How to Get Employee Benefits Peace of Mind

Employee benefits liability insurance can provide small and midsize business owners peace of mind as they build and grow their business.

Often, when a new employee starts a job, a flurry of paperwork is initiated.

This is necessary to make sure that he or she is signed up for payroll and any corresponding benefits.

Some of those benefits may include company retirement plans, health insurance and life insurance.

Larger corporations have human resources departments to handle these responsibilities.

Small to midsize businesses usually do not have a human resources department.

Owners of such businesses usually wear many hats.

The business owners not only produce their product or service, but they’re also the director of sales and marketing, the accountant, the technician, the inventory department and the hiring manager.

When a new employee is hired, a small to midsize business owner may not get to file the necessary paperwork for some time afterward.

In the meantime, if the new employee needs to use his or her health insurance and finds out that the employer did not properly enroll him or her, he or she can sue to collect damages for the amount of his or her medical claim.

This is where employee benefits liability insurance comes in.

This coverage provides protection not only for business owners but also for anyone who administers the benefit program.

Coverage is provided for any negligent act, error or omission with regard to running an employee benefit program. This might include late enrollment of an employee, failure to enroll, improper termination of a plan or improper record keeping of that plan as far as the amount of a benefit available to an employee.

This coverage really protects businesses in three ways.

First, because the coverage provides a limit of insurance, the business owner knows he or she won’t have to pay such claims out of pocket.

Second, the policy puts a time limit on reporting claims. The claim must be made and reported within the current policy term.

If a business has a policy that runs from March 1, 2010 to March 2, 2011, all claims must happen and be reported in that window. If an employee notifies his or her employer of a claim that happened on February 15, 2010, there is no coverage.

Usually, the first year of this coverage is as far back as someone can report a claim.

Finally, whether the claim is actual or alleged, the insurance carrier has the responsibility of investigating it and defending the employer in a court of law.

Large and small businesses alike have a need for this type of insurance coverage. As soon as an employer offers an employee benefits plan, the employer should consider purchasing this coverage.

Many carriers will throw in a limit of insurance as an added value on small to midsize policies so the cost is either very minimal or included in the total price of a policy, thus making it very attractive for buyers.

Are You Covered if Data Gets Compromised?

Security breaches seem to be in the news on almost a daily basis.

Just recently, a worker went to a local bar with a thumb drive of his employer’s sensitive customer information in his pocket.

When he left the bar, he left behind that thumb drive, leaving that sensitive information at risk.

In today’s technological age, small to midsize businesses with websites and computer networks that are conducting business across the Internet are at risk of having information compromised.

The insurance industry has responded to the problem by offering cyber-liability insurance to business owners.

First- and third-party coverage is typically provided.

First-party coverage deals with the losses due to a breach of security or privacy caused by an employee.

Coverage may also be provided to notify customers and handle public relations after an event has occurred.

Third-party coverage would deal with losses due to an outside element breaking into computer networks.

Cyber extortion or cyber terrorism – like a threat to initiate a virus if a demand is not met – may also be covered in a cyber-liability policy.

Each insurance carrier has its own type of cyber-liability program. Your agent can help you determine how much coverage you may need and which carrier offers the best plan to meet those needs.

The Ins and Outs of Home Insurance Policies

Once the dust has settled from moving into your home, you may want to review your home insurance policy. Indeed, it’s always a good idea to regularly review your policy to give you peace of mind that you have properly protected your most valuable asset.

The policy is usually divided into two parts. The first section typically deals with property coverage, and the second section usually deals with liability coverage. The section on property coverage includes the following groups:

Dwelling: This includes your home.

Other Structures: This includes things like garages and sheds.

Personal Property: This is quite broad and includes all of your stuff anywhere in the world. It also includes other people’s stuff while it is kept at your home.

Loss of Use: This covers costs associated with additional living expenses.

Coverage is provided, presuming that the limit requested is on an “insurance to value” basis. This means if the cost to rebuild your home in the same condition it was prior to the claim is $100,000, then the limit of insurance is $100,000. This is also called replacement cost.

There are cases where you might not want to insure your home for the full replacement value. Your mortgage lender may not require it. You may buy $60,000 of coverage. Using that “insurance to value” concept, the carrier insures $60,000 and you insure the other $40,000. Your home is considered to be insured on a 60% coinsurance basis.

A benefit of coinsurance is that you still receive the full replacement cost at the time of a claim. If this coinsurance option is chosen, many carriers require that you carry a minimum of 80% of the dwelling’s value.

In addition to knowing your limit of coverage, it is also important to know how your insurance carrier settles claims.

The conditions section of the policy outlines the loss-settlement provision and whether or not the coinsurance provision applies.

Keep a Weather Eye on Wind/Hail Deductibles

The days of having one deductible for all property insurance claims are gone.

Insurance companies have introduced varied deductibles, depending on the type of claim.

Wind/hail deductibles are showing up more frequently on both personal and business insurance policies, thanks to the number of claims from windstorms, hailstorms and hurricanes in the last decade.

If you have any type of claim other than those listed above, you would pay your chosen standard deductible, perhaps $1,000.

When it comes to a wind or hail claim, the deductible is calculated a little differently. It is a percentage of your building limit.

The percentage can be from 2% to 5% of that building limit.

This means that if you have a $100,000 building with a 5% wind/hail deductible, your deductible becomes $5,000 rather than $1,000 for that claim.

A “named storm endorsement” is another option a carrier uses, depending on the hurricane proneness of the state. Here, the percentage deductible would apply for damage as a result of a named hurricane by the National Weather Service. In the event of wind or hail damage in a non-named storm, your deductible goes back to your standard deductible.

The cover or declaration page of your policy will list whether or not there is a separate wind/hail deductible and, if there is, the percentage. Have your insurance agent take the time to explain the deductibles on your policy and how they would affect you at the time of a claim.

Term or Perm: Which Insurance Is Best for You?

If you’re looking for life insurance, you’ll probably want to ask yourself an important question.

That question usually is: What type of life insurance is the best fit – term or permanent?

Both types of life insurance have their uses.

The one you choose will depend on a number of factors.

There are some very important differences between the two.

Term life insurance, for example, provides coverage over a set period of time, such as 15 to 30 years, then expires.

Permanent life insurance lasts until death.

Term life insurance may appeal to many people because it is the easiest to understand and often is the most affordable.

It might be a good choice if you’re trying to ensure that you’ve provided for specific expenses, such as a mortgage or your child’s college education.

Permanent life insurance may be more expensive, but it also often builds a savings account that grows tax-deferred.

It might be a good option if you’re trying to ensure that you’ve provided for your beneficiaries.

Term and permanent life insurance policies aren’t the only two options, though.

Hybrid options are available that allow you to convert a term life insurance policy into permanent life insurance at a later date.

These convertible policies are usually more expensive.

However, such policies might be useful if you develop a chronic health condition that makes it difficult to qualify for new coverage after your term expires.

Your advisor can help you determine which type of policy is best for you given your individual circumstances and goals.

Moreover, whichever type of life insurance you choose, it’s important to check rates and ratings.

Why Your Employer’s Insurance Isn’t Always Best

Over the past few years, with companies cutting back on expenses, many people who previously had health insurance through an employer have found themselves seeking coverage elsewhere.

But for those who still have the option of obtaining health insurance through an employee benefits plan, there may still be good reason to at least compare the plans that are offered with an individual health insurance plan.

In fact, today more people are purchasing private health insurance coverage that is custom-designed to better fit their individual insurance needs. And in some cases, these more personal policies may be even more affordable.

When comparing an employer’s health insurance offering to an individual plan, there are several factors to consider:

Co-Payments and Co-Insurance: Most health insurance plans will charge a certain amount of out-of-pocket charges – referred to as a co-payment – for doctor visits and other types of healthcare services.

Deductibles: A health insurance deductible is the amount that an insured will need to pay out of pocket before the policy will pay for coverage. Deductibles may range from a very small dollar amount up to thousands of dollars per year. There are some plans that offer a $0 deductible, but the premiums for this type of coverage can be quite costly.

Customized Coverage: In most group health insurance policies, the coverage tends to be a “cookie cutter,” one-size-fits-all approach. Yet each individual requires different types of healthcare services. Therefore, many employer-sponsored plans may not fully meet the needs of the participants.

Premium: Premiums on employer-sponsored health insurance plans may be lower in most cases due to the fact that there are many insureds, creating a group discount. However, it may be surprising to note that even a more customized individual plan may still be more affordable – while also offering more personalized coverage. Therefore, it definitely pays to compare.

How to Fill Gaps in Your Medicare Coverage

For those on Medicare, there are a wide variety of healthcare services that are covered. However, the Medicare program does not cover all medical and healthcare expenses, and there are many copayments and deductibles. Medicare supplemental insurance, also known as Medigap, is a type of insurance that is designed to fill in some of the gaps in coverage that are not paid for by Medicare. These plans are offered by private insurance companies.

Although Medicare supplemental policies are available to most people over age 65 on an ongoing basis, the best time to apply for such coverage is during a participant’s “open enrollment” period. The open enrollment period for Medicare supplemental insurance begins six months after an applicant turns 65 and is enrolled in Medicare Part B. Therefore, when one applies for Medicare Part B, his or her open enrollment period for Medicare supplemental insurance begins automatically. And once this period begins, it cannot be changed.

During an applicant’s open enrollment period, insurance companies that offer Medigap insurance are not allowed to deny coverage to a participant in a Medicare supplemental plan. The company is also not allowed to charge an additional premium for a preexisting condition if the individual had prior “creditable insurance coverage” for at least six months. In addition, the company cannot require an applicant to wait for his or her coverage to begin. Should an individual decide to wait until his or her open enrollment period has expired before applying for Medicare supplemental insurance, some insurance companies may require medical underwriting to take place prior to issuing coverage.

Beware of These Common Auto Liability Blunders

For most people, buying auto insurance is like filling the gas tank. They do it once and then forget about it until it’s needed again.

Unfortunately, many people don’t have as much protection as they believe.

There are a number of common mistakes drivers make when purchasing auto liability insurance.

That’s why drivers should work with an agent to pick the right protection for their specific needs.

Following are some pitfalls to avoid when purchasing auto liability insurance:

Purchase the Legal Limit: One of the most common mistakes is purchasing the minimum amount of liability coverage required by your state. While it might seem like a great way to save money in the short term, it’s often a big mistake. Remember, liability protection provides payment in the event that you are at fault in an accident. Property damage, medical bills, and even pain or suffering may exceed the limits of liability, leaving you personally responsible for the remainder of the bill.

Failure to Name Other Drivers: In order to hold costs down, some drivers limit coverage to their personal use of the vehicle. If you ever loan your vehicle to friends or family, even for a short period of time, be sure to name other drivers on the policy.

Consider Your Personal Protection Needs: Don’t assume other drivers are as responsible in their decisions to purchase the right levels of insurance. Instead, make sure you have adequate coverage to protect your own interests in an accident, including medical coverage.

Why Smart Businesses Have a Key-Person Policy

Key-person coverage is a unique form of business insurance that provides invaluable protection of critical employees.

Any person with a uniquely valuable contribution may be deemed a key person. A scientific or medical company may rely on a specific scientist working on a new drug, while a manufacturing company may depend upon the talent of a specially qualified engineer.

Why Purchase a Key-Person Policy?

A small business is often extremely vulnerable to the loss of one or two key people. In the event of an untimely death or disability, the policy would provide the financial means for the small business to continue operations despite the loss of the critical employee. Business owners also opt for key-person protection to satisfy the concerns of investors, shareholders or partners.

What Is Commonly Covered?

In general, key-person coverage protects a business against lost profits directly related to the specialized skills or contribution of the designated employee. Losses related to the need to hire or replace a critical employee as well as to protect shareholder or partner interests is also a typical provision.

Key-Person Versus Life Insurance

Small-business owners often confuse key-person coverage with life or disability coverage. In fact, some business owners purchase life insurance on a key employee rather than key-person coverage. Unfortunately, that may be a mistake. Both life insurance and key-person coverage protect a critical employee, but there are a few important differences that every small-business owner needs to understand in order to make an informed decision.

For example:

Protecting the Business: The main difference between the policies is the emphasis on protecting the business versus the employee. In the event of disability, the impact on the company may be substantially different than on the individual. Key-person coverage recognizes that impact and provides valuable protection for the business.

Minimal Coverage: One of the most significant reasons to purchase key-person coverage rather than a company-owned life insurance policy is the dollar amount of potential damages.

The coverage of most life insurance policies is fairly minimal when compared to the real value of the company.

For example, a life insurance policy in the amount of $1 million or even $5 million may be very small in relation to the full value of the company itself.

Investors, partners and other stakeholders need assurance that they are protected in the event a critical contributor is no longer able to perform.

Tax Free: Last but not least, most proceeds received by a business in the event of a claim are tax-free, which is a significant advantage to a small business required to justify long-term expenditures during a period of adjustment and growth.

By minimizing risk and locking in affordable long-term security, it’s possible for a small business to generate impressive investor interest, especially given the relative scarcity of alternatives in today’s tough economy.

The Dangers of Dealing With Multiple Agents

When it comes to working with an insurance agent, more isn’t better.

Unlike medicine, where a second opinion is often a prudent course of action, insurance is one area where two minds are rarely better than one.

Following are some of the dangers of working with multiple agents:

Higher Prices: The threat to your bottom line is very real. Multiple agents increase the risk of purchasing redundant coverage options. An agent who is familiar with all your insurance needs is able to provide comprehensive coverage without duplicating other coverage options. For example, rather than having to write an entirely new policy, it may be possible to add a rider to an existing policy.

Gaps in Coverage: As if paying for duplicate coverage wasn’t a sufficient threat, the risk of leaving out important coverage is especially high when working with multiple agents. Finding a gap in coverage is one lesson most small-business owners can’t afford.

Claim Complexity: Having a trusted agent to turn to in the event of a claim is often as critical as the terms of coverage. Not only is the agent able to expedite filing the proper forms and to inform you of progress, but he or she becomes instrumental in coordinating the process when multiple policies are impacted.

Lack of Continuity: The more policies, the greater the likelihood of forgetting to pay a premium. When working with a single agent, everything you need is in one place – from annual updates of inventory to a single source of contact in the event of an emergency.

The Pros and Cons of High-Deductible Health Insurance Plans

Health insurance plans that have high deductibles are often referred to as catastrophic policies. In most cases, they have yearly deductibles of at least $1,000. However, some can offer deductibles of up to $10,000 annually.

In some cases, a high-deductible health insurance plan may allow the insured to receive preventive care before the entire deductible has been met. In other cases, no services will be paid for until the annual deductible is met. There are pros and cons to these types of insurance plans. For example:

Pros

Typically, the higher the amount of the plan’s deductible, the lower the premium will be. In the case of younger and healthier individuals, this option may make sense, as they will not need to allocate a high amount of premium toward their health insurance plans. When used in combination with a health savings account, an insurance plan with a high deductible can even allow individuals to set money aside with various tax benefits.

Cons

A high-deductible plan could be the wrong choice for some – primarily those who may not have the needed funds to pay the deductible if services are needed from the policy. In addition, for high-deductible plans that don’t offer preventive care, even a basic doctor visit could end up costing the insured several hundred dollars. In many cases, this amount would have to be paid by the insured until the entire amount of the annual deductible has been met. A high-deductible plan may also require an insured to pay more for prescription drugs.

Why COBRA Isn’t Always Your Best Choice

When an individual leaves an employer that had health insurance, he or she is often offered COBRA as a means of continuing that coverage – at least for a certain period of time.

In many cases, this may make sense to the individual, especially if he or she is not going directly to another place of employment that will offer the person medical benefits.

COBRA, named because it was created under the Consolidated Omnibus Reconciliation Act, allows the individual to continue coverage under the former employer’s health insurance plan as a way to avoid a lapse in health insurance benefits.

While this program may offer peace of mind in maintaining health insurance coverage, it is important for individuals to really weigh the pros and cons, as there are several reasons why going this route may not be the best option.

Following are some reasons for not using COBRA:

Premium Cost: One of the primary reasons for opting out of COBRA has to do with cost. Typically, the cost of maintaining coverage through COBRA will be more than the amount of premium that the former employee was paying while he or she was still working.

In addition, COBRA premiums cannot be locked in. This means that because COBRA insurance is simply a continuation of an individual’s group health insurance plan, any changes to that plan – including a premium increase – will also affect the cost of the COBRA premium.

Temporary Coverage: Should the individual not be obtaining a more permanent health insurance policy in the near future, he or she should be aware that COBRA benefits typically last only between 18 and 36 months. Therefore, this should not be considered an ongoing health insurance plan.

Before leaving an employer that has a health insurance plan, it’s important to know all the facts about COBRA in order to make a determination as to whether it’s the best option for health insurance coverage.

Who Should Be Your Life Insurance Beneficiary?

Deciding how much coverage you’ll need isn’t the only thing to think about when purchasing life insurance.

You’ll also have to determine the most appropriate beneficiaries.

You can name three types of beneficiaries on a life insurance policy. The three types are:

  • Primary
  • Contingent
  • Tertiary

The primary beneficiary will receive the benefit if he or she is alive at the time of your death.

If the primary beneficiary is deceased at the time of your death and you haven’t updated your policy, the benefit will go to your contingent beneficiary.

Similarly, if the contingent beneficiary is deceased at the time of your death, the benefit will go to your tertiary beneficiary.

When selecting a beneficiary, the most important factors may be whether you’re married or single and whether you have children.

If you’re married without children, you may want to name your spouse as your primary beneficiary and a sibling or a parent as your contingent beneficiary.

If you’re married with children, you may want to name your spouse as your primary beneficiary and your children as your contingent beneficiaries.

If your children are minors at the time of your death, their guardian will receive the benefit on their behalf.

If you’re single with children, you may want to name your children as your primary beneficiaries and a sibling or a parent as your contingent beneficiary.

If you’re single without children, you likely have more options. For example, you might want to name a sibling as your beneficiary.

You can also create a trust and name it as your beneficiary or name a charitable organization.

Beneficiaries are easily changeable, so don’t feel stuck with a decision.

Also, remember to update your beneficiaries after any life changes, such as a death or divorce.