Insurance Articles

Small-business owners frequently encounter increased liability concerns during the course of day-to-day business.

So do start-ups, not-for-profits and others engaged in business.

In most cases, general liability coverage provides a level of protection suitable for most unanticipated situations.

However, it might fall short in some instances.

General liability coverage often specifically excludes criminal activity or other omissions of directors or officers.

Liability coverage for directors and officers, commonly referred to as D & O coverage, bridges the gap by protecting both directors and officers as well as the organization itself from damages.

The liability coverage also protects officers and directors from the defense fees associated with criminal or regulatory allegations.

D & O insurance is especially important when attempting to attract quality directors and officers into companies that deal with cutting-edge areas of research and development.

It’s also important for attracting them to:

Industries undergoing rapid legislative changes

• Companies that routinely do business in several states or a global setting
• Companies with employees where relationships could potentially be considered a conflict of interest
• D & O coverage provides some peace of mind for the individual directors or officers.

It also provides a valuable level of additional protection to insulate individuals from personal loss in the event of a claim.

Contrary to popular opinion, D & O insurance does not encourage malfeasance since it excludes deliberate acts of fraud or intentional illegal activity.

Instead, it provides protection required to operate in complex industries without fear of reprisal should an accidental omission, mistake or other oversight take place.

With more than 95% of Fortune 500 companies citing D & O insurance as a core component of corporate insurance, it is no longer considered an “add-on” policy.

In fact, given the number of corporate scandals and an increasingly litigious environment, D & O insurance is increasingly considered to be imperative for companies of any size that plan to:

• Seek venture capital funding
• Initial public offering
• Other investment opportunities that involve shareholders

Research indicates that more than 30% of all companies can expect at least one claim against directors or officers.

Average defense costs of a claim exceed $1 million.

Employee benefit liability insurance is increasingly being seen as a smart step for small-business owners.

In fact, given the rapid rate of state and federal mandates likely to impact employee benefit plans, experts consider it a prudent way to protect against inadvertent errors, omissions or other acts that could result in a lawsuit.

There are two key components to keep in mind when considering employee benefit liability coverage. They are the “administration” side and the “employee benefit program.” The administration side provides protection for the counsel and interpretation of benefits, record handling, enrollment, termination, cancellation and other administrative duties connected to the employee benefit program. The employee benefit portion pertains directly to the benefits provided to employees, including life insurance, health insurance, pension plans, stock options and other benefits.

Should an error or other unintended consequence arise that results in a loss or claim from an employee, former employee, family member or beneficiary then the policy would take appropriate steps to represent the company or pay the claim in the event of an adverse ruling.

It is essential for business owners to fully understand - and implement - a proper administrative procedure to handle employee benefit plans. It is equally important to remember that employee benefit liability insurance does not take the place of fiduciary liability coverage. Speak to your agent about how to best protect your business with employee benefit liability insurance in combination with existing coverage options.

Insurance tips offered by most companies usually focus on the need to protect your property against hazards such as fire, accidental injury or other common perils. But few homeowners spend enough time selecting the right options for their personal property.

In fact, many assume that the automatic content coverage that comes with a homeowner policy is more than sufficient. Unfortunately, this isn’t always the case.

Failure to select the right coverage can be a costly mistake that may not become apparent until a catastrophic loss has taken place.

When it comes to protecting your personal property there are two main types of coverage available. They are Actual Cash Value (ACV) and Replacement Cost (RC). In addition to ACV and RC coverage, riders or additional policies are commonly used to insure high-value items. It’s a good idea to speak with your agent to determine the right type of policy for your individual situation.

ACV is the amount it would take to repair or replace your personal property, minus the depreciation. For example, expensive electronics rapidly depreciate and may be worth far less than the original purchase price. ACV is typically more affordable and therefore a good option for budget-conscious individuals.

RC is the amount it would take to replace or repair personal property with a similar style and quality. Many homeowners opt for RC coverage. Although RC coverage tends to cost a bit more, it is helpful when the value of an item has depreciated significantly.

Extended RC coverage provides additional protection by insuring an item up to 125% of its value, making it an excellent choice during periods of rapid price increases or economic inflation.

Guaranteed RC is the most expensive type of policy. It guarantees coverage to repair or replace an item even if it’s above the policy limit. There are typically limits to the total value of any single item, so be sure to ask your agent whether it would be more beneficial to obtain a rider or endorsement instead.

If you’re planning to purchase a new car, be sure to obtain insurance well in advance. Even if your policy does provide automatic coverage, it may not be sufficient to cover the cost of repairs for a more expensive vehicle. Following are some tips to help you get the right insurance when making a purchase.

Call for Quotes in Advance: Obtaining a quote in advance for the make, model and age of the vehicle will provide a full picture of the total cost of ownership for a new car, and it’s often possible to have a policy put into effect before driving the vehicle off the lot. Although most underwriters extend coverage to new cars purchased, it’s better to be safe than sorry. Verify that automatic coverage is in effect as well as the number of days required for notification.

Adding or Replacing: Tell your agent whether you will be adding to or replacing the current policy in order to obtain the best rates and coverage options. If you are replacing the current policy, most underwriters allow 14 to 30 days for notification. Premium adjustments are frequently required and may leave you underinsured if the new vehicle is involved in an accident.

Fill That Gap: Buying a car or truck is typically the second largest expenditure most people make, so it isn’t surprising that car loans or financing is necessary. Unfortunately, it’s sometimes possible to owe more than a car is worth after driving it off the lot. To avoid large gaps in coverage, most underwriters offer “gap insurance” designed to pay off large loans in the event of a major loss.

It’s a well-known fact that individual choices can lead to increases or decreases in your life insurance premiums.

However, few people realize the full extent of how seemingly simple lifestyle decisions can dramatically impact policy rates. Of course, most people expect to see higher premiums if they smoke or use tobacco. But what about if they scuba dive?

Depending upon the underwriter, everything from healthy outdoor activities to high-risk situations such as substance abuse may double, triple or even quadruple life insurance premiums. Other common lifestyle situations that may impact premiums include:

Driving Record

Whether you feel the need for speed, enjoy taking a motorcycle out on the open road for weekends or made a bad decision to drive after drinking, chances are your individual driving record could have a major impact on premiums.

Recreational Pursuits

Skydiving, scuba diving, being a part-time pilot, racing a bike, skiing and even mountain climbing might be great ways to stay in shape but statistically speaking they tend to increase the odds of an accident or an early death.

Travel

It should come as no surprise that routine travel to high-risk areas - as opposed to relatively safe domestic destinations like Disney - is more likely to result in expensive life insurance premiums.

Smoking, Drinking and Other Vices

Although you might be willing to take your chances when it comes to smoking, drinking and other vices, the insurance underwriter isn’t usually as inclined.

But don’t assume it’s impossible to obtain great rates even if you engage in less than healthy habits.

Depending upon frequency and duration of particular habits and other individual situations, life insurance agents are often able to provide very cost-effective and affordable life insurance quotes.

Medical evacuation insurance may not be at the top of your priority list when traveling, but for a growing number of people it’s fast becoming a “must-have” item.

Also known as a “medevac plan,” this once relatively unknown form of insurance is no longer relegated to the jet-set crowd. Globe-trotting baby boomers, international sporting enthusiasts and even business executives who routinely travel overseas are increasingly concerned about the ability to return home for medical treatment.

Medevac plans fill a much-needed gap in coverage by providing emergency services such as air evacuation, long -distance ambulatory services and other necessary medical transportation.

The insurance should not be confused with traditional travel policies. In fact, most travel insurance specifically excludes medical evacuation insurance, which may result in undue financial distress to travelers who experience a serious injury or illness while out of the country.

Transportation to medical facilities can be quite expensive, especially in situations that require specialized technology, nursing assistance or other care. It’s not merely a question of obtaining a new airline ticket. Highly trained medical staff and extensive safety procedures may be required to transport a patient back home in time to obtain treatment. Language barriers, out-of-the-way locations and lack of local assistance may also complicate an already bad situation.

By obtaining medical evacuation insurance, international travelers can have peace of mind in knowing help is just a phone call away. Multilingual support, specially trained pilots and clinical staff are available throughout the world at any time of day or night.

Most investors understand that the basic benefit of fixed annuities is that they offer the potential for a guaranteed payment. Regardless of whether the economy or markets are performing well or poorly, an annuity pays a minimum amount of income every month. But just how much money should you put in an annuity versus other investments?

When it comes to fixed annuity allocation, some financial advisors recommend that you put no more than a third of your assets into annuities. Others recommend that you limit it to three-fourths of your assets. But that’s a big difference.

The reason for the discrepancy is that some financial advisors feel they can get better returns for their clients by investing in a diversified portfolio of securities. But that’s a harder sell today than it used to be, given the huge losses the stock market has experienced in the past few years.

So how much money should you allocate to a fixed annuity? As is the case with any element of a portfolio, fixed annuities are best used in moderation. That’s because they’re a compelling way to guarantee a certain amount of fixed income in retirement. If overdone, however, they can rob a portfolio of flexibility.

No single answer fits every investor, but one guideline is to use an annuity to cover your basic living expenses. You may have to put a significant part of your nest egg into the annuity to receive the amount you need, but you’ll know it will be there, through good times and bad.

The benefit of a fixed annuity is the potential for a guaranteed payment.

Regardless of whether the economy or markets are performing well or poorly, an annuity pays a minimum amount of income every month.

But before you rush off and buy into one, you may want to determine that your expectations are realistic.

You see, no single investment, including an annuity, is perfect.

All investments have their downsides, and annuities are no exception to the rule.

A big downside to annuities is the expense.

A fixed annuity typically pays out no more than 5% of its principal each year.

To receive $2,000 a month in income at that rate, you would have to invest $500,000.

Of course, this example is hypothetical and does not represent any particular product.

You also have to factor fees into your annuity expectations.

The more guaranteed features an annuity offers, from inflation adjustment to joint survivor benefits, the higher the fees generally are.

And as with mutual funds, these fees are embedded in the annuity itself, in the payouts.

Additionally, annuity distributions are taxed as ordinary income, which can be taxed as high as 35% compared to 15% for capital gains in a brokerage account.

So your annuity income could very well be reduced by more than it would have been if the same distributions had been paid out through a brokerage account.

That doesn’t mean annuities should be avoided. They offer benefits that other investments don’t.

The key is to keep your expectations realistic. Understand in advance how much the annuity can be expected to provide in income, as well as how much it is costing you in fees and taxes.

Flood insurance might be one of the most important forms of protection the average homeowner ever purchases.

Unfortunately, it’s also one of the most easily overlooked.

Following are some of the reasons flood insurance should be at the top of your insurance portfolio:

1. Revised FEMA Maps

Millions of homeowners across America have been surprised to learn they need to purchase flood insurance for the first time. New homebuyers and even sellers should make a point of obtaining up-to-date plat maps to determine if they fall within the new  flood zones implemented by the Federal Emergency Management Agency. Otherwise, the mortgage company is likely to purchase a policy on your behalf.

2. High Risk

Even if your property doesn’t fall within a known flood zone, it’s often a good idea to purchase a flood insurance policy. Flooding is one of the most frequent high-dollar claims submitted. In fact, flooding is more likely to take place than is fire or other named hazards.

3. Big Damage Claims

Many homeowners make the mistake of thinking they are covered for flood-related damages when, in fact, they are not. Flooding is caused by more than merely rising water. Other common causes of flood-related damage are broken pipes, storm surge, rain and, of course, flash flooding. Unfortunately, the time to obtain flood insurance is before it’s needed. Don’t wait until storm season to obtain quotes, as it’s often too late. Most flood policies go into effect 30 days after purchase.

To determine if you’re fully covered in the event of flood-related damage, simply ask your agent.

Remember, flood-related damage is the single most common cause of additional property destruction after a hurricane, storm surge or even earthquake.

Nearly every item in your home is subject to water damage, including drywall, electrical systems, furniture, and other belongings and household items.

Staying with the same agent or broker simply makes sense when it comes to property and casualty insurance.

Following are some of the advantages of having a long-term working relationship with one agent:

1. Continuous Coverage: One agent will be better prepared to quote complete coverage without existing gaps, and you’ll be more likely to save money by eliminating duplicate coverage. One of the problems associated with buying multiple policies from various providers is the ease of duplicating coverage and inconsistency or gaps in coverage, especially among homeowner, car and umbrella policies.

2. Competitively Priced: Don’t assume that shopping around provides the best price. Instead, calculate the total cost of all coverage after rate reductions, elimination of duplicated provisions and other deductions such as multiple-policy discounts. Long-term clients often reap the benefits of low prices, rate reductions and convenience simply by staying in place. Stop shopping and stay in place for the best rates.

3. Single Point of Contact: Having a single point of contact for all your insurance needs is convenient for making payments and keeping contact information up to date. It’s also vital for quick response and individual attention in the event of a claim. Not only can all your benefits be easily coordinated by an agent who is familiar with your needs and coverage, but it reduces the stress and strain of trying to navigate the complex and confusing world of insurance when you need it most.

Buying a life insurance policy is one of the most important steps you can take to protect your family’s financial future. It can also be one of the most confusing tasks.

The following are some mistakes to avoid when buying a life insurance policy:

Mistake #1

Procrastination is by far the most common mistake made by the majority of people. Most assume that it is either too expensive or that they don’t need coverage because they are young. Neither situation could be further from the truth. Term life insurance is especially affordable, with policies starting at under $20 per month. As for age, the best time to purchase a life insurance policy is when you are young and healthy. Not only does it ensure that you will get the best rates possible, but it provides valuable protection for growing families that are not yet financially secure.

Mistake #2

Purchasing the wrong policy is another common mistake. Life insurance is a complex topic with long-term implications, so it is a good idea to take your time and speak with an insurance agent about all your options. Cost, coverage, duration, tax consequences and other considerations should be addressed for your specific situation. Term, whole life, universal and variable are just a few of the options available, so weigh your options wisely.

Mistake #3

Not purchasing enough insurance can be a problem. It’s easy to underestimate the cost of living when initially purchasing a life insurance policy. In addition to replacing an income or paying down mortgage and other debts, it’s important to add in an inflation-adjusted cost-of-living increase plus extra expenses likely to be incurred in the event of a loss. Everything from yard care and maintenance to child care and tutoring may need to be supplemented in the event of the death of a spouse. Tally up the total cost - plus inflation - for all the services and support provided by the insured person and then use it as your starting place when obtaining a quote.

More than half the nation’s population will spend time in a long-term care facility at some point in their lives, research shows. Unfortunately, very few people carry long-term care insurance.

Long-term care insurance is perhaps a necessity for the nearly one in five Americans nearing retirement age. To find out if you’d benefit from purchasing long-term care insurance, consider the following:

1. Do you or an immediate family member have a family history of Alzheimer’s disease, stroke or other condition that might make it difficult or even impossible to remain at home?

2. Can you financially afford an average of $50,000 or more for the annual cost of caring for a loved one in a long-term care facility? Experts expect the annual cost of care to rise faster than the rate of inflation and rapidly approach the $75,000 per year limit. By 2030, the average cost is expected to reach $300,000 per year - far beyond the reach of most retirees.

3. Can your children or family members afford the time and cost of providing in-home care, including skilled services for special needs? If not, long-term care insurance provides the protection you need to avoid becoming a financial burden on your loved ones. Remember, nearly one of every five workers will become disabled before retirement age, and more than 50% of people over the age of 65 experience some form of debilitating disease or illness that impedes their ability to perform normal activities of daily living.

As the stock markets plummeted in 2008 and 2009, many pre- and post-retirees withdrew all their funds from their annuities.

Many also took significant losses - something they’re still recovering from to this day.

As a result, many people may now want to know if they can deposit any proceeds in excess of the cost of purchasing the annuity into an Individual Retirement Account, known as an IRA.

The answer?

Well, you see, it depends.

And it depends on a lot of things.

Some annuity contributions are made with pre-tax dollars, and others are made with after-tax dollars.

If the annuity consisted of qualified funds, such as an IRA, it can be rolled into an IRA.

On the other hand, if the annuity consisted of non-qualified funds, it cannot be rolled into an IRA.

If the annuity consisted of non-qualified funds, though, there is one small bright spot.

According to the rules, if a non-qualified annuity is surrendered for less than its cost basis, you can use the full amount of the loss to offset ordinary income.

You’d do that with any capital loss, but in this case the loss should not be subject to the $3,000-per-year capital loss limitation.

Of course, the preceding information is just an overview.

It’s best to contact a professional investor.

A professional investor will be able to help you determine if you can roll your annuity surrender proceeds into an IRA.

The legal and tax information contained in this article is merely a summary of our understanding and interpretation of some current provisions of tax law and is not exhaustive.

Consult your legal or tax counsel for advice and information concerning your particular circumstances. Neither we nor our representatives may give legal or tax advice.

For many people, tax deferral is by far the most important benefit of choosing an annuity as a retirement savings vehicle.

Because of that, it’s important that people understand at least the basics of tax deferral.

Following is a brief overview of tax deferrals:

Tax deferral is a means by which the payment of taxes on certain assets can be delayed until some date in the future.

Tax-deferred assets grow untaxed - with interest, dividends and capital gains appreciating - until they are withdrawn.

This permits you to experience potentially higher overall returns, since returns are not reduced by income taxes every year.

Since you probably won’t withdraw the assets until later in life, when you could be in a lower tax bracket, you may also minimize the taxes you have to pay on withdrawals.

That’s also the case with annuities.

Any contributions made on an after-tax basis will be tax-free at distribution time, although the contributions that were made on a pre-tax or tax-deferred basis will be fully taxable at distribution.

The legal and tax information contained in this article is merely a summary of our understanding and interpretation of some current provisions of tax law and is not exhaustive.

Consult your legal or tax counsel for advice and information concerning your particular circumstances. Neither we nor our representatives may give legal or tax advice.

January is the perfect time to pause for a moment and reflect on the year that’s passed. It’s also a good time to prepare for the one ahead.

Taking an inventory of your insurance needs is a great way to make sure that your hard work and New Year’s resolutions are protected against fiscal uncertainty in the coming months.

Types of insurance

First, you should determine what forms of insurance are required.

The most common are auto and homeowners insurance, but don’t stop there.

Many people find that they benefit from additional forms of financial protection for small-business enterprises, as well as umbrella or supplemental policies for valuables.

Who is to be insured

Second, assess who is to be insured, the amounts of insurance and beneficiaries.

Changes to marital status, employment or other lifestyle-related concerns can have a dramatic impact on insurance coverage.

It’s important to update policies to reflect changes that have taken place over the past year. Inform your agent of any changes that have taken place to obtain the most up-to-date quotes.

How much to be insured?

Third, you should update insurance amounts.

Inflation takes a heavy toll on the cost of living, so it’s essential to update coverage amounts on a regular basis.

Changes to employment, health or even other forms of coverage can also increase or decrease the need for certain types of insurance. Ask your agent about other forms of coverage that may supplement existing policies or even replace employer-sponsored policies at a better price.

Fourth, you should document and take photographs of belongings. If you bought or sold business assets, personal belongings or other items, take photographs and record the item number. A documented inventory comes in handy during a loss or claim.

A common mistake made by the average driver is being under-insured. Unfortunately, what might seem like a small oversight can become a costly mistake. You can make sure that you’re purchasing the right amount of liability coverage by speaking with your agent and understanding the following important considerations:

1. Understand how other assets can impact auto liability insurance. Many people make the mistake of thinking they need additional auto liability insurance only if they own an expensive vehicle; however, few things are further from the truth. Almost anyone with substantial assets such as real estate, a small business or other holdings could benefit from additional liability coverage. Your agent can advise you about your holdings in order to determine the right amount of protection for you and your family.

2. Know the rules of the road. Although the laws regarding uninsured or under-insured drivers differ from state to state, it is important to understand how it could impact your own financial situation. Ask your agent to explain what coverage is in place and what forms of supplemental protection are available in the event of an accident or claim.

3. Umbrella policies provide an additional layer of affordable protection. An umbrella policy provides a cost-effective method of obtaining additional liability protection and picks up where standard insurance leaves off, making it a superb way to protect your family.

The start of a new year is the perfect time to review your life insurance needs. The following information will help ensure that you get off to a sound and secure financial start.

Why You Need Life Insurance

Plain and simple, life insurance is the ultimate form of protection for your family’s financial future. Whether you’re the primary breadwinner or the person who holds it all together at home, life insurance ensures that your family is able to sustain its standard of living should you pass away.

Why Purchase Your Own Policy

Purchasing your own policy, rather than depending solely upon an employer-sponsored policy, makes perfect sense. There are important tax advantages to consider, and your own policy provides stability in the event of a job loss. Be sure to speak to your insurance agent about your individual situation.

Types of Life Insurance Policies

There are several types of life insurance policies designed to fit nearly any budget, age or need.
A few of the more common forms include:

Term Life Insurance: Such insurance is considered one of the most affordable options. Term life insurance provides important protection for young adults and others seeking cost-effective options. It does not include an investment option. Policies range from one to 40 years duration.

Whole Life Insurance: Premiums typically include a face value portion and an investment portion, which is paid in the form of dividends. Although initial premiums are higher than they are for term life, whole life often is more affordable for long-term coverage.

Variable Life Insurance: With variable life insurance, a portion of the premium is used to pay for the cost of the insurance and fees, and any excess can be invested in such things as stocks and bonds, mutual funds, equity funds, and money market funds. It is advisable to work closely with your agent in order to determine the right level of coverage and investment diversification to meet your individual portfolio needs.

Most people make it a priority to purchase adequate levels of home, auto and even life insurance, but few make the same commitment for disability coverage.

Unfortunately, research shows disability insurance is one of the most urgently needed forms of coverage available. It is vital to ensuring financial stability, though, as nearly 80% of people are likely to experience at least six months of disability during their lifetime.

Disability insurance provides financial protection in the event of an accident, illness or injury. Even those with a hefty emergency fund in place may find their accounts insufficient to meet the additional demands of child care, home health services, medication or other needs during a disability.

Long-term disability is one of the leading causes of bankruptcy and poverty in the nation, affecting not just the ill or injured person, but the entire family. Even short periods of disability can have a dramatic impact on the finances of an entire family.

Unfortunately, government-sponsored forms of disability coverage often have extensive waiting periods and other limitations that may result in a devastating financial crisis, especially if a family is dependent upon a primary wage-earner for support.

Disability insurance ensures that the household is able to meet basic obligations whether the situation lasts a few months or several years. Like most forms of insurance, though, it’s most affordable when you are still healthy.

People who rent a car for the holidays can get the right insurance without paying too much if they follow a few simple steps.

First, renters should call their insurance agents or brokers to clarify what type of coverage they need, taking into account limitations and exclusions as well as special situations that may apply to anticipated travel plans.

For example:
•    If you drive an economy car most of the time, be sure to ask about additional coverage if you intend to rent a luxury vehicle while on vacation.
•    Make sure that you are covered when crossing state lines or renting a car in another country.
•    If you plan to share the driving, make sure everyone is equally covered before making a final determination about who will get behind the wheel of the rental car.

Renters should consider the pros and cons of all available options before making a final decision about rental car insurance.

While many credit cards claim to provide very affordable, or even free, rental car coverage, there are often major limitations and exclusions that should be fully understood.

Likewise, car rental companies provide insurance that tends to be quite costly, so read the fine print and find out how each plan supplements your own insurance to find the right balance between coverage and cost.

Purchasing condo insurance can be complex, so it’s imperative to work closely with your broker or agent to obtain the best price and policy.

Why Are Condos Different?

Due to the use of shared space and amenities, there are special considerations to keep in mind when obtaining insurance. Most condos include special fees to cover routine maintenance and repairs, as well as specialized insurance for the entire complex or condo association.

Different Dwellings

Insurance is important for anyone residing in a condo, townhome, co-operative or other shared organization, whether you live in it year-round or use it as a vacation home.

Coverage Choices

Unit-owner policies are one of the most popular forms of individual insurance used by condo owners or occupants. This insurance picks up where the master policy leaves off by providing insurance for modifications or improvements made to the unit or for other uncompensated damages. Additional coverage may be required for personal property and even liability depending upon your individual circumstances. Ask your agent or broker about special situations, including small home business, increased personal property limits for valuables or collectibles, and enhanced loss assessment coverage. Your agent or broker will be able to provide specific insurance that complements the existing master policy to make sure you have the best policy. Loss of use is another popular form of coverage that every condo owner is likely to need. If you’re unable to use your unit due to a fire, weather-related damage or another problem, the loss of use coverage provides the protection needed to maintain a roof over your head until repairs are made.

Common Exclusions and Add-on Considerations

Every policy is different, but a few of the more common exclusions found in many policies include flood damage, earthquake- or mudslide-related expenses, pest- or pet-related problems, and business-related activities. Ask your agent about specialized coverage needs.