Key Person Insurance Helps Protect Your Business
In small businesses, the death or disability of a key employee is difficult to overcome. His or her share in the business normally transfers to heirs. This can cause problems for businesses that may not want a new partner or cannot afford to buy out heirs.
To avoid this problem, many business owners enter into a buy-sell agreement. This “set price” agreement means that upon a business partner’s death or disability, the business is pre-valued, using life insurance as the payment guarantee. Here are five reasons why you should consider this coverage.
- Upon your partner’s death, heirs do not have the expertise to replace your partner. You may find yourself saddled with a partner that is a liability rather than an asset.
- Financing is the lifeblood of almost any business. Banks may insist on this coverage for partnerships or large companies.
- This coverage offers financial security to heirs or those dependent on a key person.
- You and your partner’s personalities may be the driving force behind the business.
- Key persons may be others in your organization, not just partners. Consider how long it would take to replace a long-term employee responsible for training and motivating your sales team.
Determining how much coverage to buy and who name as beneficiary depends your company’s revenue, how much the key person contributes and the type of life insurance. If your partner or a key person dies or is disabled, you should be prepared. Key person coverage can help. Call us today to discuss your business insurance needs.
Do Referrals Help or Hurt Your Business?
If you have developed a healthy, mutually beneficial working relationship with a client and built a solid foundation of trust, there is a potential for referrals.
Most of us understand that leads can often come from referrals within our vendor or colleague pool. Yet have we stopped to consider how much we’re putting on the line each time we give out a referral? You may be jeopardizing your relationship with your hard-won client each time you send out a referral.
They say that who you know and associate with is a reflection of yourself – the same principle applies to a professional environment. The people you work with or refer have a direct impact on your reputation. If they perform poorly, the law of association states that the client you referred will think poorly of you too. After all, it was your judgment call to offer the referral and, essentially, trust another company with their needs.
There are a couple steps you can take to avoid negative impact on your reputation from the fallback of a referral gone wrong.
The next time a client asks you for a referral, recommend two or three competitive options. You should also discreetly disclose any additional information the client might need to make a decision. For example, one vendor might be better suited to a particular market – or perhaps another offers great work, but communication can be a challenge, in which case you could offer tips on how to best communicate with that vendor.
HOT BIZ TRENDS
Latest Tech Tools Help Boost Your Business Productivity
If you wish to seize new opportunities, you will need the right tools for each task. Several popular tech devices and apps help to track work, bill clients and get paid. They can also help overcome the bookkeeping entanglements that impede success.
Many small business owners are using cloud accounting to simplify their bookkeeping. An especially “trendy” platform is FreshBooks, which allows online access by both you and your bookkeeper. This program can send invoices and accept online payments. A little bookkeeping management assures that all sales and expenses are recorded in order to make the financial information you need available anywhere with Internet access.
Organizing receipts for recording expenses is often a dreaded chore. With the NeatReceipts scanner, you can organize paper receipts to assure that future bookkeeping entries are accurate. NeatMobile accomplishes the same mission using your iPhone or Android device. Another hot item for consultants and professionals who track billable time is HourTracker. This app can track time by day, week, month, or project; and you can export the data for easy billing.
The latest trend for obtaining fast payment from customers is using Square, which turns your iPhone, iPad, or Android device into a mobile payment system using a plug-in accessory to swipe credit cards and record payments. Meanwhile, the newest vogue for accepting online payments by credit card without a merchant account is Stripe. It functions like PayPal or Google Checkout, by charging a fee only when you get paid, and you incur no monthly fees or setup charges.
Spending time more productively by deploying fashionable technology keeps your business growing and eliminates the pain of managing financial details.
Four Things to Know About Contractual Insurance
Managing contractual insurance requirements from your vendors and subcontractors is rarely straightforward, but it is an integral part of risk management.
Insurance requirements under any contract can be difficult to administer, because the more complicated the project or service, the more sophisticated vendors’ and subs’ insurance programs may be.
When evaluating deductibles, self-insured retentions (SIRs) or available insurance limits, your organization can take a variety of approaches.
How you approach insurance requirements should depend on at least these four considerations:
- How critical the services the vendor furnishes are to your organization’s mission.
- The size and scope of the contract, including the exposure (what can go wrong that can cost you money or goodwill) your organization faces from the proposed project or service.
- The financial stability of the vendor or supplier, and the financial rating of its insurance carrier.
- Your history with that vendor. A new vendor requires more scrutiny than one you have utilized for years.
Since the vendor or supplier has to pay premiums and will want to pay for less insurance rather than more, deductibles, limits and scope of coverage are all bargaining chips to the vendor. For example, a small contractor who performs routine maintenance at your facility may balk at furnishing $1 million in general liability coverage. For a small project, you may agree to lower that limit.
However, in one particular case that occurred in a Hawaiian hospital, a contractor cut the power to an oxygen line to premature babies. Hospital maintenance responded quickly; however, $1 million in coverage would never have settled this accident if the incident had not ended so well.
SIRs are the loss portion that the insured absorbs before insurance coverage pays. Accepting an SIR requires additional deliberation.
Deductibles are generally paid by the insurance company, which then recovers that amount from its insured. In the event of a loss with an SIR, in most case you will negotiate directly with your contractor to obtain the SIR amount.
The larger the company, the more likely they are to have an SIR as opposed to a deductible. SIRs usually pertain to liability policies, and may apply both to damage payments and expense amounts paid to handle the claim, or only to the damage amounts.
This difference can be tricky, because SIR provisions vary. Reviewing policy provisions and endorsements before a loss occurs is the only sure way to determine how a claim will be handled. You will be more comfortable accepting an SIR in lieu of a deductible, knowing that the vendor’s insurance company would not write coverage with an SIR if the company’s operations, loss history or loss funding were unstable.
Like everything in life, insurance coverage is negotiable. If you have questions on the insurance requirements your company should request, we are here to assist.