Insurance for Your Business

The importance of insurance cannot be over-emphasized and neither can the danger of paying for insurance you don't need. It is strongly recommended you solicit the advice of an in-dependent business insurance agent. Don't forget to SHOP! Talk to three or four independent agents and compare notes and prices. An insurance agent will lay out a vast array of insurance coverage much of which you simply may not need. Your situation will be unique and you must consider each insurance element carefully to ensure comprehensive coverage.

Whatever your final insurance program looks like, you should review it at least every six months. Your business can change rapidly, especially in the first few years and insurance needs change with it. Keep your program up to date by calling in your agent and reviewing your coverage. Make changes where necessary.

LIABILITY INSURANCE

This is probably the most important element of your insurance program. Liability insurance provides protection from potential
losses resulting from injury or damage to others or their property. Just recall some of the big cash awards you have read about that have resulted from lawsuits concerning liability of one kind or another and you will understand the importance of this insurance. Your insurance agent can describe the various types of liability insurance coverage that are available. If you will end up with a comprehensive general policy, make certain that the general policy does not include items you don't need. Pay for only the insurance you need. For example, your business may not need product liability insurance.

Do not confuse business liability coverage with your personal liability coverage, both of which you need. Your personal coverage will not cover a business-generated liability. Check to be certain.

Compare the costs of different levels of coverage. In some cases a $2 million policy costs only slightly more than a $1 million policy. This economy of scale is true with most forms of insurance coverage. That is, after a certain value, additional insurance becomes very economical.

KEY PERSON INSURANCE

This type of insurance is particularly important for the sole proprietorship or partnership where the loss of one person through illness, accident, or death may render the business inoperative or severely limit its operations. This insurance, although not inexpensive, can provide protection for this situation. Key person insurance might also be necessary for others involved in your business.

SGC was a small firm run by three partners, a software programmer, marketer, and a general manager. Their product was a complex computer program used by aerospace firms. Al, the programmer, was involved in a severe automobile accident, became totally disabled, and SGC lost their programming capability. The problem was that the computer program written by Al was essentially the company's sole product. Modifications to accommodate the customer became impossible and the time to bring another programmer up to speed was excessive. SGC lost considerable business as a result of this situation. These losses could have been offset by key person insurance.

DISABILITY INSURANCE

You, as a business owner, should be covered by disability insurance whether or not you decide on key person insurance. This insurance, along with business-interruption insurance, described below, will help ensure your business will continue to operate in the unfortunate situation where you are unable to work. Your disability insurance policy needs to provide satisfactory coverage. Particular attention should be paid to the definition of "disability," delay time until payments start, when coverage terminates, and adjustments for inflation.

FIRE INSURANCE

Fire insurance, like all insurance is complicated and you should understand what IS and IS NOT covered. For example, a typical fire insurance policy covers the loss of contents but does not cover your losses from the fact that you may be out of business for 2-months while your facility is rebuilt. Fire insurance is mandatory whether you're working out of a home office or you have a separate facility. You should discuss a comprehensive policy with your agent. Take the time to understand the details. For example, will the contents be insured for their replacement value or for actual value at the time of loss?

Consider a co-insurance clause that will reduce the policy cost considerably. This means that the insurance carrier will require you to carry insurance equal to some percentage of the value of your property. (Usually around 85%.) With this type of clause it is very important that you review coverage frequently so you always meet the minimum percentage required. If this minimum is not met, a loss will not be paid no matter what its value.

If you are working out of your home, your existing homeowner’s policy may not cover business property. If this is the case, have your insurance agent to add a home-office rider to your policy.

AUTOMOBILE INSURANCE

You probably already have automobile insurance but it might not include business use of your vehicle. Make sure that it does.

WORKER’S COMPENSATION INSURANCE

If you make the decision to hire employees, you will be required, in most states, to cover them under worker's compensation. The cost of this insurance varies widely and depends on the kind of work being performed and your accident history. It is important that you properly classify your employees to secure the lowest insurance rates. Work closely with your insurance agent.

BUSINESS INTERRUPTION INSURANCE

This protects against loss of revenue as the result of property damage. This insurance would be used, for instance, if you could not operate your business during the time repairs were being made as a result of a fire or in the event of the loss of a key supplier. The coverage can pay for salaries, taxes, and lost profits.

CREDIT INSURANCE

This will pay for unusual losses as the result of nonpayment of accounts receivables above a certain threshold. As with all policies, you must thoroughly understand the details so discuss it with your insurance agent. One of the largest providers of this coverage is American Credit Indemnity, Baltimore, MD. (800) 879 1224.

BURGLARY/ROBBERY/THEFT INSURANCE

Comprehensive policies are available that protect against loss from these perils, including by your own employees. Make certain you understand what is excluded from coverage.

RENT INSURANCE

This policy covers the cost of rent for other facilities in the event your property becomes damaged to the extent that operations cannot continue in your normal location.

DISABILITY INSURANCE

This insurance will pay you an amount each month slightly less than your current salary in the event you become disabled and are unable to work. Cost for this coverage varies considerably depending on your profession, salary level, how quickly benefits start, and when they end. Benefits paid are tax-free only if you, not your company, pay the premiums.

This list could be continued since it is possible to purchase insurance for just about any peril you can imagine ... if you can pay the premium! When considering your insurance coverage, use the following checklist:

INSURANCE COVERAGE CHECKLIST:

• Can you afford the loss?

• What coverage is required by Federal, state, or local law?

• What SPECIFIC items are covered by the policy?

• Are items to be insured for their replacement cost or original value?

• What SPECIFIC items are EXCLUDED by the policy?

• If there is a co-insurance clause, do you have adequate coverage?

• Have you chosen deductibles wisely in order to minimize costs?

• Do any of the policies you are considering duplicate or overlap one another?

• Do you need any insurance based on location, e.g., flood, earthquake?

Use the following checklist to review your insurance plans:

INSURANCE PLAN CHECKLIST:

• Employ an independent insurance agent rather than going to individual insurance companies. Ensure the agent shops for your insurance.

• Talk to and get quotations from at least THREE agents and pick the best one for you.

• Use money saving comprehensive policies, if possible.

• Perform periodic (every 6-months) reviews of your insurance program.

• Have business assets professionally appraised to determine coverage needs.

• Ensure existing personal insurance coverage includes business-related activities and add riders as necessary or obtain additional coverage.

http://www.TotalBusiness.com is a Website that provides business owners with the information they need in order to successfully start, manage, grow, and sell their businesses.

The site features over 3,000 articles and 60 guides on business topics such as starting a business, financing a business, sales and marketing, building a website, setting up an office, hiring employees, and selling a business. The site also contains articles on legal and accounting issues affecting businesses and allows business owners and entrepreneurs to get free expert advice from local lawyers or accountants. The site contains over 1,000 business forms and agreements that are helpful to business owners and provides a business directory with over 1,700 merchants who provide services specifically for small businesses.

Eran Salu, JD,MBA,CPA is the Founder and CEO of TotalBusiness.com

Article Source: http://EzineArticles.com/?expert=Eran_Salu

ANNUITY GUIDE

Annuity Guide
An annuity is a contract where the person who pays for the annuity (the annuitant) will receive a set amount every year for a certain period. Despite the name annuity, the payments may be made monthly and the cost of the annuity will depend on the likely length of time for which it will be paid.

Most annuities are bought for a lump sum, i.e. single premium, and start immediately – known therefore as immediate annuities. Regular premium annuities are also available.

Annuities are normally expressed in terms of annual amounts payable, though in practice, they can be payable monthly, quarterly, half-yearly or annually. An annuity can be paid in advance or arrears, for example, where an annuity is effected on 1st January 2003, the first annual payment is due on the same date if it is paid in advance, or on 1st January 2004 if it is paid in arrears.

All types of annuity have in common the fact that they provide certainty of income over a given period. They are not usually savings schemes and it is possible that the amounts recovered will be less than the cost of the annuity. This is particularly true for a purchased life annuity. In return for the premium (single or regular), annual payments are made for the duration of the annuitant’s life, however long or short that might be. There are also annuities where the amounts paid depend on the growth of the sum invested, which might be used to buy units.

Where an annuity is payable in arrears, it can either be with proportion or without proportion. This is because each payment is made at the end of the period to which it relates. Thus, when the annuitant dies, there will be a period since the last instalment date for which no payment has been made. Under a with proportion annuity, a proportionate payment will be made to cover this period. This is not the case for a without proportion annuity, where no payment is made.

THE VALUE OF YOUR HOME

How to determine your homeowner's coverage

Your first step in determining the right homeowners coverage is estimating the replacement cost of your home. The second step is selecting the coverage amount that best fits your needs. We recommend that you purchase an amount of coverage equal to the estimated replacement cost. But the choice is yours. Determining your home’s estimated replacement cost is important because this will ultimately determine which policy options are available to you. Since it is impossible to predict today what the exact cost will be to replace your home in the future, it’s important to have enough coverage to account for unforeseen circumstances.

Understand the difference between market value and replacement cost

“Replacement cost” is the amount needed to repair the damage or to rebuild the home to its pre-loss condition. The replacement cost of a home is NOT the market value of the home, its purchase price or the outstanding amount of any mortgage loan. It does not include the value of the land, but is the cost of rebuilding your home. New improvements or required upgrades are also not accounted for in the replacement cost.

You've worked hard to get your home. We’ll work hard to help you protect it

Before you purchase a new home, make sure that you determine the appropriate amount of coverage needed. When you have the home appraised, ask if a replacement cost estimate is available. Or consult with your local builder association or a reputable builder for an estimate.

Be aware of any architectural details or unique building materials that may affect your estimated replacement cost, such as:

• Upgraded bathrooms or kitchens (including cabinets)
• Additional rooms
• Custom molding or arched windows
• Other unique features

A contractor or appraiser can help estimate your home's replacement cost

Building contractors or professional replacement cost appraisers are a good source for obtaining an estimated replacement cost of your home. Estimates from these sources should reflect your home’s features, like those mentioned above. If you are unable to obtain a detailed estimate from these sources, your State Farm agent can help provide one for you.

Review your policy annually to make sure that your coverage meets your needs

• Have you recently remodeled or improved your home? When you upgrade or improve your home, you may increase your home’s estimated replacement cost.
• Has the rate of inflation risen since your last appraisal? Your agent provides coverage that automatically adjusts each year in an effort to compensate for increases in construction costs in your area. However, certain conditions such as severe weather can increase the demand for labor and materials, and raise costs beyond normal inflation. It is important to update your coverage amount each year to keep up with the changing economy.
• What influences the building costs in your area? Market conditions in your area may impact the amount it will cost to rebuild your home if you experience a loss. Replacement cost estimates are influenced by supply of labor, demand for labor, and cost of construction materials. Staying abreast of the current market conditions in your area, and changing your coverage amount accordingly, will help you maintain 100% estimated replacement cost coverage for your home.

Some important things to consider when determining your coverage amount: Your home’s estimated replacement cost is different than its market value (real estate cost)

• Each time you remodel or improve your home, you should adjust your coverage amount accordingly.
• If your home is made of unique building materials, make sure they are reflected in your replacement cost estimate.
• Stay abreast of the fluctuating building costs in your area and update your coverage amount accordingly. Make sure that you maintain coverage at 100% of your home's estimated replacement cost at all times.
• It is important to review your coverage annually and inform your agent of any changes you’d like to make.

BASIC COVERAGE IN HOMEOWNER'S INSURANCE

Basic Coverage included in Homeowner's insurance

The homeowner’s insurance policy is a package policy that combines more than one type of insurance coverage in a single policy. There are four types of coverages that are contained in the homeowner’s policy: dwelling and personal property, personal liability, medical payments, and additional living expenses.

Property Damage Coverage

Property damage coverage helps pay for damage to your home and personal property. Other structures such as a detached garage, a tool shed, or any other building on your property are usually covered for 10% of the amount of coverage on your house.

Personal property coverage will pay for personal property including household furniture, clothing, and other personal belongings. The amount of insurance coverage is usually 50% of the policy limit on your dwelling. The coverage is also limited by the types of loss listed in the policy. The coverage only pays the current cash value of the item destroyed, unless you purchased replacement cost coverage.

Your homeowner’s policy also provides off-premises coverage. This means that the policy covers your belongings against theft even when they are not inside your home. Your insurer will reimburse you for the cost of replacing your suitcase and its contents if it were lost or stolen while you were on vacation, but only for replacing them with items of like kind and quality.

Personal Property Floater

Your homeowner's insurance policy may provide only limited coverage for furs, jewelry, silver, and other valuables. It may be necessary to insure these valuables with a special addition to your homeowner's policy, such as a personal property floater. A personal property floater itemizes each article, gives a description of the article insured, and lists excluded perils. It often provides coverage that is broader than the coverage granted in the home insurance policy. You should discuss this with your insurance company or agent to determine the availability and cost of this additional coverage.

Your homeowner’s insurance policy does not cover your pets, your car, and any aircraft. Although your policy does not cover your pet or damage it does to your possessions, it will cover damage your pet does to others or their possessions.

Personal Liability Coverage

Homeowner’s policies provide personal liability coverage that applies to nonauto accidents on and off your property if the injury or damage is caused by you, a member of your family, or your pet. The liability coverage in your policy pays both for the cost of defending you and paying for any damages the court rules you must pay. And unlike the other coverage in your policy, liability insurance does not have a deductible that you must meet before the insurer begins to pay losses. The basic limit for liability coverage is usually $100,000 for each occurrence. You can request higher limits that are available for an additional cost.

Medical Payments Coverage

Medical payments coverage pays if someone outside your family is injured at your home regardless of fault. This includes payment for reasonable medical expenses incurred within one year from the date of loss for a person who is injured in an accident in your home. The coverage does not apply to you and members of your household. The medical payments portion of your homeowner’s policy will also pay if you are involved in the injury of another person away from your home in some limited circumstances. Medical payments coverage limits are generally $1,000 for each person. Higher limits of medical payments coverage are available at additional cost.

Additional Living Expenses

If it is necessary for you to move into a motel or apartment temporarily because of damage caused by a peril covered by your policy, your insurance company will pay reasonable and necessary additional living expenses. The typical policy will pay an amount up to 20% of the policy limit on your dwelling for these expenses. If you move in temporarily with a friend or relative and do not have any extra expenses, you will not be paid any additional living expenses by your insurance company.

WHY YOU NEED A HOMEOWNER INSURANCE

Why you need a Homeowner Insurance?

The largest single investment most consumers make is in their home. The consumer can protect his or her home, possessions, and liability with a homeowner’s insurance policy.

In addition to its availability to homeowners, similar coverage is available to those who rent homes or apartments. These policies are referred to as tenants’ or renters’ homeowner’s policies. If you are a renter, you do not need protection against damage to the building itself, but you do need protection against damage to or theft of your personal property and liability in the event someone falls or gets hurt on the part of the premises you rent.

A condominium owner may purchase a condominium homeowner’s policy to insure personal property. Some policies may also include any additions or alterations not insured by the condominium association. It is important to check with your condominium association and your agent before buying a policy to make sure you are adequately covered.

HOMEOWNERS INSURANCE

What is homeowner insurance?

Homeowners is one of the most popular forms of personal insurance on the market. The typical homeowners policy has two main sections: Section I covers your property, and Section II provides personal liability coverage (to cover you in case of lawsuits arising from things that happen on your property). Almost anyone who owns or leases property should have this type of insurance. Often, homeowners insurance is required by lenders as a requirement to obtain a mortgage.

LONG TERM HEALTH INSURANCE

The Basics of Long Term Care Insurance

The harsh realities of aging in America are coming into sharp focus. Soon, a 95-year-old baby boomer without long term care insurance may have to rely on a 90-year-old spouse or a 70-year-old son or daughter for personal care.

Consumers can't rely on Medicare, Medicare supplementary insurance, or health insurance to help them meet long term care costs. They don't cover most long term care expenses.

When to Buy a Long Term Care Policy

When buying long term care insurance, your age is a primary factor in determining its cost. The younger you are when you get the policy, the cheaper your premiums will be. Of course, you also will be paying those premiums for a longer period of time before taking any benefits.

A good time to buy long term care insurance is between ages 50 and 55, according to the American Health Care Association (AHCA), a federation of 50 state health organizations representing assisted living, nursing facility, long term care, and subacute care providers. A policy that costs you $800 annually when you're 55 will cost you nearly twice as much if you wait to buy it when you're 65.

There is an exception, however. You might want to purchase a long term care policy before age 50 if your employer sponsors an attractive long term care group plan at an affordable price.

Most insurers won't sell you long term care insurance if you're over 85 or if you have a pre-existing medical condition such as heart disease or diabetes. A reputable insurer only sells long term care policies to reasonably healthy people who are at low risk of needing their benefits in the foreseeable future. So beware of policies and premiums that sound too good to be true.

Important Policy Features

The most crucial factor when choosing a long term care policy should be its benefit triggers, the set of conditions that must exist before you begin receiving coverage. Ordinarily, you must have an acute medical condition that requires skilled nursing care before your benefits kick in. The best, and most expensive, policies allow you to start receiving benefits if you suffer from a cognitive impairment such as Alzheimer's disease, even if you can bathe and dress yourself.

Bathing is one of several activities of daily living, or ADLs, which are the most commonly used benefit triggers. Your benefits begin when you are no longer able to perform a certain number of ADLs without assistance. (Your policy will determine that number. A good LTC policy will require the inability to perform two ADLs.)

A good long term care policy also will cover all levels of care — including custodial or personal care — in a variety of settings. Those settings include:

• Adult day care: Sites that provide personal and skilled care, and recreational services.
• Assisted living facilities: Living quarters that provide individualized personal care and health services for people who need help with personal care.
• Facility care services: Licensed agencies that provide skilled nursing care, speech, physical, or occupational therapy, or help from health aides.
• Nursing facilities: Residential sites for people who need daily medical care. Many nursing home stays are for a short rehabilitative period after an acute illness or injury such as a hip fracture.

Make sure you know exactly what types of services and facilities are covered by your long term care policy. If you don't go to the right kind of facility, your insurance company can refuse to pay for your care.

You also should investigate whether your policy has a nonforfeiture benefit, which is additional long term care coverage you can buy that protects some of your policy's value if you drop your policy or let it lapse. While this benefit offers some protection for your investment, it will raise your premiums. If you are confident you will be able to pay your premiums, even if there are future rate hikes, you can lower your costs by passing up this option. See Insure.com's "Choosing among long term care insurance riders".

Waiver of premium is another important feature in a long term care policy. This provision lets you stop paying premiums during the time you are receiving benefits. Read your policy carefully to see whether there are any restrictions on this feature, such as a requirement to be in a nursing home for a period of time (60 to 90 days is standard) before your premiums are waived.

Most long term care policies sold today must be guaranteed renewable, which means the insurer guarantees you the chance to renew your policy. It doesn't mean the insurer guarantees you a fixed premium. Note: Your premium will probably increase over time. While you can't be singled out for a rate increase — no matter how many claims you file — you should know that state regulators routinely grant increases to insurance companies to cover whole classes of policies that experience a large number of expensive claims.