Disability (employees) = you pay a premium to receive benefits if you get sick or injured off the job and cannot work to earn income. You receive temporary cash benefits for a specific period of time. There are short term and long term disability insurance policies which refer to the length of time you can receive benefits.
Disability (business owners) = you pay a premium to receive benefits if you get sick or injured and cannot work, operate your business, or pay business expenses including payroll. This insurance typically pays a percentage of your net profits. If you are injured while you own a business you lose much more than a paycheck.
Dishonesty Bond (aka fidelity bond) = you pay a premium to protect your client from fraudulent acts of your employees.
Employers Non Owned Auto = If you have employees occasionally use their vehicles to run errands for your business this insurance pays a benefit if there is an accident during use to help with damage to the vehicles or even medical bills. If employees use their vehicles regularly they should be added to your commercial auto policy.
Liability = you pay for this to protect your business from getting sued or held liable for any legal damage, injury, or negligence case. It pays for legal costs and legal payouts you would be found responsible for.
Employee Life Insurance (aka Group coverage)= your employer pays for this (sometimes you can pay for an additional amount) so your family can be paid a benefit if you die while actively logging hours at work. This is the least reliable form of insurance. You do not own this policy. There are too many exclusions and multiple stipulations required to qualify for this insurance and most death occurs after you clock out.
Life Insurance (personal) = you pay a premium to receive a large pile of money if you die too soon. This covers immediate expenses and future expenses for your family as the loss of your income continues long after you’re gone. There are 2 types of insurance: Whole life(aka cash value) and Term.
Umbrella = this is an extra liability insurance you buy to cover all the gaps left in your other policies. This insurance pays in addition to benefits your other policies may or may not pay out in their limited and extremely specific scope of coverage.
Workers Compensation = this insurance is paid by an employer to cover wage replacement and medical benefits to employees while injured on the job. In exchange for this benefit, an employee cannot sue you for negligence.
Insurance can be confusing for a new business owner. In this section we will go over the basics, when we’re done you will be educated and informed as to what you need. We will discuss both personal and business insurance and make a few recommendations to get you started. When you’re first getting started the only insurance you really need is business liability, unless you are employing people right away.
Business liability covers any personal injury or property damage to your client or their facility. Let’s say that you are mopping a floor, even though you have a ‘caution wet floor sign’ placed in several areas, someone slips and falls. Unfortunately, slip/fall accidents are one of the most common in the commercial cleaning industry.
If there is an injury you would submit a business liability claim. Or if you are vacuuming and you plow over an expensive vase or piece of office equipment. Your liability insurance would cover this. Most businesses will require that you provide them with a certificate of insurance verifying that you have coverage.
The minimum amount you should have is $300,000 which is nothing in the world of personal injury lawsuits. As your business grows you will need at least one million dollars of coverage. The good news is a basic $300,000 policy should cost less than $1,000 a year when you are first getting started. The rate is based on your sales and number of employees, so as you grow your insurance cost will go up. One year we paid over $12,000 just for liability insurance. In perspective, our sales were high enough to justify this expense.
When you start paying people, even if you call them ‘subcontractors’ you will need workers compensation insurance. The cost will vary per state, in NY we pay around 6% of total cleaning payroll or $6.00 for every $100.00 in gross wages. Clerical rates are less for your administrative staff because the risk of injury is less. Don’t think you can call someone a ‘subcontractor’ to get out of paying workers compensation and the other costs that go with employing people. Subcontractors must carry their own insurances.
Employees must also be covered by disability insurance. We are allowed to withhold up to .60 cents per paycheck to contribute to the cost of disability insurance. Overall it’s not extremely expensive and is based on the number of male/female employees on the payroll. In 2016 I believe I paid $2.00 per month, per male employee and $6.00 per month per female employee. If your employee gets hurt and cannot work they can claim disability insurance and receive a small amount of income from it.
As the business owner, you are not covered by the disability policy for your employees. You should look into a personal disability policy for income replacement if you cannot work. I will warn you that it’s challenging to get and can be very expensive. You will also want to exclude yourself from the workers comp policy, otherwise, your earnings will be considered part of the base payroll for your comp bill.