Let’s Talk About Insurance | Multithreaded Income Episode 39

That's an excellent question, Sean. And on this solo episode, we're going to cover just some of the basics around insurance for independent consulting, contracting freelancing. First things first, do you really need insurance going into your first contract? Professional answer is yes, you should probably have insurance. Insurance is always a good thing because let's discuss what the purpose of insurance is. The reason you have insurance is to mitigate risk.

And risk for someone in our position that is a consultant or a freelancer. Could be big. What if you mess up and what have you messed up royally? You don't want to be on the hook for. The damages that could occur if you were to get sued or some sort or lawsuit is brought against you. That's why it's a really good idea to have insurance. Let's talk about the different types of insurances. You probably care about.

It's not the exhaustive list of all the types of insurance that you could have, but the ones that you might want to care about. Uh, and these are

also insurances that. Are normally required for some larger companies. And this is how I'll lead into the conversation. I did a contract many years ago for Harley Davidson and I was going through there. Supplier on-ramping they had a requirement for not just general liability insurance, but professional liability, which includes errors and omissions. And. What exactly does that mean? First you have general liability. General liability. Doesn't really mean anything for us. People working at home.

In front of a computer. Because it's meant to cover just general things for a business. If someone gets hurt, uh, while on the job at your business. That should be covered. If any property gets damaged. Uh, In the means of doing business general liability should cover that as well. Uh, there's also things around. If you get sued for slander or libel, just general bad things. And then there's all sorts of degree of like medical payments. So if,

um, Let's say you had a real business and someone comes in the door and they slip on the floor. They're not an employee of your business, but they get hurt. Your general liability would cover things like that. Now that doesn't really mean anything to us. And it's not typically a thing that we care about, but. It's usually something that. A lot of larger companies will require you to have just in case. The second type of insurance, which is professional liability, and this is errors. Omissions.

Insurance. This is the one you care about and the one that you should probably have all the time. This covers you in a lot of different cases. Specifically. If you screw up, if you screw up on purpose or you screw up accidentally. And the business has. A legitimate claim that you caused. Damages to the business because of your work. This is where. You can come back and say, all right, I have errors and omissions. Insurance. To cover. The damages here.

Uh, and it could be for a couple of them, for things like negligence, that means you just provided bad advice. You did the wrong thing. That's stuff happens. That's why you have insurance. Uh, sometimes you make a mistake and it costs the business money. So maybe you, uh, you brought a job. That accidentally overcharged. A bunch of customers or you wrote a job at under charged customers. That could be claimed under errors in a missions. Any mistake you make it covers legal fees.

I specifically, in my professional liability insurance, they give me a packet. And on the first page it says up at the top. If you are in. The case of ever being sued. Here's the phone number to call? Like we will take care of

it for you. Just call this phone number. And that's really useful to have, especially because a lot of us don't have lawyers on retainer. And that's not something I advise for anyway. But if you need help. And. You call the insurance company. The insurance company is in the best position. Two. Look after your, your needs, because ultimately if it comes down to a settlement or a judgment, It's insurance. It's going to pay because you're paying for the insurance.

Now let's go back to my Harley Davidson example, where I was being required to have both these types of insurance. And they were also asking for workers' comp insurance, which is another type that. Someone might ask you for, I was able to go back to Harley Davidson and said, this is kind of a dumb insurance for me to carry. I'm not going to do it. And it was specifically because I'm an employee of one. In my business. Specifically if I was getting hurt because of doing something on the job.

I'm probably not going to pay myself workers' comp for, for my injury. I'm just going to take the time loss. Uh, that was good for them. They, they were fine dropping the workers' comp insurance claim. But they were still stringent on the general liability and professional liability. they wanted a million dollars of general liability insurance, which sounds like a crazy big number, but it's okay. We're going to keep talking about this.

And then they wanted to maybe $3 million of professional liability. I was able to go back and say, look. Me having $3 million of professional liability. Is not probably going to happen because it's an outrageous expense for the type of work that I do.

There's no task that I'm doing on the project that would accidentally cause $3 million worth of damage. I don't know, maybe it could happen, but making a claim that. A million dollars of professional liability. Was more suitable for the position I was coming into was perfectly. Uh, reasonable. So I have that actually I have $2 million for professional liability. And I paid for both of them every year. I just keep renewing the policy. And. This kind of leads on to everyone's.

Next question is how much does that cost? Well in the grand scheme of thing, I pay about $400 a year. For

general liability. Now that's just an estimate because I don't really look at the numbers anymore. I get the invoice, I pay the invoice. I don't really think about it. Professional liability is still around 450 to $500 a year for having that coverage. And it's really nice to know that I just have. All that protection around myself and my business in case that something were to happen.

So if we take the Holly Davidson example and we move forward a little bit, Uh, I do have a couple of times where I have been very thankful to have had the insurance. And there's one. Clients in particular that I wrote a post on this, I call it Stockholm clients where I had a client that was amazing. Amazing. I love this client to death and they love the MI, which is a great relationship to have. And. Over night, this relationship. Soured because I was taking on more tasks.

I was working on a large project forum. And the project was not going. In the direction that we all wanted it to go. And, uh, against my better judgment and recommendations, they ended up going live with a product that was not meant to go live. It needed. Another couple of weeks of testing. Fine tuning some of the aspects of it. But the client was insistent that we go live with the project and I'm here to do what the client wants. So we went live with the project.

It was a complete disaster and that's a conversation for a whole nother time, but we went live with the project. And I ended up spending three or four weeks just working. 12 to 15 hour days, just trying to fix this mess and get this application back. On track and that's after a lot of data got just kind of screwed up in the process. And again, It was my fault because I wrote the application. But I had also advised that the application wasn't ready to go live.

So a lot of the risk fell onto the client to go live with this and they approved everything. So. We went live with this. Yeah, I got screwed up. I fixed it the best I could. Uh, I decided along the way that this was not a relationship I wanted to continue anymore. So per my contract, which we've talked about in other episodes. I started the process of telling the client I'm no longer going to work for you. I will help you through a transition period to another provider, but I'm done.

I'm getting out. For the next couple of weeks, I didn't sleep very well. I was very stressed out about the possibility of being sued because there was. There was some damage done and I fixed the damage. Like I didn't leave them in a bad place. I took care of everything that, that went wrong. But you still get this feeling in the back of your head, like, oh, they, they may come back and Sue and the. Person in charge of this particular project. I would have put it past them to.

Start the lawyer process. Like they, they were, they were that type of person. Um, thankfully that never came down to, to a lawsuit. I never, never got a call about it ever again. And I haven't heard from that client in five, six years. It all ended well, but this is one of those cases where I was stressed, but I felt protected because I had the contract in the place and the contract had no warranty. It said. Whatever y'all accept is what you get. And if you accept it, It's on you.

Uh, also I had no warranty.

Like there was nothing in there that said, this is really, it doesn't matter how bad Kevin screws up. Um, if you accept it and it goes into production. Cool. It's on you. But that doesn't stop someone from. Issuing a lawsuit. So if they did Sue me. For damages or whatever they wanted to do. Well, I have the insurance and the insurance backed lawyers to come to my aid. And helped me through these cases. Now. Last question. And we'll wrap this up is how do you get these various insurances?

Especially if you're someone out there doing technical consulting. I recommend the provider I used and it's a broker. It's tech, insurance.com. I'm not affiliated with them. I get no kickback. You just go to tech, insurance.com. They have a really good questionnaire about the type of work that you're trying to do. And where you live and they'll find you. Various quotes. It's no different than buying auto insurance or homeowners, insurance or renters insurance. You just ask.

Couple of questions and they'll tell you who has the best rates. You just go with the one that works best for you. So I have insurance through the Hartford. And his Cox. In the United States. They both provide great service. There's a checkup every, every year to just make sure you're getting the right. Uh, insurance, but they don't really try to upsell you to anything new. I think the biggest leap was

in cybersecurity protection, but for the most part. The importance of just got added to the existing policies. I didn't have to go buy additional insurance. So I hope that was helpful for you, Sean. I hope you're listening. That was a great question that I think a lot more people should ask, take the steps necessary to protect your business, because ultimately it's going to protect your business and your family. And you don't want someone to be able to come in and touch that.

Um, but thank you all so much for listening. If you want to continue this particular conversation, you should really come join our discord. At MTI dot T. Slash discord. That's a short link that gets you in a community. And we could talk about this a little bit deeper. Uh, not just myself, but the entire multithreaded income community is there to. For you to. pitch ideas off of, or to get your. Questions answered. We would love to help, but until next time everyone take care.

I'll see you in a week.