How a Risk Manager Could Help Your Business

Should you hire a risk manager?

If you’re a small-business owner and not sure how to answer that, the following information might help. It could be one of the most important business decisions you’ll ever make.

Risk Manager Defined

A risk manager helps identify, assess and prioritize the risk and liability associated with conducting business, then plans and prepares appropriate actions to address that risk.

To put it another way, the risk manager addresses the effect of uncertainty on objectives both positive and negative.

What Is Risk Management?

According to the University of Texas (U of T), risk management is the process of making and carrying out decisions that will minimize the adverse effects of accidental losses.

What Is the Risk Management Decision-Making Process?

The U of T says the risk management decision-making process consists of five steps:

•    Identifying and analyzing loss exposures

•    Examining alternative risk management techniques

•    Selecting the appropriate technique

•    Implementing the technique

•    Monitoring the results

Loss prevention, spreading risk, contractual transfer and insurance are examples of risk management techniques.

Who Needs a Risk Manager?

In theory at least, nearly every business could benefit from the advice of a well-trained risk manager. In reality, though, it’s not always cost-effective.

Big business entities routinely invest in the services of a risk management consultant or even a full-time department to handle such needs, but small-business owners may not be able to afford the same services despite the disproportionate importance of avoiding litigation.

Commonly Encountered Situations

For those that think their small business is immune from risk, think again.

A quick glance at the most common types of risk should provide more than ample proof that risk is unavoidable.

•    Damages due to fire, water or other natural disasters, including the loss of use and amount of business lost until business is able to resume.

•    Lawsuits or litigation due to accidents, injury or other situations.

•    Criminal activities, key person loss, business interruption and even competition from other providers.

Attractive Alternative

One method many small-business owners use to circumvent the cost without exposing their business to undue risk is to use the services of a knowledgeable insurance agent.

Agents have the advantage of constantly dealing with claims and commonly encountered liability situations, and they’re also required to be informed about the legal, social and fiscal environments surrounding their clients and insurance products.

Is Your Home Business Properly Insured?

As more small-business owners work from home, there’s a growing need for special insurance to protect visitors against accidental injuries or illness associated with the business function of your home. Following are some things to consider:

Limitations: Many small-business owners are surprised to learn their traditional homeowner policies won’t cover accident and injury claims if visitors are a normal part of the daily business activity. Instead, it’s often necessary to purchase an additional liability insurance policy to protect business visitors, delivery drivers and even couriers conducting business at your property. Without proper protection in place, a simple slip by a delivery driver dropping off business items can turn your profitable home business into a major catastrophe.

Legal Considerations: Another commonly overlooked issue that results in coverage gaps involves zoning, health regulations, statutes and other legal considerations at the state or local level. Any claim arising from a location or business practice outside of the law is typically void, so it is essential to verify that all legal mandates are carefully followed.

Frequently Forgotten: Two of the most frequently forgotten areas of concern for the small-business owner include auto coverage and product liability coverage. Like your homeowner policy, most personal auto policies specifically exclude the business use of a vehicle. Likewise, product liability coverage is an especially important type of policy for those who create, design or manufacture an item – even something as simple as home-baked breads for resale. Protect clients and your assets against accidental injuries or claims by speaking with your agent today.

HMOs and PPOs: What Are the Differences?

Managed care is a term that describes the services provided by entities such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Care provided via these organizations is meant to help reduce the cost of health care for both individuals and families.

HMOs provide a full range of health care services. They have a high concern for wellness and therefore also provide many preventive care options.

Care recipients in an HMO plan generally pay one fixed monthly premium, regardless of how much care is received during that time. In return, members must obtain their care from doctors and other facilities that are within that particular HMO network.

One of the benefits of an HMO includes low out-of-pocket costs. Rather than worry about a wide range of deductibles and co-payments, a member’s monthly fee covers a great deal of the costs. This arrangement also reduces paperwork for the member.

In addition, there is usually no lifetime maximum benefit with HMO plans. Therefore, members will continue to be covered for as long as they need treatment and are in the plan.

PPOs have contracts with a wide variety of physicians and hospitals in order to provide care to members at a discounted rate. PPOs generally have deductible and co-payment requirements. Unlike with HMOs, PPO members’ monthly premiums might not cover all their care, so they may be billed for the difference.

Advantages of a PPO include open access and choice of providers. For example, PPO members may see a care provider who is out of the network, although they will likely receive a higher reimbursement amount if they see in-network providers.

With a PPO, a member’s out-of-pocket costs are also typically limited for services that are covered within the plan. There is normally an out-of-pocket cost cap for individuals as well as for families.

Regardless of whether you choose an HMO or PPO, it is important to read over the specifics of each plan to know what’s covered.

Life Insurance 101: Choosing the Right Policy

Cracking the complex and confusing lingo of life insurance can be a chore. Following is a tutorial that might help:

Term Life: Term life insurance provides basic protection in the event of an untimely death. It can be purchased in various durations, ranging from five to 35 years. There are various types of term life policies, including level, annual renewable and mortgage insurance. Some term life policies are guaranteed renewable, while others are not.

Permanent Life: Unlike term life, which may expire at the end of the original duration without having ever paid a claim, permanent life insurance remains in effect until the policy matures. It also builds cash value in addition to the face value of the death benefit. There are several forms of permanent life insurance, including whole life, universal life, limited pay and endowment.

Whole Life: Whole life insurance combines a level premium with cash value and guaranteed death benefit. Although typically more expensive to fund in the initial stages, whole life policies are typically less expensive for those who intend to hold a policy for 20 years or longer, due to the increased dividend payments that offset the cost of premiums later in the life of the policy.

Universal Life: Universal life insurance provides permanent coverage and higher rates of return in exchange for a decreasing cash amount. Premiums tend to be flexible, and death benefits may also be modified in keeping with the ability and needs of the policyholder.

Limited Pay: Limited pay is a less commonly used form of permanent life insurance that locks in a payment period by which all premiums must be completed.

Endowments: Endowments are a form of life insurance that tend to be more expensive due to a reduced payment period. The cash value of the policy is expected to equal the death benefit by a specified period or age. Overfunding certain whole life policies could result in the Internal Revenue Service designating a policy a Modified Endowment Plan and subject to different tax rules and rates.

When in doubt, speak to your agent about the right policy for your life stage.

What You Need to Know About Vision Insurance

Many regular health insurance plans cover costs for treatment related to eye disease or injury to the eye. However, the cost of routine eye exams, glasses, contacts and corrective lenses is generally not covered. To obtain coverage for these services, a vision insurance policy would be required.

Most vision insurance plans cover basic eye-related services like annual eye exams, eyeglass frames, eyeglass lenses, contact lenses, and photorefractive keratectomy and laser-assisted sub-epithelial keratectomy procedures, albeit at a discounted rate.

Some plans contract with certain eye-care professionals to provide services, while other plans allow insureds to use any eye-care provider at a discounted rate. Many of the vision care plans that are offered by vision insurance companies are preferred provider organizations (PPOs). In these plans, there is a network of eye-care providers through which the member may receive a discounted rate. With the PPO vision care plan, the member may see eye-care providers that are outside of the PPO network, but they will likely be required to pay a higher out-of-pocket amount.

Some companies offer stand-alone or individual vision insurance plans. And discounted vision-related services may also be found through a vision discount plan. However, these are not insurance policies but rather membership plans that offer their members discounted eye exams, eyeglasses and frames, and contact lenses. Prior to purchasing a vision insurance plan, be sure that it covers all needed services.

Tips for Picking the Proper Flood Insurance

Two inches of water can cause nearly $8,000 damage to the average home, according to research conducted by the Federal Emergency Management Agency (FEMA).

Not only is water-related damage one of the most common causes of an insurance claim, thanks to recent flood-zone revisions by FEMA, millions of homeowners are racing to find affordable flood insurance for the first time.

Unfortunately, selecting the best flood insurance isn’t always the easiest of tasks.

Following is a checklist to use when speaking with an agent about purchasing the right flood insurance protection for your property.

Timing

Many underwriters are restricted from writing a new flood policy once a major event is announced, so shop for flood insurance ahead of time.

Find out when the flood policy is scheduled to go into effect, and ask about purchasing a temporary policy during the interim.

Remember, flood insurance doesn’t always cost a lot.

Homes in low to moderate risk areas may qualify for preferred risk policies.

Policy Specifics

Understand what type of flooding is included and what is excluded, as well as which portion of the policy will cover the damage.

For example, high winds from a hurricane may result in water damage to exposed areas of the home, earthquakes can cause pipes to burst and even putting out a fire may result in extensive water damage.

Ask your agent what portions of the policy provide needed protection in different scenarios, and evaluate the deductibles, limitations and restrictions for each.

Review Your Risk

Updated flood maps have resulted in big changes.

Visit www.floodsmart.gov and enter your zip code to get an up-to-date listing of flood risks for your area.

Actual Value and Total Loss: What Is the Difference?

Perhaps one of the most frequently misunderstood aspects of auto insurance is the difference between actual value and a total loss.

A total loss is when the cost to return the vehicle to pre-accident condition would be as much – or more – than the value of the automobile. It’s important to learn how total loss is determined, in order to make sure you obtain the proper protection when purchasing your next auto policy.

It’s also important before purchasing a policy to understand actual cash value (ACV) as it’s related to a total loss. Otherwise, you might find yourself underinsured in the event of a major claim.

Many auto owners mistakenly believe the insurance will pay off the existing loan or cover the entire cost of purchasing a new car, but that is rarely the case. Instead, insurance underwriters estimate the value based upon the Kelley Blue Book, Edmunds or National Automobile Dealers Association guides, then modify the quote to reflect the mileage, condition and other options for the vehicle. In most instances, this is significantly less than the cost to purchase a new vehicle or even pay off an existing loan.

Most new vehicles lose a significant amount of value as soon as they are driven off the lot. The trade-in value would be substantially less, even if you only owned the vehicle for a short period of time. Likewise, the actual cash value of a vehicle is often much less than the amount owed or even the cost to purchase a similar car.

Tips for Picking the Best Insurance Against Floods

Many small-business owners assume they have flood insurance protection through their standard business policy only to find out they aren’t once disaster strikes.

You can fight back by buying a flood insurance policy to protect your business before experiencing the worst.

It’s an important step to protect your financial future, especially if your livelihood depends upon it.

Who Benefits From Flood Insurance?

Flood insurance provides more than basic protection against rising tides or overflowing rivers. It can also protect your business against inadvertent leaks or damages due to water-related problems. Not only does flood insurance protect your small business, but it also protects your employees and clients by reducing the risk of rebuilding and replacement costs associated with major flood losses.

Who is at Risk?

Obviously, any small business located in a flood-prone area is at greater risk. To determine the risk for your area, ask your insurance agent or visit FloodSmart.gov to calculate the risk to your small business. Remember, flooding is the number one cause of claims due to natural disasters, including hurricanes, rising rivers, tornadoes, flash floods and other associated losses.

How to Purchase

Purchasing small-business flood insurance isn’t that difficult, but it’s important to act sooner rather than later. Most policies exclude coverage for the first month, and many underwriters restrict the ability of an agent to issue a new policy once a severe weather warning has been put into effect. Never wait until the last minute. Instead, plan ahead to purchase the right policy for your small-business needs.

What to Include

When purchasing a small-business flood policy, you will be required to list covered assets. Be sure to include automobiles, equipment and all inventory. It’s a good idea to make a complete list that includes the make and model numbers. Be sure to update the list at least once per year to include new assets or eliminate older assets from the list. Specific high-priced items or inventory that is commonly used off-site may need to be covered under an additional policy rider. Your agent can assist in evaluating the best policy for your specific small-business needs.

Potential Discounts

It’s a good idea to ask whether or not your small business qualifies for reduced rates or other discounts based upon low- or moderate-risk flood zones or preferred risk policies. If not, you may still be able to obtain affordable flood insurance for your small business via the National Flood Insurance Program.

Last-Minute Reminders

Keep track of your records and important policy documents, including inventory list, photographs of assets and other important information.

It’s a good idea to store a copy off-site in a safe-deposit box or online storage service. Be sure to include the contact information for your insurance agent. In the event of a claim, it is that much easier to access the required documents even if you are unable to enter the property.

Are You Covered for Professional Liability?

In today’s uncertain economy it makes more sense than ever to protect yourself and your assets from litigation with professional liability insurance. Unlike small-business liability insurance, professional liability protection covers the actual interaction with your clients, including malpractice and breach of contract claims.

Who Needs It?

Essentially anyone who provides a professional opinion, makes recommendations, or proposes solutions or treatment options is potentially at risk for a professional liability lawsuit.

What Is Covered?

Professional liability policies are especially valuable in addressing common complaints such as malpractice or breach of contract, but other essentials are also included such as professional negligence, loss of client data, claims of nonperformance, negligent oversell and ancillary losses. Also called Errors and Omissions Insurance coverage, professional liability protects against losses and liability associated with accidents, oversight and omissions.

Peace of Mind

In today’s litigious society, professional liability coverage provides you with peace of mind in knowing you have a team of experts on your side should a claim arise. It’s no longer enough to do your best and allow the rest to take care of itself. Honest mistakes or even overtly fraudulent charges may result in excessive legal fees even if a suit is dismissed. Professional liability protection allows you to keep conducting business even while the lawsuit is addressed in court, by providing judgment protection, assisting with defense expenses and court costs.

How COBRA Fits Into Your Health Insurance Plans

Today’s economy has produced a vast change in the employment landscape. Nearly every day we hear about another company that has gone under or downsized, leaving hundreds or even thousands of employees jobless.

Most people who have lost their jobs have also lost access to their health insurance. To many people this can be devastating, as individual policies are often expensive and hard to find, and require a great deal of paperwork and health exams in order to qualify.

One option is for employees to continue their current health coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA). The Act was established in 1985 and provides a way for employees to temporarily retain company-sponsored health care benefits after they’ve lost or changed jobs, had their hours reduced or had a major life event.

Employers who have at least 20 employees and offer health insurance must offer COBRA to employees who leave or are terminated.

When employees elect COBRA, they are allowed to keep their existing group health insurance coverage, so no changes are necessary with regard to doctors or pharmacies.

In addition, since the former employer usually handles the administrative aspect, there is no additional paperwork involved. And, since coverage remains the same, there are no additional medical exams necessary to determine the employee’s current health condition.

Although COBRA offers an easy and convenient way to retain health insurance coverage, there are a few factors to keep in mind.

The coverage is considered temporary, meaning that COBRA benefits will run out after 18 months. At that time, the employee will need to shop for another health insurance policy if he or she has not found new employment that offers insurance benefits.

Those who may best benefit from COBRA are those who have pre-existing conditions and may not immediately qualify for another health plan, or those who will join another group health insurance plan with a new employer within the 18-month COBRA time frame.

Why Life Insurance Is About More Than Just Price

One of the most important factors to consider when shopping for life insurance has absolutely nothing to do with the actual policy or price.

In fact, it has nothing to do with anything other than a few simple choices made by the individual prior to completing the forms. However, those simple choices can save thousands or even tens of thousands of dollars in the event of a claim.

Following are some quick tips to help you maximize payouts and prevent common life insurance policy problems:

Owner Options

Carefully consider who owns the life insurance policy before purchasing. For example, many small-business owners or traditional employees rely exclusively on employer-provided life insurance policies. While these may be cost-effective in the short term, the long-term costs are often substantially higher due to taxation of benefits.

Calculate the total cost of purchasing employer-provided insurance versus a self-purchased or individual policy by comparing after-tax benefits.

Beneficiary Basics

It’s important to clearly identify the beneficiary well in advance and make sure changes are recorded in a timely fashion to avoid the costly and time-consuming problems associated with probate. However, it’s equally important to consider how the funds should be dispersed.

In the event of a claim, the beneficiary will be required to decide which payout method best meets his or her needs. Lump sum, life income, interest income and partial payment with contingencies are just a few of the available options.

Taxing Considerations

Life insurance proceeds may be subject to estate taxes. With rates as high as 45%, it’s important to maintain a limit of $3.5 million to any one individual.

Instead, consider assigning ownership to a spouse, adult child or other individual in order to minimize estate taxes.

Check with your tax professional for more details about your specific situation.

Considering Dental Coverage? How to Find the Right Policy

Dental care is essential to overall good health, but some treatments can be costly. That’s why it is essential to have at least some amount of dental insurance.

Dental insurance works like many other types of health insurance coverage. Generally, the insured pays a regular premium to an insurance provider in return for various covered dental services. Although dental insurance plans can vary widely, most cover treatments such as regular cleanings, fillings and crowns, emergency tooth replacement, non-cosmetic oral surgeries, and dental X-rays.

When shopping for a dental insurance policy, it is important to know what to look for in order to be sure it will cover most, or all, of your dental needs. Compare several options, noting all the potential out-of-pocket expenses you may incur. These expenses will include premiums, co-payments and deductibles. Also, be sure to check the annual and lifetime policy maximums. For example, if a policy has an annual maximum of $10,00, any expenses exceeding that amount with a year must be paid out of pocket by the insured.

Having dental insurance can lead to better dental care. Those with this type of coverage are more likely to receive regular cleanings and checkups. This helps in preventing dental problems or controlling them before they become more serious and more costly.

This results in not only better physical health, but better financial health as well.

Replacement Costs: What You Need to Know

Now that market values of many homes throughout the nation have dropped, it’s more important than ever to obtain reliable replacement valuations when purchasing insurance.

The following tips can help you estimate replacement costs and obtain the right level of protection for your family and future:

1. Don’t Confuse Market Valuation With Replacement Cost

Undoubtedly this has led to a great deal of confusion, especially in markets that have experienced significant numbers of short sales and foreclosures.

Market values in many areas have dropped below the cost required to rebuild the home.

While it might sound like a quick way to save some money, dropping replacement coverage is often costly in the long run. Remember, replacement coverage provides the protection required in the event you must rebuild or replace the home rather than the actual depreciated value of the property or item in question.

2. Overages

Most policies stipulate you must have at least 80% or greater coverage in order for the replacement value to go into effect, but during rapidly changing conditions, inflation or tight labor markets it’s not unusual for repairs to become more costly than originally anticipated.

It’s possible to purchase an additional rider that provides enhanced protection against any overages.  Used in combination with replacement coverage, it helps ensure that you have the protection needed in the event of a claim.

3. Zoning and Ordinances

Replacement value alone may not be sufficient, especially if you live in an older home or an area that has implemented new zoning or ordinance changes.

Standard replacement value covers the original item but may not include zoning, ordinance or other regulatory changes required to rebuild.

Ask your agent about a zoning and ordinance policy to make sure you are completely covered.

Hiring a Childcare Worker? Make Sure You Are Insured

Whether you have a full-time nanny or hire an occasional babysitter for a night out on the town, it’s important to obtain the right type of insurance coverage for all your childcare needs. Use the following checklist when speaking with an agent about proper coverage options:

Full-Time or Part-Time: One of the most important factors in deciding what type of insurance is required is whether a childcare worker is full-time or part-time. Full-time workers such as a live-in nanny tend to work longer hours and may require additional forms of coverage.

Automobile Coverage:
If a childcare worker uses a family car, it is critical to make sure he or she is included on the policy. Likewise, even if part-time childcare workers use their own vehicles, verify they have up-to-date insurance in place prior to transporting the children.

Liability Coverage: It’s essential to verify the limits of liability coverage for your own protection as well as that of the childcare provider. Ask your agent about expanding your personal protection as well as obtaining liability coverage on a nanny or worker. Popular policy types include public liability insurance that provides protection in the event something happens to children when in the care of the childcare worker.

Homecare Coverage: Inviting a person into your home is never a simple task, but proper insurance can help reduce the risk of theft or other emergencies. Ask your agent if your household insurance policy provides protection in the event of a claim related to childcare.