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I opened up my business in June of 2001.  We service heavy equipment and do most of our work at customers' locations.  I bought our first truck, a six-year-old Chevy pickup, for $8600.  Gasoline was $1.60 a gallon.  The workers compensation coverage cost $1,150 for the year.  A two million general liability policy was $1,175.  The Healthy NY policy for the family ran $270 a month.  We didn't have a single customer and spent the first week steadily on the phone reaching out.

The trucks I buy still run about 8 grand.  Gas, everybody knows about the gas.  The insurance is what really gets me.  The general liability has never had a claim.  It increased to two grand in 2002.  I attributed it to 9-11 as they based the renewal on the requirement that we perform no work within the 5 boroughs.  But it kept going up.  Last year, it reached ten grand.  Same coverage, no claims, nine times as expensive.  

The health insurance isn't quite as dramatic, but that ran from $270 to $840 a month last year when I dropped it for a high deductible plan.  

It seems to me, that if other businesses face what I do as a small S-corp, then it likely isn't taxes that are putting the squeeze on small businesses, as my republican friends argue, but insurance costs.  It is the liability, workers comp, auto, health costs that have skyrocketed in the last decade.  On top of that, now all the big companies want an umbrella coverage to expand on the general liability and/or professional errors and omissions insurance to guarantee you're doing professional work, or labor law coverage to do god knows what.  

I told one customer the expanded insurance protections they wanted cost more than they pay me gross last year.  The kick of it was, they were one of my first customers.  They've seen us and trusted us for over a decade.  I cold called them in 2001 and did our first job in there before I supplied a liability or comp certificate.  

Now, even from small clients I'm getting vendor agreements wanting me to sign away my ability to be compensated if they kill me or to pay their legal bills if they want to sue me.  The hand shake got replaced with a one to one-hundred page document.  

Insurance seems to be so closely tied in with the ability to make money, that i feel it is becoming a basic necessity to being an entrepreneur.  If these insurance companies are choking out small businesses by seeking higher profit than could be reasonable expected for the risk they assume, then they are in fact harming the well being of this country.  They are in essence driving Americans into the shackles of wage suppressing enormous companies that can afford proper coverage.  Keeping them in secure low-wage jobs because they can no longer start up a company from their garage.   Well, at least not a service company.

Stagnating wages suck, but they didn't kill the American Dream.  Wages would need to quintuple over a decade to keep up this some of these insurance costs.  I couldn't start my business again today.  It would take a over a hundred thousand to do what 30 grand did a decade ago.  Who is going to risk that kind of money on something that has a great chance of failing anyway?  

Big business must like it.  Employees feeling it is better to just stay at the cubicle and put in the time.  Less competition from small businesses who aren't as concerned about making a 30 percent profit as they are about a decent living wage while staying at all in the black.  The end I fear we are racing  to will be the realization by the daydreaming perspective entrepreneurs that they can't afford to insure others against their dream.

Originally posted to Prime Cuts on Thu Feb 16, 2012 at 11:53 AM PST.

Also republished by Community Spotlight.

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