er and an owner of a few other small ventures, I found out recently that my clients expect a new level of insurance in order to do business with me in any way. Until recently, I have not run into any issue where I felt I needed insurance, but the firms we are dealing with are starting to gear up for protecting themselves from liability by requiring every business to provide them with proof of coverage. And these are not small policies.
Now you can look at your business practices and say “I don’t need that type of coverage because I don’t ___________________.” (Fill in this blank with anything such as ‘go onsite’, ‘personally hire employees’, ‘drive for my clients’, ‘have visitors in my home office’, ‘have any paperwork that wasn’t written by an attorney’, etc.) You’ll find out the hard way that you are under insured.
In the last 2 months, I have had several clients delay paying invoices because their ‘Insurance Compliance Officer’ had not been notified of me being a new vendor for their firm and the ICO had a list of requirements for me. What a great time to find out that I have a list of things to do in order to get paid monies that I have already earned. Now my receivables get stretched by the time it takes to comply PLUS 30 days! If you are starting from scratch with getting some types of insurance, it can take 2-3 weeks just to get a rate quote. And all of these delays don’t necessarily happen the day that you bill the client. The other delay that comes into play is the time that your invoice sits in Accounts Payable and they are waiting to have the ICO contact you about compliance. I have had 2 invoices go over 120 days out for this issue. Can you imagine how it feels to have a client company owe you $45,000 for over 120 days on a single invoice? I can tell you personally – IT SUCKS!
Here is a recommendation:
1) Find a BUSINESS insurance agent that you can get along with and treats you professionally. Ask if they have dealt with recruiting businesses before. You will want to have a first name relationship with this person because they will have more work to do on the backend of your policies than you would expect. Make this person a friend.
2) Plan on a minimum of:
• $3,000,000 Liability with $1 mil per occurrence
• $1,000,000 Umbrella
• $1,000,000 Automotive (in the business name, not your personal policy)
• $1,000,000 to 3,000,000 Errors & Omissions coverage (depending on client demands.
• Proper amounts of Worker’s Compensation Insurance for yourself and any employees. (In some cases, if you are a sole proprietor clients will let you waiver this – but I don’t think it’s a good idea.)
3) When you start to deal with a new client – call into their Accounts Payable and find out if they have an ICO. Contact the ICO upfront and get a compliance package sent to you. This will save you the lag time in payment when you are invoicing them for services. If you have the above named policies and they pop up with wanting more – explain what you do for their company and ask if they can waiver down your expected coverage’s. Sometimes the ICO can do this – sometimes they look at their jobs as to be very firm and you won’t get any flexibility. But it’s worth trying. I have had some requirements lowered for me when I’ve asked.
Typically a client is going to ask for a form from your insurance company disclosing your coverage and naming them as an ‘Also Insured’. A picky ICO will have the EXACT phrase or address that they expect to have on this form. I had one where I had the local office address for my client and the ICO wanted the PO Box for the corporate office on the form. (This is when having a friendly relationship with you agent comes in handy.) It had to be changed and my agent had a new version of the form for me in less than 2 hours.
My wife is a health insurance agent – so I’ve heard enough horror stories to understand the value of insurance. I do feel over insured for the type of services I perform, but I also sleep better at night understanding my coverage. And I really like getting my invoices paid!