There are a lot of things to consider when starting your own hoof-care business. Insurance protection should be at the top of your list.

According to the 2018 Farrier Business Practices Report, conducted by American Farriers Journal, the vast majority of full-time farriers (95%) have some type of medical insurance. Yet, farriers are woefully underinsured in areas such as life (61%), disability (26%) and liability (46%).

When the farrier’s body is ready to retire, it’s likely without the means to do so unless they can become dependent on either their children or their spouse. It’s not so much a strategy than it is a stumble-to-the-finish-line exercise.

Like them or not, these are the four basic imperative skills that a hoof-care business owner should possess:

1. Horse skills.
2. Hoof skills.
3. Blacksmithing skills.
4. Business skills (administrative management, wealth management and business strategy).

It is common for the farrier to focus almost exclusively on the first three, sometimes to varying degrees, and assume that they will culminate in deft execution of the fourth.

It’s a little like trimming a hoof, shaping the shoe, then laying the nails and hammer together with the shoe next to the horse and expecting it to get tacked on by itself.

As a farrier, you will work hard at not protecting your business. Those who do take that important step of developing your business skills should be aware of the three common mistakes that are made by entrepreneurs when it comes to insurance.

1 Sourcing and Placing Coverage

Insurance is a complex field and it’s filled with many different products offered by many different carriers. You genuinely need to be educated in the field and be familiar with the workings of the industry. Many people think that insurance is as easy as buying the cheapest policy they can find. Often they call the first number that comes along with the catchiest jingle on the television. As a result, a lot of people are overpaying for being underinsured.

The solution? My preference and advice are to find an independent broker. Insurance sales come from two distinct sources.

• Captive markets, such as State Farm or Allstate, which create and sell only its products. This would be like hiring a farrier who only shoes with Natural Balance horseshoes. It could be right, but undoubtedly limited. By definition, captive agents represent their companies.
• Brokers, who are appointed to many different markets, and who definitively represent their clients. The independent broker pledges no allegiance to any one company over another and will have the ability to move your coverage to the one that is performing at the top of its game at that time.

2 Buying Cheap Insurance with Low Deductibles

When you pay for cheap insurance, you could well be throwing your money away, because the concept of insurance is to hedge paying out large monies for an unforeseen event. If the triggering event takes place and you don’t have coverage — why pay for it at all?

3 Waiting to Insure Until Later in Life

There is an appropriate time and place for everything. Waiting until you are hurt before you buy disability insurance is not only shortsighted, but it is also called adverse selection. An insurance company isn’t going to accept the risk of protecting your back after you’ve blown out three discs. That would be like a horse owner trying to convince you to work on their horse once you’ve learned that the animal seriously injured two other farriers.

A more sensible approach might be the guideline that’s set out below that suggests when, what and how to insure.

One truly enormous wreck could well be the end of everything you’ve worked hard to acquire. Be sure you’re adequately covered with a commercial auto insurance policy.

Starting Your Career (20 to 30 Years Old)

You probably don’t have many, if any, assets, little money and little know-how between the ages of 20 to 30. You have a lot going for you, though. You’re young and ambitious, you heal quickly, you can start your career again if you’re not hurt too badly and you can move your fledgling business if your reputation is put under threat.

If you can learn how to treat your customers like royalty — by keeping your appointments, treating their horses like you’d treat someone’s child and return messages — you can get step one taken care of: Making money.

The most important thing to note at this age is that the future value of an investment relies on time to grow — and growth creates exponential compounding, which means that growing your money could easily be taken care of with even a small investment made at this age. An investment you make at age 21 is going to be almost 200% stronger than the investment you make at age 28.

You should also take into consideration that you are a desirable enrollee for an insurance company, so they are going to give you highly favorable rates. The earlier you start to build your insurance score (yes, there is such a thing as an insurance score), the more you will benefit. Insurance carriers want people who have good scores because it reduces the type of risk that farriery brings.

You should be looking at:

• Disability insurance. You’re going to get hurt.
• Individual retirement account (IRA). The earlier you deposit $1,000 into a tax-deferred brokerage account, the better the benefits of compounding accumulation you will receive over time. If you stick $1,000 into your account in your first year, followed by $500 every year thereafter until you’re 30, you won’t be a billionaire, but you’ll thank me later.
• Commercial auto insurance. Many small business owners-operators are primarily concerned with keeping their operating costs low. A common error among owner-operators is to title their vehicles in their personal name and insure it on a personal lines policy. Some of those policies offer a “business use” categorization. What this actually intends to convey is that the vehicle is used to perform low-risk work-related operations. The carrier is not offering to insure a farrier rig loaded with tools and equipment being driven during high-traffic times of day onto peoples’ property with trailers and signage indicating that they are a business. The reason is that large vehicles cause significantly more damage in crashes. When the damaged party identifies the vehicle as a business vehicle, there is a tendency to flag it as having the ability to pay out a full amount for all conceivable damage. The most prudent way to insure a farrier’s rig is on a commercial policy, not just because it offers higher limits but because it is rated for mobile operations.
• Health insurance. Again, you’re going to pay the least amount in premiums now than you will for the rest of your life. I know you’re young and healthy now, but when you do end up at the hospital, they will take every dime from you if they can. Let the insurance company negotiate the price of your treatments.

You might think that these are unnecessary bills because at this age it’s hard for you to envision how these policies help you to protect your strategy to make money. Just remember: Either prove to the insurance company that you are a good risk and let them pick up the tab in the future on your $300,000 claim, or start saving up now so that you can blow all of your life savings on a large-sized claim when it comes about. You don’t have any way to measure what the likelihood of a catastrophic event is, but I can guarantee that given your new career choice, it’s greater than a 25% chance. Are you willing to gamble that you aren’t in that 25%?

The Middle of Your Career (30 to 45 Years Old)

These are your highest income years, when you have refined your business operations and you’re starting to create some savings. You likely have a few assets (a house, some toys like a boat or an ATV, maybe some savings) and quite likely a family. You won’t heal quite as quickly now as you did in your 20s and you also won’t have the luxury of taking lots of time off because of your newly acquired responsibilities. You should be thinking about a few things to come on the horizon, such as college for your kids and what you’re going to do when you get to be too old to shoe or trim horses.

This also would be a perfect junction to consider taking on employees. The concept of taking on an employee is rare in American farriery and can be daunting to a lot of hoof-care providers.

You should be thinking about:

• IRA, Savings Incentive Match Plan for Employees (SIMPLE), or some version of an interest-bearing account. You will need to be making regular contributions to this account as well. Think about how much you need to end up with and then work backward. If you have an advisor who can aim to grow your money by 10-12%, and you want to retire with $3 million at 70, when you’ll be forced to cash out you’ll need to max out your $6,000 contributions every year. Let’s face it, after 65, you’d rather shoe because you want to, not because you have to. In today’s world, you’re likely to live several more decades, so you have to subsidize a lifestyle for another 40 years once you hang up the chaps.
• Term life insurance and invest the rest. While the market makes no promises, life insurance is an annuity. That means you are guaranteed to leave something to your beneficiary. If you don’t like the idea of leaving your loved ones with the bills of a mortgage, college, funeral and so on, then do the responsible thing. For $1,000 per year over 20 years, you could leave your spouse a cool $1 million to help hold down the fort.
• Disability insurance. You could be contributing another $3,000 every year to a tax-deferred shelter growing at 6%. Plus, when you do get hurt, you’re going to need an opportunity to heal up before you get back out into the field. If you get hurt so badly that you can’t go back to shoeing, disability might pay for you to re-train, or even modify your home to accommodate your challenges.
• Commercial auto insurance. This is one of your biggest risk exposures, and one truly enormous wreck could well be the end of everything you’ve worked hard to acquire.
• Liability insurance. Horse owners don’t think of their animals as livestock anymore. They think of them as kindred spirit buddies. It’s not out of the question that even a minor incident could result in a lawsuit. If that should happen, you will be glad that you are protected.
• Health insurance. You’re not getting any younger, you have a family and you work in a high-risk profession.

Late-career (45 to 60 Years Old)

At this point, you have a refined business, the best clients and your best reputation. If you are a single operator, you should consider employee benefits because your ability to provide service will be stifled. It behooves your ability to expand and care for your client to take on an employee.

When this is undertaken, the issue always has been, “Well, I take on an employee, I train them, they grow disgruntled and they move on to start their practice with the skills I have furnished them with.” To that, I would say, think about how you can make yourself an attractive employer. One of the most obvious ways is to offer your employee benefits. It could be a 401K, medical/disability insurances, or life insurances. It’s important to understand that group benefits are superior in quality to their individual counterparts, and they are relatively inexpensive. Typically, they only require one W2 employee. It benefits the employer as much as it does the employee. As such, you should be thinking about:

• Disability insurance.
• IRA.
• Whole life insurance.
• Liability insurance.
• Commercial auto insurance
• Health insurance.

The End of Your Career (60 to 75 Years Old)

The transition toward retirement is taking shape. If you haven’t already hired an employee, you should consider keeping one or taking on a partner to maintain the group benefit that’s outlined in the late-career section. You should be thinking about:

• Disability insurance concludes. This occurs at age 65 and you’ll collect the Return of Premium (ROP). You pay a little extra with ROP, but you’re entitled to all of your paid premiums, less any benefits paid out at the end of the term. This endorsement usually creates a 6% growth on paid premiums, so it can be a great way to maximize savings.
• IRA ends at 75.
• Whole life insurance.
• Reducing or eliminating liability insurance. Because you are at your smallest service group, with no new clients, you can likely accomplish this.
• Commercial auto insurance ends at retirement.
• Health insurance.

Retirement

Congratulations! You’ve reached your reward. Your focus should be on:

• Life insurance.
• Brokerage account.
• Medicare supplement.
• Personal auto insurance.

Because we already have learned that insurance is planning for the unexpected, catastrophic, events in our lives, we might interject here that by paying for insurance, you are creating a tax-deductible expense whose intention is to subsidize a high-ticket event in the future. In other words, you pay your $1,000 in annual premiums and deduct the expense so that next year, when you are involved in the four-car pile-up or have to be admitted for an unplanned surgery, the carrier can pick up that tab for the tens of thousands of dollars.

Insurance and wealth management is your ticket to meeting the needs of you and your family when you need it most. Invest wisely now to avoid struggles in the future.