Are you covered?

Photos © Freshidea | Adobestock and Dana Massey

Growers worry about fire, theft, floods and hurricanes, so commercial insurance is one of the first things that gets ticked off the to-do list when buying or launching a business. But did you know that most business insurance policies won’t cover you, the owner, if you get injured, fall ill or must take a leave of absence to care for a loved one? And depending on where you live, workers’ compensation won’t pay out if you fall off a ladder or are in a car accident, so you can’t make a claim to replace lost income. Here’s how to get peace of mind.

Beyond the basics

When you call an insurance broker, they’ll begin by advising you about what policies the laws in your state require you to hold, such as property, liability, business, auto and workers’ compensation (in states where that’s mandatory).

Growers often don’t realize that while a commercial liability policy protects your premises, stock and operations against most natural disasters and lawsuits, it doesn’t cover the people who are most important to the business, says Traci Dooley, national agency sales director for Hortica, part of the Sentry Insurance Group, in Edwardsville, Illinois.

That’s why experts advise purchasing a “key person” or “key man” life insurance policy in tandem to your commercial one that will cover you, your spouse — if they work with you — and any essential employees should any of you become incapacitated or die suddenly.

“Key person life insurance premiums are paid for by the business and can be a great retention tool to keep a good employee. It’s a benefit to them because it could pay their absent salary to their family should something happen to them,” explains Dooley.

This type of insurance can cover anywhere from three to 10 times your current compensation, depending on who or what you wish to protect.

“Are you trying to protect what it would take to hire and train a new employee if you weren’t there, or protect a certain percentage of the profits of your business? Or are you looking for an income continuation after your death or retirement?” she adds.

Key person insurance benefits include covering lost profits, extended absences and any business loans the key person was responsible for. Premiums can cost as little as $100 per month up to $1,000 or more depending on the person’s age, gender, salary and health status, plus the amount of coverage your business needs.

Thinking ahead

Fresh out of college in 2009, Dana Massey was hired as head grower of annuals at Plantworks Nursery in Rougemont, North Carolina, which carries annuals, ornamental grasses, perennials, tropicals and vines. Mentored by owner Douglas Chapman — who founded the company in 1978 — Massey quickly moved up in the organization. Within three years, Chapman had tapped her to take over when he retired.

“We’ve called it my Cinderella story: I was in the right place at the right time with the right people,” says Massey, who agreed to buy Plantworks in 2012.

“Doug and I had a five-year transition plan until he fully retired in July 2017, and when we made the agreement in 2012, he got key person insurance for me. He decided it was in his best interest and mine: If something happened to him, I would be protected, and if something happened to me, it would buy him time to either find my replacement or decide what to do with the business.”

It’s all in the details

There are other types of insurance growers should consider, notes Dooley. For example, while your property insurance will pay to replace the building if it’s damaged by wildfires or windstorms, what about lost profits while you’re unable to operate during rebuilding?

“That’s where business interruption insurance comes into play; it covers your net profit and continuing expenses,” explains Dooley.

Ten years ago, two other potential threats to your business were perhaps not on your radar, but they should be today, she adds.

“Cyber liability — if your information is hacked by another party – and employment practices liability — whether it’s age discrimination, wrongful discharge of employment or sexual harassment — can both have a huge monetary impact on your business,” she says, noting that you can purchase protection to cover you against these threats.

Have difficult conversations now

Don’t wait until tragedy strikes to figure out a game plan — especially when it comes to partnerships, advises Dooley. Traumatic situations can cloud the ability to make important business decisions.

“Thirty-some years ago, I worked with a small nursery run by three siblings. One was killed in an auto accident,” recalls Dooley. “The other two siblings suddenly had to make a decision: Do they buy out their brother’s family, or allow them — as one-third owners — to come into the business? Ultimately, they decided they couldn’t work together any longer and sold the business.”

Having a buy-sell insurance policy clarifies everything up front, she adds. Depending on the type of business you have, how it’s set up, whether your business is a partnership or an LLC and whether you’re the only managing partner or there are others who need to be protected in case something happens to you, buy-sell policies become very important.

If Partner B dies suddenly, but partner A doesn’t want to be in business with partner B’s spouse or children, a buy-sell agreement would outline that, says Dooley.

“You can fund a buy-sell agreement with life insurance and set it up so either the partners pay for the insurance, or the business pays for the insurance. If something happens to one of them, the business is the recipient of the life insurance proceeds, and they use that to buy out the other partners,” she adds.

Invest in your business

Massey is considering multiple insurance coverage options but has focused her attention on running the business.

“Taking over an existing business came with lots of growing pains — you’re watching every penny and waiting for the right moment, but you can’t wait because there’s never going to be a perfect time for anything,” she admits.

“I’m in this for the long haul, so this is something I want to get accomplished.”

Wendy is an award-winning journalist, content provider and TV producer based in Montreal, Quebec, Canada. Reach her at wendy@taketwoproductionsca.