Month: June 2014

On Sunday, August 28, 2005, business owners in New Orleans closed up shop for the day, unaware they’d be closing for a very long time. And some, forever.

Unfortunately for them, many of these small businesses were missing an extremely important part of their commercial insurance – business interruption coverage.

Unexpected circumstances – such as hurricanes like Katrina – can close businesses for an undetermined amount of time. Unlike employees of a large company, business owners don’t have workers’ compensation or sick leave to tide them over during a long closure. But there is an “equivalent” for businesses: Business interruption (B.I.) insurance. Here are several common situations that are covered by B.I. insurance:

• Fire: Even if only a part of your business’s building is damaged, you may have to close for a while for restoration.
• Windstorm: When your roof or your siding is torn off your building in a storm, it’s no laughing matter. New roofing or siding is costly. And, without a roof over your customers’ heads, the risk of a liability claims greatly increases.
• Hail: That outdoor patio may be romantic, but not in a hail storm. Restaurants welcoming guests to open-air dining have issues of liability and cleanup, both of which can be time-consuming and costly.
• Vandalism: Whether it’s graffiti or broken windows, you still may have to close down for cleanup.
• Damage to equipment: Machinery does break. Depending on your type of business, this could totally shut you down. Repairs may take a long time, and, of course, they’re costly.

If your business closes from a covered loss, you will be reimbursed for revenue you would have earned if you had remained open. Insurers use financial records to determine the compensation you’ll receive, so be sure to keep them up to date and accurate. Fixed expenses, such as rent or utility bills, don’t stop just because your company had to close. On average, 23 percent of a business’s revenue goes towards operating expenses, and these are covered by B.I. insurance while you’re closed.

Coverage amount: The amount of coverage is business-specific and depends on revenue, monthly expenses, and risk. Consider the following:

• How much will your bills be if you shut down for three days. What about three weeks? Three months?
• Do you do business in an area at risk from floods, tornados, hurricanes, or wildfires?
• What is the average recovery time for businesses dealing with the same risks you face?
• Do you want to continue to pay your employees while business is interrupted?
• Do you have enough in the bank to get through a long closure?

Cost: Cost varies all the way from $750 to $10,000, depending on the size of the business and coverage needed. Businesses in high-risk tornado zones or coastal areas will likely pay more. Business type plays into risk, too – restaurants may pay higher premiums than a shoe repair store due to higher fire risks.

Regardless of premium cost, B.I. insurance is much cheaper than what you stand to lose without it.

In 2012, Goldman Sachs employee Greg Smith quit his job. Instead of bemoaning his fate in private, Smith wrote a New York Times op-ed piece saying that Goldman’s environment was “toxic” and that the company “sidelined” clients’ interests.

There’s no telling how many people read that piece in print and online, then shared it via social media. And that’s not even allowing for the thousands of words written in post-publication commentaries.

However, apparently as a result of this firestorm, Goldman Sachs experienced a whopping $2.15 billion decline in market value. That’s how expensive damage to a company’s reputation can be.

With word spreading so quickly via social media, it’s now essential for companies large and small to guard their reputations. Although reputation insurance is now primarily accessible to the “big kids” on the playground, it’s worth keeping an eye out, because it likely will be available soon to small and medium-sized businesses (SMBs).

How can an insurance policy put a stop to rumor mills? Most reputation policies provide companies with public relations expertise before something happens, and it covers the costs and expense of anything from recalls to damage control if something does happen. It would not only cover losses like Goldman Sachs’, but also the repair costs, too.

Currently, most reputation insurance products cost roughly $10,000 annually. As business magnate Warren Buffet once said: “It takes 20 years to build a reputation, and five minutes to ruin it.”

These days, it’s not just large companies or high-profile individuals who are at risk of having a lawsuit filed against them. According to the Association of Trial Lawyers of America, civil lawsuits cost the U.S. economy more than $230 billion annually. That’s an average of $809 for every citizen.

Most people are surprised to learn just how vulnerable they are to being sued. They’re also shocked at the potential cost of losing a suit; their homes, their businesses, and most other assets could be wiped out.

The solution is personal liability insurance, which is liability coverage above and beyond what is included in your homeowners, malpractice, or car insurance policies.

You are at risk, if:

• you own your own business, act as a consultant, or are in private practice
• you have investments in land, rental properties, or other important assets
• you hire contractors who don’t have their own liability insurance, or you don’t pay workers’ compensation for your employees
• you have a pool or a trampoline on your property
• you have a teenager – whether he or she is living at home or is away at college, you are responsible for any car accidents or other liability situations your teen might be involved in before he or she reaches the age of adulthood, usually considered to be 18 years old
• you are a member of the board of directors of a corporation or not-for-profit agency

Personal liability insurance is one of the most affordable types of insurance available – typical personal liability policies cost between $200 and $450 annually for coverage of $1 million to $2 million. When you consider the alternative, it’s a great price for peace of mind.

Your insurance advisor can provide you with information on inflation and valuations and help you decide how much personal liability coverage you’ll need.

Summer is finally here. What sunshine-filled adventures do you have planned? Maybe they involve tents, towable pop-up campers, or luxurious motorized vehicles. You’re ready, but are you properly insured? Here are some factors to consider before wandering into the great outdoors:

Tents or gear: Your car is covered under your auto insurance policy, but the policy typically doesn’t provide coverage for personal belongings. If your tent and/or camping gear is damaged in an accident, fire or storm, auto insurance won’t cover your losses. That said, these summer essentials can be covered under renters or homeowners insurance.

Motorhomes: Motorhomes need to have the same minimum liability coverage required for any vehicle. Since risk of serious injury is greater due to a motorhome’s size, it is highly recommended you carry liability limits higher than state minimums. For physical damage to the motorhome, you’ll need comprehensive and collision coverage, just like any vehicle. Unlike standard auto policies, most insurers will provide contents coverage on motorhome policies.

Towable pop-up campers: Whenever you pull something with your vehicle, the vehicle’s liability coverage extends to the item you’re pulling. Since the risk of injury to others or property damage is higher if you’re pulling a camper, opt for the highest liability limits available.

Note that this coverage is for liability only. Physical damage coverage isn’t extended from your vehicle’s policy to whatever you’re pulling. To cover damage to your pull-behind, add specific comprehensive and collision coverage for it.

We have health insurance to help us avoid large out-of-pocket medical expenses, so denied claims are disappointing. But take heart: It may well be a mistake. Here’s what to do if your claim is rejected:

• Revisit your policy; gather questions, and contact your insurer and your medical provider.
• Ask the provider for medical records and billing details, including codes. Ask carriers why your claim was denied. Hopefully, their representatives will resolve the issue.
• If not, appeal the denial. Insurers usually provide information on their appeals process in print and online.
• Act quickly; there are often deadlines for appeals. Submit a letter explaining what the procedures were billed for and why your claim should have been paid. Include medical records and X-rays or lab work.
• If your appeal is denied, you have two choices: Accept the result or try again. Carriers usually allow second-level appeals with 60-day deadlines.
• You also can attempt to resolve the issue through arbitration with an independent third party. The insurer or policyholder can begin the process by notifying the other in writing. Before doing so, contact your state’s insurance regulator for information on health insurance claims laws.
• Finally, you could contact a lawyer, but be aware that this is an expensive route to go.

Avoid denied claims in future by raising any questions you have with your insurance agent now.

It’s now a fact of life – you have to carry health insurance (H.I.), or you will be fined. But what if you missed the deadline and don’t want to buy a policy from a health exchange? There are alternatives:

• Insurance agents outside of marketplaces: This is often an excellent option. Insurance agents can help you compare coverage options. They can also help review each plan’s provider network so you don’t discover later that your preferred healthcare providers aren’t in your plan’s network. Working one-on-one with an agent who knows your situation helps prevent mistakes or plan gaps.
• Group plans through employer-sponsored family member plans and professional associations: If you qualify for a family member’s plan, it’s worth investigating. However, do compare the costs to private individual plans, as it’s sometimes more expensive to join an employer-sponsored plan. Group plans are often offered through professional organizations or associations. But in many cases, organizations have contracts with carriers, who pay the association to offer their plans. This could work for you, but it also may mean fewer plan choices, and make comparisons difficult.

When opting for plans outside of the insurance marketplaces, ensure they comply with the Patient Protection and Affordable Health Care Act (ACA) for good coverage and to avoid fines.

However, if you don’t have a health insurance policy at all, you’re risking much more than a fine. If a major health issue arises, you could wind up paying more out of your pocket than you would in years’ worth of fines. Make sure to research your health insurance options before purchasing.

As Benjamin Franklin famously pointed out: “In this world, nothing can be said to be certain, except death and taxes.” Indeed, more than 55 million people die annually, which makes the issue of life insurance particularly important.

To many of us, life insurance is a way to provide for our heirs after our death in the event that they cannot provide for themselves. Non-working spouses and children often come to mind.

The unseen cost of dying

But there are other reasons to buy life insurance, and one is the high cost of dying in today’s world. With 2.4 million funerals held in the U.S. annually, the funeral market is a large one: It’s estimated to be a $20.7 billion per year industry, according to a PBS report. And, it’s likely to grow, with 57 million Americans currently over age 60, and 76 million Americans expected to be over age 60 by 2020.

A profitable industry

Until the 1970s, most funeral homes were independently owned; today, many are owned by publicly traded corporations that seek to profit from the aging of America, and profit they do: A casket that a funeral home sells for $1,295 wholesales for $325, again according to the PBS report.

Do you think that sounds expensive? Consider this: PBS’ report says that the typical funeral in the U.S. ranges from $8,000 to $10,000. This includes $2,300 for a casket, $1,500 for the funeral director’s services fee, $600 for embalming and body preparation, $1,000 for the funeral ceremony and viewing, $2,000 for the grave, $2,000 for a headstone, and $600 for miscellaneous expenses (such as hearses, death certificates, and obituaries).

Are you prepared for those expenses? If not, life insurance can help. If you haven’t done so already, consider it not only as a means of protecting your loved ones, but as a means of paying your final expenses.