Wake Up, Jerry: Your Wife Wants You to Stop Snoring and Read This Before Launching Your Landscaping Biz

An insurance expert explains that Jerry skipping essential business insurance is a "false economy" for new small-business owners, and a labor attorney outlines how Jerry can avoid being accused of unfair competition when setting up shop. When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.You are now subscribedYour newsletter sign-up was successfulWant to add more newsletters?Delivered dailyKiplinger TodayProfit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. 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For anyone going out on their own to start a small business, having appropriate business insurance is critical. Even more so is knowing the rules of fair competition."Mr. Beaver, my husband, Jerry, has learned the landscaping trade since graduating from high school, by working for a landscaping company in town. He plans to open his own business, offer jobs to several of the people he has worked with and then advertise that he now has his own company. Jerry and his boss never signed any type of an employment contract."I am worried. Jerry doesn't care about having business insurance and said it would be too expensive for us now. Would you please do a story on why skipping business insurance can be a huge mistake?Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail."I think it would wake up my snoring husband, and in addition to obtaining insurance, he needs to discuss his business plans with an attorney. Thanks, 'Caroline.'"I ran Caroline's question by veteran insurance agency principal Karl Susman, president of Susman Insurance Agency in California and a regular contributor to Kiplinger's Adviser Intel.I asked, "Why does someone like Jerry, who is going out on his own for the first time, need business insurance?""Jerry might be a great landscaper," Susman noted, "but when insurance people hear, 'We can't afford it,' as the reason for not obtaining small-business coverage, especially a new business owner, they know the reality is that anyone in Jerry's situation can't afford not to have it."He outlined the basic coverages that most small-business owners need. (Later in this article, I cover the risks Jerry faces if he tries to establish his landscaping firm the wrong way.)About Adviser IntelThe author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.All it takes to seriously damage Jerry's financial security is a personal injury claim from someone who says they tripped over a hose negligently left in the wrong place, Susman noted. Business insurance would protect Jerry. Without it, he would be facing potentially expensive litigation and medical bills.Other coverages that protect small-business owners:General liability insurance covers third-party claims of bodily injury, property damage and personal/advertising injury (such as libel) due to marketing activities.Commercial property insurance protects rented/owned buildings, equipment, inventory and tools from damage or theft.Workers' compensation insurance is required in most states if you have employees. It covers medical expenses and lost wages for work‑related injuries.If the employer does not have workers' comp insurance, the employer would be personally liable for medical bills and could face criminal prosecution.Business income/interruption insurance kicks in when a disaster interrupts operations and leads to lost income. Lacking insurance to cover ongoing expenses can result in permanent closure.Professional liability insurance (errors and omissions) is extremely important for service‑based businesses and will handle claims of negligence or mistakes made during the performance of professional services.For example, if Jerry's employee damages a customer's irrigation system, resulting in a flood that destroys property, errors and omissions coverage could save Jerry's business from a costly lawsuit.Commercial auto insurance is required for vehicles used for business purposes to cover accidents, damage or injuries. Personal vehicles used for business purposes are generally not covered by the owner's insurance.Cyber liability insurance is critical for businesses that handle customer data — for example, credit card numbers or driver's license numbers. It protects in the event of data breaches or cyberattacks.So, why would a business owner not have insurance? Susman said that insurance agents hear the following excuses, "often after it is too late":It's too expensive. This argument is false economy. When you compare the cost of litigation, property damage or employee injury, to list a few, with the expense of business insurance, the insurance premiums would cost far less.It's not going to happen to us. That type of thinking is fine, until it isn't. The cost of not having insurance is almost always higher than the cost of having it.Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.I ran the issue of Jerry competing against a former employer by a friend of this column, Southern California labor and employment attorney Jay Rosenlieb, who "sees these kinds of situations fairly often," and underscored that, "yes, Jerry is free to open his own landscaping company, but he may not engage in unfair competition."Rosenlieb set out what that means:Rosenlieb stresses the importance that, once he leaves his employer, "Jerry (should) not give the impression that he is raiding his former employer's people." He can, however, "announce his new business with ads, a website and on social media, and then former coworkers can reach out on their own. Directly contacting them could be seen as unfair competition."I asked Rosenlieb if Jerry should simply open up and discuss his plans with his employer. What would be the risk of that?"Dennis, as Jerry has worked since high school for the employer, feelings could be very, very touchy, winding up with Jerry fired on the spot. It is a huge risk."To attorney Rosenlieb, "American business thrives on competition — on fair competition. Jerry is one fortunate husband, as his wife sees her husband's need for business insurance."Before doing anything, (he should) arrange a consultation with a business attorney to help save him from costly mistakes that I have, unfortunately, seen impact marriages far too often."Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, You and the Law. Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."