Why Business Owners Might Need Extra Insurance

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 Errors: Get Protected

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.

How to Choose Personal Property Insurance

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.

Buying a New Vehicle? Make Sure You’re Insured

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.

How Lifestyle Choices Affect Insurance Rates

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.


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.

Why Savvy Travelers Are Buying Medevac Plans

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.

Annuities in Your Portfolio: What You Need to Know

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.

Make Sure Your Annuity Expectations Are Realistic

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.