Q&A With Insurance Expert Don Fowler
“Whereas, if you would have had the right type of insurance, it would have been taken care of…”
It’s inevitable that you’ll make some mistakes in business. When it came to junk removal insurance, Lee Godbold says that at the start of Junk Doctors, “we did what we shouldn’t have, and we operated for about a year without workers’ comp”. One of the challenges when first starting your junk removal business is that you don’t have the foresight to know which risks you need to guard your company against. It’s simple to find a fail-proof method to protect yourself, though: insurance. Lee had a conversation on the topic with Don Fowler, an Independent Insurance Agent with over 30 years of experience.
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All Things Insurance For Your Junk Removal Business: Making Hay With JRA
Do I Need Insurance?
It’s a common practice for many when they first start a business to try to save as much money as possible. Generally, personal insurance is less expensive than commercial insurance; by not opting for the more expensive insurance policy, you have less going out upfront. However, if an unexpected claim pops up, you quickly find out that personal insurance doesn’t cover it and you’ll end up footing the bill. Whereas, if you would have had the right type of insurance, it would have been taken care of.
As a small business owner, you invest countless hours and dollars into your company. Make sure you’re properly protecting the asset you’ve built for the long term by insuring against any unexpected ‘bumps’ along the road. Simply put, commercial insurance limits the risks that you run as a small business owner; even if you’re operating as a sole proprietor or a partnership, if something happens and it results in a lawsuit, your personal insurance will not be a viable solution. Even if you’re in the mentality that you “don’t have anything” that can be taken away, you have more than you think! Your reputation and ability to generate an income in the future are able to be taken away by someone else just because you didn’t have the correct type of insurance.
What Are The Types Of Insurance?
When determining how to choose junk removal insurance, especially for junk removal industries, you should know about the three main types of insurance: general liability, commercial auto, and workers’ compensation.
- General liability is insurance for claims that happen as a result of normal business operations. For example, physical injury, property damage, or personal and advertising injury; advertising injury is defined by an advertisement that damages the reputation of another company resulting in loss of income.
- Commercial auto helps to cover the financial costs resulting from auto accidents where an employee was at fault. As well, damages or injuries that occur after you have taken possession of the items fall under the purview of a commercial auto policy; it’s what protects you inside a customer’s home. Unlike a commercial auto policy, personal policies and general liability aren’t covered after an item is in your care. “That’s the biggest caveat.”
- Workers’ compensation provides things like wage replacement and medical treatment coverage from an injury that occurred at work or disease related to the occupation. Workers’ compensation is required in North Carolina for businesses with three or more employees, but it is important to verify these requirements for your state. The North Carolina Industrial Commission recommends contacting a lawyer or insurance agent if you are unsure about your responsibilities as an employer.
Also, if you have at least one employee, apart from insurance, you need to consider purchasing an employee dishonesty bond. This helps to protect the company against accusations like theft within a $25,000 limit (it’s important to verify the limit amount for your state, as it may differ from North Carolina). These bonds do not protect against actual criminal offenses, which would fall on the employee. Normally, the bond will be no more than $150 per year, per employee. Also, it’s important to note that an employee dishonesty bond does not cover the owner of a company.
What Risks Are Junk Removal Companies More Susceptible To Compared To Other Types Of Business?
It’s the nature of a junk removal business that you’ll have road exposure. Also, it’s important to consider the employees that often seek employment with a junk removal company; many are younger employees with a higher rate of turnover. Since they’re younger, they’ll be less experienced drivers and more prone to reckless behavior behind the wheel because they feel “immortal”. Don’t believe the myth that a personal auto policy will cover potential damages that occur.
How Can I Limit Exposure To Risks?
One way to reduce exposure to liabilities is to ensure that either the customer or a licensed professional removes any water, appliance, or electrical lines before you begin hauling the item away. This way, the blame can’t be shifted onto your company. Even though you are likely capable of doing so correctly, accidents can always occur, so it’s better to remove the risk altogether.
Since junk removal companies are more susceptible to accidents or injury from increased road exposure, it’s important to specify which employees are “drivers”; otherwise, there will be additional charges that ensue if damage occurs. This is typically verified at the beginning of every year.
By hiring uninsured sub-contracts, you’re opening yourself up to avoidable risks. Any insured professional should be able to provide you with a Certificate of Insurance. Be certain that he or she is insured, otherwise damage or bodily injury will fall back on your policy.
Most common injuries surrounding junk removal are injured backs, hands, and lacerations. Some workers may have previous injuries, as well. To help mitigate any liability from prior injuries, and to prevent future injuries, junk removal employees should wear protective gear like back braces and ‘no-cut’ gloves for lacerations. These requirements need to be written as well, otherwise they may not be valid.
Don’t compete with cheap pick-ups haulers that are inexperienced and uninsured. By being insured, you’re reducing the customer’s liability; if an injury occurs, it will be covered by your commercial insurance policy, not be up to them to pay for.
How Can I Get Junk Removal Insurance?
There are two markets for a consumer to buy junk removal insurance: direct writers and independent agents. These are the options to explore how to get junk removal insurance.
Direct writers, for example, include insurance companies such as State Farm or Allstate. They are typically more established within a particular area of insurance, like personal insurance or some small businesses; these niche areas mean that they are very proficient at what they do, but it is more limited than the scope of various independent agents.
A key difference from direct writers is the fact that independent agents do not work for insurance companies. Unlike direct writers, independent agents will shop around to find the best coverage options at the best premium. Typically, choosing to obtain your junk removal insurance from an independent agent is a more “personal relationship”. The video below provides a breakdown of these key differences:
What Should My Coverage Level Be And What Will It Cost?
The best policy when it comes to determining how to get junk removal insurance is to purchase as much insurance as you can afford. After you’ve dedicated so much to build a successful company, you don’t want to have your efforts be a waste. For example, if there was a minor accident, a commercial policy with a $1 million limit will be enough. However, with a multi-car accident, that may not be enough. Although there’s a smaller chance of actually reaching the limit for higher coverage amounts, like $2 million, it will protect you when the unthinkable happens. The premium for your insurance will vary, depending on a number of factors. This is why it’s important to find an agent that will find the best prices available for you.
General Liability Coverage
Review: General liability insurance protects from things like physical injury and property damage before you take possession of an item, or advertising injury that are the result of normal business operations.
With general liability, you will likely want to begin with a minimum of $1 million in coverage; when you are contracted by some commercial properties, like apartment complexes or new home construction, you may be required to have $2 million in coverage for general liability insurance. It’s good to increase your level of coverage once you are able to, especially when it means you will be able to handle larger jobs like these. As well, some commercial properties may require you to have an umbrella policy that is a much higher level of coverage than necessary. Speaking with your insurance agent and asking them to provide evidence that this amount of damage would not be possible to incur can help waive this requirement.
Commercial Auto Coverage
Review: When there is an auto accident, or damages that occur after you have taken possession of an item, these claims are covered under commercial auto.
For commercial auto, it’s important to ensure that your plan covers bodily injury and damage to your vehicle. Similarly to general liability, you will likely want $1 million in coverage. Because there isn’t a standard classification for junk removal, the categories that these claims fall in vary depending on the type of insurance. In North Carolina, the classification that junk removal insurance claims fall under is “hauling company” for commercial auto.
Workers’ Compensation Coverage
Review: Workers’ compensation provides coverage from an injury that occurred at work or disease related to the occupation.
For workers’ compensation claims, the classification in North Carolina is “junk dealers”. Also, within most states, there is an assigned risk pool to secure workers’ comp. Generally, this amount will be around 13-16% of your pay pool. As time elapses, you will have a lower or higher “experience mod“, or experience modifiers. This is based on the company’s record of accidents and injuries. Your rate could reach just 5-7% as you establish a good record over the course of a couple of years. As well, the aim should be to move to a system where there is a monthly audit; with a monthly audit, you pay on the actual payroll amount, not an estimate.
We hope this has been able to provide you with valuable information when you go about acquiring junk removal insurance. As always, it is important to find a reputable insurance agent or lawyer to counsel when beginning this process. It will save you time and headache to find professionals to help when questions or concerns come up!