How to Save Money on Insurance For Start-Ups

The biggest mistake start-ups make is being too optimistic.  Of course, you wrote in your business plan that demonstrates to your investors that you are going to make $1,000,000 in the first year and turn a profit by year three, but that's not what you should be telling your insurance agent.  

As a start-up, cash will make or break your business. CASH IS KING.  You will often have to accept 60-90 terms to get orders, your vendors (and insurance company) will want cash upfront.  Here are a few tips to keep your insurance overhead as low as possible so you can turn your start-up into the business of your dreams:

Since its first store opening in 2005, Pinkberry has nearly 100 locations throughout the United States, Mexico and the Middle East...(11/30/2011: Pinkberry Website)

Be Conservative on Sales and Payroll Estimates

You don't know how much you are going to make the first year.  Your numbers are based on estimated sales based on estimated customers based on research and industry benchmarks.  Insurance policies are generally based on either annual sales or payroll, so the higher you estimate the larger monthly bill you are going to have during that crucial first year.   

How conservative should you be?  

It really depends on your business.  After the first year the insurance company will do a review (nice way of saying audit) with you and will adjust the yearly premium based on your actual sales or payroll.  Go here for a great FAQ on audits.  If you estimated sales of $50,000 per year and you end up doing that in the first quarter, you need to call your agent to adjust the policy so the payments will be spread more evenly.  The last thing you want is to estimate a super low sales or payroll figure, have a great year and have an extremely large bill when the insurance company audits you.  The idea here is to increase cash flow and lower overhead.  

Look at all your options with your independent agent when starting an insurance policy.  Keep in mind that your personal assets could be at risk even if you incorporate, so price shouldn't be the only factor in choosing your policy.  Don't know where to start?  Check out this blog post: Insurance 101 for New Business.

What Insurance Does a Dental Office Need?

I love to work with clients that truly are interested in protecting their business from unforeseen losses.  I can’t say that I have a favorite client, but one that comes to mind is Dr. Solomon Cantwell DMD .  He is a dentist that is truly dedicated to his customers, his staff, and the growth of his practice.  He is committed to keeping up to date with the latest dental technology and making his customers comfortable. 

Solomon and Joe in front of the dental office after talking business insurance.

Business Owners Policy and Workers' Comp

I have worked with him to make sure his equipment, liability, and building are all covered properly on his business owners’ policy.  In addition, we worked together to make sure that his employees had the proper coverage in case they were hurt on the job.

Employee Practices Insurancee (Sexual Harassment Insurance/Wrongful Termination)

We also went over the advantages of two other types of coverage including Employee Practice Liability Insurance (EPLI) and Data Breach Insurance.  EPLI is a coverage that is put in place in case an employee sues for wrongful termination, sexual harassment, or wage disputes.  It’s an important coverage that is often overlooked by many business owners because they don’t know about it or their agent never offered it.  There are actually more EPLI claims per year than General Liability claims per year in California. 

Data Breach

The Data Breach Insurance coverage is a relatively new coverage that was created in order to pay damages caused by loss of client information due to a breach in security (online or offline).  Most data breach policies cover: notifying your customers of the breach, paying an organization to monitor clients’ credit, repairing damaged PR, and even paying government fines for non-compliance.   Take a look at California's penal code relating to a breach.


Malpractice
Malpractice is for mistakes that the dentist makes when working on a patient.  An example would be doing a root canal on the wrong tooth.  Most dentists already have this coverage when we start working because it is often a requirement for working as a dentist, but there are many programs that can offer malpractice at competitive rates.