INSURANCE PRIMER
Insurance is a necessity, not a luxury as some believe. When you need it, you can’t get it – it’s too late. It has to be purchased before anything happens.
The primary purpose of insurance is to cover potentially large losses, not bumps and bruises. Regardless of the type of policy and loss you want to be covered, if you want coverage for bumps and bruises, you are paying for it in the premium. Let’s go on, but before we do, I urge you to speak with your insurance agent, attorney and/or accountant to make sure you have the best coverage for your specific needs.
You also need to understand coinsurance, minimum coverages, and how certain losses are handled. Take the time to learn.
PROPERTY & CASUALTY – PERSONAL
You should be familiar with the traditional coverages, for your home, auto, personal property, etc. More often than not, your lender drives the deductible. If you own it free and clear of any liens, consider a higher deductible. Try to stay with reputable insurance companies with an A rating from the insurance industry. Cheap does not equate to coverage in time of need. The higher the deductible, the lower the premium. (Remember catastrophes vs. bumps and bruises. Besides, placing a claim may impact future premium costs if your risk factor is deemed to be higher.)
Definitely consider an umbrella policy. In today’s litigious environment, large judgments are not uncommon. An umbrella policy covers these risks relatively inexpensively. Generally, it is linked with your homeowner or auto policy. If you need to protect other assets in the event of a large judgment, this is the perfect remedy.
A comment about flood insurance for your personal residence. Don’t be the person who thinks that you do not need it because your lender does not require it and/or you may not be in a flood zone. It is very inexpensive, but again, it covers catastrophes. If you don’t have it, and you suffer the consequences, your investment in your residence may be in peril.
If you rent rather than own your residence, renter’s insurance is a must for your personal belongings. Again, protect against the catastrophe.
PROPERTY & CASUALTY – BUSINESS
Besides the obvious, talk to your insurance agent about business interruption coverage. If the catastrophic loss shuts you down temporarily, the business interruption coverage may be critical to your survival.
And the event may not even be your fault or on your premises. Adjacent fires and weather events such as tornadoes or hurricanes may impact your business. Your telephone and internet services could be down for an extended period.
Another lesser-known coverage is cargo coverage through your UPS account. It is coverage for any in-transit loss for any carrier (yes, even their competitors). A truck or plane or boat incident – each is covered under our particular policy. We still insure the smaller shipments directly with the carriers, but this is primarily for our inbound needs.
And please do not overlook product liability insurance in today’s litigious environment along with aggressive government regulations. Understand your potential risks and speak with a professional for proper coverage.
ACCOUNTS RECEIVABLE INSURANCE
Yes, you can even insure the collection of your accounts receivable through a number of creative coverages. There are policies specific to this area, and there are factoring arrangements possible without recourse where they are “buying” the receivable and credit risk. Then there are ways to utilize letters of credit to insure the collection.
LIFE INSURANCE
There are too many variables to address in this brief overview. Suffice it to say that you want to wrap up long term coverage when you are still healthy. There are traditional permanent life policies that will last for your lifetime as well as term policies that cover you for a specific number of years.
It is easy and inexpensive to offer group plans, such as life and disability insurance, though benefits may be limited for small groups.
Term life insurance can also be an effective tool to fund a buy/sell agreement between partners and/or to provide the business with cash at the premature death of a key employee or business owner.
HEALTH INSURANCE
Not sure where to begin, other than to say you need it. Non-negotiable. Group rates are better than individual rates in most instances. Think catastrophic coverage (have I said that enough?), not bumps and bruises.
Policies offered by AFLAC (and others) are akin to pay as you go. So are most dental and vision policies.
LONG TERM CARE
Costs in a professional facility continue to escalate. Consider coverage now, when you are younger and healthier, particularly if your family history suggests longer survival rates. Things happen along the way.
Insure the catastrophes, not the bumps and bruises.
A 1975 graduate of the Wharton School at the University of Pennsylvania, Harvey enjoyed a 20+ year career in commercial banking, exercising his “golden parachute” in 1996. In his volunteer life, he is a past chair of the Small Business Banking Unit of the American Bankers Association, Easter Seal Society of New Jersey, the SAAGNY Foundation, PPAF EXPO, and Supplier Committee of PPAI. He is also a past President of PPAF. PPAI awarded him the H. Ted Olson Humanitarian Award in 2013.