense before I make my first dollar. Though I understand why I should get insurance I just cant see myself spending money on it right now. I will bookmark this for later when I can afford it. 100-200$ per year based on Mary Anne’s comment isn’t too bad though.

  3. I applied for a quote from them, but nothing was immediately available. They said they’d get back in 48 hours. Will let you know how it goes….

    • Hi Monica! We would love to follow up with you. Please give us a call if you have any questions at 1-800-655-1714. We look forward to doing business with you!

      Team Insureon