Owning a business is like walking a tightrope. It can be scary, but it’s easier to do if you’ve got a safety
net below you.

Warning: The topic for this column may cause the following symptoms: glazed eyes, head falling forward
onto the desk, waking in a puddle of your own drool. The subject that has these mesmerizing effects is
insurance.

Now we all know that insurance is important. If your brother-in-law sells the stuff, our flippancy
may wound him, but we can’t help that. Insurance, for most people, holds the entertainment value of
drying paint. We’d rather that your brother-in-law tell us what we need, take our money and say no
more.

If you own a video business or are thinking of starting one, you have enough on your mind
without worrying about insurance. Tough. You have to do this worrying anyway. What kinds of insurance
do you need and how much money should you expect to spend? That depends on how big a gambler you
are. You might have heard of someone who never took out any insurance, no health, no life, no property,
no insurance. He won the gamble and has since retired to cruise around on his yacht. Was he lucky? You
bet.


Life On the Edge

Should you go through life without insurance? You can if you wish (and if the law doesn’t require you
to carry it), but be aware that you are assuming a lot of risk. You will have to shell out the money if
someone gets hurt on your property, or if your production van gets smashed by falling rocks, or if your
employee gets sick because of the radiation coming out of your color monitors (just kidding). Can you
afford to pay for these things? Or would it be cheaper in the long run to pay insurance premiums so that the
insurance company will cover them?

You could try to subcontract your video work, so that you have no equipment to insure and no
liability if someone does gets hurt. But the chances of creating a business that needs no insurance is
slim.

It Takes All Kinds

As much as it pains us, we will now discuss the different types of insurance that you may need. If it
turns out that you actually need something different, don’t be a bit surprised (this is our disclaimer,
assigning you all responsibility for your own decisions).

Let’s break this stuff down into Life Insurance, Health Insurance, Liability Insurance, Property
Insurance and Special Coverage. Hey, wake up.

As most of you already know, Life Insurance is a euphemism. In many cases this is a policy that
has enough money in it to pay for your funeral if you die. But as a business owner, especially if you have a
partner, you may want to look into Key-employee insurance.

Consider this scenario: you and your partner own a video business. She is the salesperson and
financial wizard and you produce and direct the shows. She gets hit by a bus. Your business goes down the
tubes.

If you and your partner had taken out life insurance policies on each other, then when she was
squashed you would have had a fund to help you get by until you could find someone to take over your
partner’s duties. It’s a cold subject, but one you should think about.

Now let’s say a bus hits your partner but your business kept going. Your partner’s beneficiaries
(husband, children, parents, whoever) now own part of your business. These people may take a laissez-
faire attitude toward your business and let you alone to run it the way you always have. Or they can come
in one day and start trying to sell the furniture. Can you say “deep doo-doo?” Because you would be in
it.

The way to defend against this problem is to put together a cross-sell agreement. With this
document, you and your partner would agree to buy the deceased partner’s share of the business from the
beneficiaries. To have the money to do this, each partner would take out a policy on the life of the other.
Isn’t insurance fun?

How’s Your Health?

People who work at large companies take this perk for granted. If they get sick or pregnant or hit by a
bus and survive, they can expect the company health plan to cover a large part of the health expenses, say
80%.

As a business owner, you are responsible for your own health insurance. You may choose not to
buy it or your spouse’s insurance may cover you. But if you do pay for your health insurance through the
business, be aware that the law may require you to cover your employees with a comparable plan.

As your business grows, you will probably need to put together a health plan for your employees.
Why? Because you are greedy. In order for your video business to make the greatest amount of money,
you need employees who are good at what they do and who care about your company. In order to attract
such people you have to show that you care about them. A decent health package is a good step in this
direction.

We’re not going into any detail about health insurance because there are plenty of people who
would love to discuss the subject with you. And these people have the possibility of a commission as an
incentive, which we do not.

Who’s Liable?

In our litigious society, very few people take responsibility for their actions. Therefore, when a
woman buys a cup of hot coffee from a fast-food restaurant and then places said hot coffee in her lap and it
spills, said woman can sue. Is she responsible for not being careful? Evidently not. The restaurant is
responsible for selling coffee that is too hot. Outrageous? Possibly, but there are lawyers who will pursue
these cases (for a percentage of the award), so you need to plan for the worst.

Anyone who comes into contact with your video business can hold you liable if you fail to take
the proper degree of care. If you are on location and a light stand falls over and hits someone on the head,
this person can sue you. If you are sitting in your editing suite and someone tips his chair back and slips, he
can sue you.

A comprehensive general-liability (CGL) policy covers these types of risks:

  • Money paid out to cover accidents and injuries that happen on your premises or are caused by your employees.
  • Medical expenses at the time of the accident (ambulance, emergency room care).
  • Payments to the attorneys who investigate and settle the mess you’re in.
  • Costs of court bonds or other judgments while you appeal.

These general policies don’t cover auto accidents that your employees have while working for
you, nor are you covered for product liability (your videotape explodes due to your negligence–who
knows how), nor workers’ compensation claims. These are all separate policies. Did we mention that
insurance was fun?

If you have employees, you should know that the law requires workers’ compensation insurance
in all 50 states. And don’t feel smug if you are paying for health insurance for your employees. When one
of our employees tried to cut off her thumb with an matte knife, we learned that our health plan doesn’t
cover work-related accidents. Workers’ compensation has to pay for these. Workers’ comp provides
unlimited medical coverage during the employee’s course of employment. In many policies, the premium
is based on total payroll for the company and the safety record of the company.

Your Property, Other People’s Stuff

There are all sorts of ways to destroy your stuff. It can burn, float away, be stolen or swallowed up by
the ground in an earthquake. You need to have a policy written on an all-risk basis instead of a named-peril
basis. A good all-risk policy should help you cover all your stuff without covering some of it twice (which
you might do with several separate policies), or failing to cover one type of disaster (say tornadoes) while
paying for insurance that covers the water pipes breaking.

You’ll probably want to get replacement cost insurance for your equipment. This policy will pay
to replace your equipment or property at whatever prices are current, rather than what you paid for it.

Isn’t That Special?

The other strong emotion that hits when we think of insurance (the first being boredom) is fear.
What’s frightening about insurance? Submitting a claim and hearing the following phrase: “Oh, your
policy doesn’t cover that.”

The problem with insurance is that you are at the mercy of the person who writes the darn things. This
person has to make sure that the policy doesn’t cover everything, because then it would not be profitable or
even possible for the insurance company to make money. This leads to lots of fine print and legal mumbo
jumbo that few people are able to read and comprehend.

The point is, you can’t assume it covers you for everything. You will have to ask your agent if
you need extra insurance for things discussed in the following paragraphs.

Care, Custody and Control

During a recent shoot, the client gave you an expensive piece of equipment that you took to your
studio. There, you videotaped a demonstration of this product. You finish the shoot and you are returning
the expensive gear to its proper home. As you sit at a stoplight, a comet falls from the sky and hits your
van. You escape, but extraterrestrial flames consume the client’s equipment.

The Care, Custody and Control policy covers your client’s property while it is in your possession
and will reimburse you (and the client) for the loss.

If you live in California and earthquakes threaten to gobble you up, or in Florida where hurricanes
blow through four months every year, you may want to look into business-interruption insurance. This
policy will reimburse you for future profits lost and fixed charges as a result of damages that the policy
specifically outlines (earthquake, hurricane, locusts, plague, etc.). The policy will keep you going until you
can reopen.

You can cover electronic equipment for fire, theft, malicious damage, accidental damage,
mechanical breakdown or electrical breakdown. You might even be able to get someone to cover the cost
of re-shooting and re-editing all of your video programs if a fire or flood wiped out your masters. The
question is: can you afford the premiums?

The general rule on premiums is: the lower the premium, the higher the deductible; the higher the
premium, the lower the deductible. I’m sure you’ve run into the deductible before. If you have a health
insurance policy with a $100 deductible, it means that if you have a claim, you pay the first $100 and the
insurance pays the rest.

  • To keep your premiums at an affordable level, therefore, you should make the deductible as
    high as you can afford to pay if you have to file a claim.

  • If you do have to file a claim, remember these things about losses: You have to tell the
    insurance company that you’re in trouble. Depending on your policy, you may have to do this in as little as
    24 hours. You don’t have to file the claim in this time, just let them know that you will be doing so.

  • You have to be able to prove that you lost something. The charred remains of a camera struck by lightening would probably do the trick. But if you have to provide documentation (receipts, or
    whatever), the insurance company will give you time to find these papers.

  • To compensate you, the insurer can give you cash, repair the damaged item or replace the item with a similar one. If you like one of these options better than the others, let the insurance agent know.

  • If you and the insurance company don’t agree on the amount of compensation (“My camera is worth more than that!”), then you can have someone arbitrate the dispute. You can bring in an independent appraiser to give an opinion. If you still can’t come to an agreement, call a lawyer and take ’em to court.

To Conclude…

Well, there’s an introduction to the wonderful world of insurance. As you have found out already,
owning a business involves a lot of risk. Insurance is one way to reduce this risk to a level that you find
acceptable. Beyond that, all we can say about insurance is this: . . . . we’re sorry, we just woke up in a
puddle of our own drool. What were we saying?

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