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Insurance Annie’s Project January 30, 2007 Coweta Oklahoma
What Is Insurance? n Protects you and your business from financial risk and losses. n Required by law and some lenders to have some types of insurance. n Can protect against: q Fire q Theft q Storm Damage q Vandalism
Life Insurance An Important Estate Planning Tool
Life Insurance Can Provide n Immediate cash for payments of debts n Costs of the last illness n Burial expenses n Costs of administration n Other settlement costs n Elimination of the possibility of a forced sale of assets
Life Insurance Can Provide n Funds for the surviving partner to buy the partnership interest from the deceased partner’s heirs n Enable the business to continue as an ongoing enterprise n Many, many other situations that Life Insurance can assist
Designation of Beneficiaries n A life insurance policy is a legally binding contract which directs the distribution of assets to the beneficiaries. n Because family situations change frequently, it might be necessary to change the beneficiaries every so often.
Children an Beneficiaries n If the child is a minor, court may appoint someone to manage the funds until the child is of legal age. n If parents are not sure if the children are capable of managing the funds directly, assets can be left to a trust for the children.
Types of Life Insurance n Term Insurance: q Provides financial protection for a limited, specified period of time. q Does not generate a cash value. q Have a fixed annual payment for the specified period of time. n Whole Life: q q Provide a death benefit for the entire life of the insured. Provide a tax-deferred build up of cash values. Can borrow against the current cash value of the policy. Have a fixed annual payment for the life of the insured.
Types of Life Insurance n Universal Life Insurance q q Flexible premium payments Adjustable death benefit Most have interest rates that are competitive with other investments Must look at the administrative costs of the policies. n Variable Life Insurance q Death benefits and cash values fluctuate according to the experience of a separate account managed by the life insurance company. q Assume the added benefits and risks of the investment performance. q Must carefully review all policies.
Business Insurance Needs
Common Misunderstanding n Home and auto insurance will NOT automatically offer coverage for businessrelated accidents and losses. n People usually find out when it’s too late and discover that their homeowners coverage might be jeopardized.
Would You Be Protected? n You’re driving to buy parts. You hit another car, severely damaging both cars and injuring the other driver. n A customer trips over a tool left on the floor. n A power surge hits your computer and destroys the computer containing your client’s business records. n You hire a new employee. The employee is injured requiring hospitalization.
Types of Insurance Essential to Business n Insurance on the Structure and Contents n Liability Insurance n Automobile Insurance n Crime Insurance n Worker’s Compensation (for employees)
Structure and Contents Insurance Suggestions n Might need a extended coverage rider for: q Windstorms q Hail q Smoke q Explosion q Vandalism q Loss of Business Records q Loss of Tools and Inventory
Structure and Contents Insurance Suggestions n Additional coverage might be needed for: q Computers q Fax Machine q Cell Phones q Other Special Equipment
Liability Coverage n Cover your business and yourself from damage or injury to customers, workers, or property. n As the owner and operator, you have more exposure to liability and property loss than when your house was used only as a residence. n Verify your current auto and homeowners policy to make sure it covers business pursuits.
Liability Insurance Suggestions n See if you current homeowner’s policy can be expanded to cover your business liability. n May need to purchase a general liability policy to cover: q Bodily Injury q Personal Property q Damage q Libel and Slander
Vehicle Insurance Suggestions n Consider adding a business use endorsement to your personal automobile policy. n Vehicle insurance may encompass both physical damage and liability coverage.
Worker’s Compensation n All employers are required to provide worker’s compensation insurance for their employees. n An employer who has five or fewer employees, all of whom are related by blood or marriage are exempt. n With the exception of agricultural employees who are not engaged in operation of motorized machines, all workers employed in agriculture or horticulture must be covered if their employer had a gross annual payroll in the prior calendar year of $100, 000. 00 or more
Determine Your Coverage n List the things that might adversely affect you. n Contact two or three insurance representatives for an evaluation and cost. n Cover your largest loss-exposure first. n Avoid duplication in insurance. n Take measures to reduce your risk: q Install sprinkler system, burglar alarms, etc.