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Business Insurance

The transcript below features Clay Clark, US Small Business Administration Entrepreneur of the Year, and Tim Redmond on Thrive15.com, an innovative Ohio business college, discussing the need for an business insurance fund. 

Clay:                I think there's a lot of entrepreneurs who believe that not only are they going to be that two out of the 10 businesses that is successful, but that they're not going to have any emergencies ever. Right?

Tim:                Yeah. Yeah.

Clay:                We're not going to put any money into our insurance fund.

Tim:                Right and I work with my clients and we will take a look at what assumptions do you have in life. Most of us, I put myself in there, most of us live with sloppy assumptions. To assume that we're not going to have something that costs us more than what we have, that's going to come in unexpected is a sloppy assumption.

                        Yeah, but I don't want to have faith for that. OK, have as much faith for nothing bad happening and prepare for the worst thing happening because you don't want that plant to die. You've got a phenomenal business idea.

                        You've tried businesses that have been shut down. You've seen other people. They've got great ideas, great businesses. It's been shut down because they did not protect the process of growth.

Clay:                There's a lot of entrepreneurs that believe that not only are they the chosen ones who are going to be this two out of 10 that actually is successful, but then they believe they're going to live in a bubble. Some of us believe that we're going to live in a bubble.

Tim:                We're immune.

Clay:                I believed that I was never going to get hurt until I found myself in the hospital with Dan McKenna, one of our Thrive owners here, I found myself in a hospital getting a spinal tap because I was having a food sickness. I was basically having a food allergy, but they thought I might be having spinal meningitis.

Tim:                Oh geez.

Clay:                I'm in the hospital having Dan hold me like a little baby and I'm getting a spinal tap. It's the worst thing. I don't know what that cost, but that wasn't cheap. I realized I am not the chosen one. I'm going to go to the hospital at some point.

Tim:                I think I want to call you Neo though. You might be. You might be the chosen one.

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Clay:                I want to ask you though, we buy insurance for I guess for the things we can't afford. That's the idea.

Tim:                Yeah, yeah. To think that you're immune from these things happening, now there are things that you can do to avoid, that we really think through, but most people aren't like that.

                        We're running through life. We wake up, we're sliding into another day without really thinking through and planning.

                        We're going to predictably have these unpredictable things happen. To assume otherwise is to have a sloppy assumption and you're not setting yourself up. You're not respecting your business. You're not respecting your life not to take care of it.

                        Yeah, but if we had to pay that then we won't eat. Well, if it gets down to starving versus having insurance, I would recommend you go ahead and eat something.

                        We use these extreme forms to excuse ourselves from having this long term perspective, healthy assumption to say I've got to protect the plant in the process of growth.

Clay:                We are going to predictably have these unpredictable things happen.

Tim:                It happens.

Clay:                It blows my mind. Now countless authors have said that basically insurance is the cheapest form of peace of mind you can buy. I just want to go through these kinds of insurance real quick just so you can give us a high level understanding of why we need these specific ones.

                        Health insurance, having a high deductible. Basically the idea is if you get in an accident, you have a very high amount you would pay per incident I guess, but you keep your insurance rates lower. Can you explain how that works a little bit just so I can kind of get ...

Tim:                Yeah. Health insurance is just in a crazy state of flux right now. The cost, I thought we passed a bill to lower the rates, but mine just went up 30%, my wife told me last week.

Clay:                It's probably because you're making bad choices.

Tim:                Yeah, making bad choices, so we keep having the catastrophic insurance go up and up and up and we're going to take care of the daily stuff.

                        We have in health insurance, we have different components, we have the prescription, how much of the prescription are you going to buy versus how much is going to be negotiated by your provider. We have the office visits into the doctor, emergency care, that kind of thing. The more you're going to cover of the that, the less your expenses will be.

Clay:                The more you're going to pay out of your own pocket, the less your insurance bill is going to be.

Tim:                Right, right. Yeah. We've seen some health insurance where no matter what you do it's $10 for the medicine, it's $10 for an office visit, so my wife would have more of a tendency to bring the kids in for anything going on.

Clay:                Yeah.

Tim:                They might have a sniffle, but now it may be at $50 or $100 a visit so you go let me make sure here. Let's make sure the kid doesn't actually die before we bring him in.

                        The higher the deductible for your medicine prescription or the higher per visit or then the third component is how much are you going to cover if you have some catastrophic event like you break your leg.

                        I busted my leg three times, left leg twice, right leg once. Very expensive kid. I broke my head. I was in a very serious accident. I fractured my skull and busted up my body. Very expensive, OK?

                        During that time you may have where you agree to say, "Listen, I will pay for the first $3,000 then after that I'll pay for 20% whatever's left over and the insurance will cover all the rest."



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