Shubert & Associates Insurance Blog

Business Continuation

Sunday, June 13th, 2010 | Your Money | 1 Comment

Eventually every business owner will leave the business that he or she created…either by selling the business or as a result of death, disability or retirement.  As a result, business continuation planning is about taking control of something that is inevitable.

The first step in business continuation planning is to clearly define your goals.  For example:  

• What do I want for my future?  Do I want to work indefinitely, or do I want a clearly defined exit strategy?  

• What do I want for my family?  Do I want my business to remain in the family?  What steps have I taken to secure my family’s financial well-being in the event something happens to me?  

• What do I want for my business?  What would happen to my business if I died or became disabled?  Do I want my business to survive my death, disability or retirement?  In answering these questions, you have three options to evaluate:  retain the business in your family, sell the business to co-owners, employees or to outsiders or, as a last alternative, liquidate the business. 

Without advance planning, others may control the process.  With advance planning, a business owner has the opportunity to realize the maximum value of the business, develop an appropriate tax strategy, leave the business in the hands of chosen successors and avoid the family and business turmoil that can result from a lack of planning.  

Our free Business Continuation Life Guide is designed to provide a framework through which you work to arrive at the answers that are best for you, your family and your business.

A Unique Asset.. Life Insurance

Friday, June 11th, 2010 | Life Ins | No Comments

Don’t put all your eggs in one basket.”

This old saying reflects a common-sense approach to long-term asset accumulation. Even if current returns from a particular investment are quite profitable, there’s wisdom in not putting too much of your savings into a single financial asset or product, whether it’s in the stock market, real estate, certificates of deposit, or countless other items.

Because each class of financial asset possesses unique characteristics, a well-rounded financial portfolio typically includes a mix of asset types. Some may be valued for their guarantees or liquidity, while others may be prized for their steady income or potential for long-term appreciation.

Where Does Whole Life Insurance Fit As An Asset Class?

It’s an interesting question, one for which the answer seems to be changing.

One long-held conventional perspective regarding asset classification has been that “insurance is insurance and investments are investments, and the two should not mix.” In this line of thinking, insurance (of any type) is a different type of asset. Insurance provides protection against loss, which is an important part of a well-rounded financial program. But insurance is not an accumulation asset – you cannot accumulate insurance, then “spend” it when you retire.

Whole life insurance blurs this distinction between protection and accumulation, in that it provides both an insurance benefit and accumulation in the form of cash values. This has led some financial commentators to evaluate only the cash value accumulation aspect of whole life, usually in comparison to other accumulation products. While life insurance cash values can deliver stable, conservative long-term returns, the accompanying life insurance costs have prompted some to proclaim “permanent life insurance is a poor investment.”

But What if Whole Life Insurance is Neither Insurance Nor Investment , But a Unique Asset Class on It’s Own?

That’s the position advanced by Richard M. Weber in a recent paper titled, “Life Insurance as an Asset Class: A Value Added Component of an Asset Allocation.” In this 106-page document, Weber, an MBA and founder of an insurance consulting firm, concludes that whole life insurance (along with other versions of cash-value life insurance) is an asset with singular characteristics.

In the May 2009 issue of Financial Advisor magazine, an article featuring Weber’s ideas, writer Mary Rowland comments on how the investment in a permanent life policy “matures” at the insured’s death, rather than a specified date or market event. While the timing of one’s death is uncertain, the certainty of financial settlement at that moment can make estate and inheritance plans much more effective and secure, as well as establishing values in business plans.

In the period prior to death, cash values accumulate on a tax-deferred basis, yet policyholders can access funds through either loans or withdrawals at any time. According to Rowland, these characteristics mean that whole life insurance is “uncorrelated with nearly every other asset class.”

Not only is whole life insurance different, Weber further states that owning it can “produce a return that is just as favorable, with less risk, than the same portfolio without life insurance.” He provides an example where interest from an income-producing bond portfolio is used to pay the premiums for a permanent life insurance policy, as opposed to being reinvested in additional bonds. In the early years of the comparison, the reinvested bond account produces a greater asset value (but contains no insurance benefit). However, as the time goes on, the combination of cash values and bond values exceeds the bond-only account – and provides a guaranteed insurance benefit as well. In other words, having whole life insurance doesn’t necessarily require a decrease in your total asset value – in the long run, you can have your cake and eat it too.

Weber goes on to make another interesting observation about whole life insurance: It is an asset that needs regular management. With its unique “maturity” features, a whole life insurance policy is a long-term holding in someone’s financial portfolio – once you buy it, you are planning to have it for your whole life. But during your lifetime, the policy’s design flexibility, which may include various riders and options1 as well as the liquidity of cash values through loans or withdrawals2 may prompt you to make adjustments to align with your current goals.

To take full advantage of these possibilities, a whole life insurance policy requires regular review and management: it is not a “set-it-and-forget-it” financial product.

1 Riders may incur additional costs.

2Policy benefits will be reduced by withdrawals, loans and loan interest.

• IS WHOLE LIFE INSURANCE PART OF YOUR PORTFOLIO?
• IF SO, IS IT PROPERLY MANAGED?
• IF NOT, WHY NOT FIND OUT IF ADDING WHOLE LIFE CAN MAKE YOUR FINANCIAL PICTURE EVEN BETTER!

Teenage Drivers

Wednesday, June 2nd, 2010 | auto Insurance | 1 Comment

“Teenage Drivers”

Inexperience and immaturity make it much more likely that a teenage driver will have an accident than an adult driver. A driver in the age group of 16-19 is FOUR times more likely to have an accident than an older adult and TWICE as likely to die in an auto accident (in some states, a 16-year-old is TWENTY times more likely to have an accident than an older adult). A 16-year-old is THREE times more likely to have an accident than someone 18-19 years old. OVER ONE-THIRD of all deaths in the 16-19 year old range are due to auto accidents.

From an insurance standpoint, it is more expensive if your child has a vehicle driven primarily by them. Consider not getting your child his/her own auto and letting him/her drive a family car. If you insist on providing him/her with an auto, consider buying an inexpensive, but reliable, used car. Anticipate at least one or more fender benders. In general, you are better off not buying collision insurance and reporting these minor claims…an increased claims frequency can result in higher premiums or nonrenewal.

 Unless it is impossible, do not insure your child’s auto under a separate policy. It is almost always advantageous, from a pricing and coverage standpoint, to have your child’s auto on your policy. In addition, since statistics show conclusively that teenagers have a higher claims frequency and severity, make sure you have a personal umbrella policy with at least a $1 million limit. The cost can be as low as $150, but could be as high as $300 or more. Still, it’s a bargain to protect yourself and your assets from catastrophic loss.

 Have your child complete a driver’s education program. That can reduce your premium by 10% or more.

 If applicable, ask for a “good student” discount. If your child’s grade point average is a “B” or better, you could get a discount of 10-20% or more.

MOST IMPORTANT, practice sound loss control. When dealing with teenage drivers, preventing accidents is more important than relying on insurance to fix things. Insurance can replace your vehicles and pay for broken bones, but it can’t replace the most important thing in life…your child. So, consider the following:

 Talk seriously to your child about the dangers of driving, including driving under the influence, horseplay, etc. Use statistics from web sites such as www.iii.org to impress upon them how dangerous driving can be.

 Consider prohibiting your teen from transporting more than one passenger…some state graduated licensing laws may require this too. Reckless behavior is directly proportional to the number of teens in a vehicle. By limiting the number of passengers, you reduce the chance that peer pressure and dares might result in your child taking foolhardy chances.

Consider having your child sign a “contract” similar to the one at http://www.parentingteendrivers.com ― if anything, it will get his/her attention.

 Driving is a privilege, not a right. If your child violates your rules or the rules of the road, take that privilege away from them until they can demonstrate that they understand the seriousness of this responsibility and the possible consequences of their actions.

 Copyright 2002 by William C. Wilson, Jr. Reprinted with permission.

NOTE: Policy coverages and circumstances can change at any time, so the information above may not be accurate at the time of reprinting or subsequently to that time. IIABA does not assume and has no responsibility for liability or damage which may result from the use of any of this information. The most current, up to date version of this article can be found at IIABA’s Virtual University at http://vu.iiaa.net.

Long-Term Care…Did You Know?

Tuesday, June 1st, 2010 | Uncategorized | No Comments

Gaps in your insurance protection?

Tuesday, June 1st, 2010 | Agent Value | No Comments

of all unpaid claims happen because people have dangerous gaps in their insurance.  Don’t let that happen to you, your family or your business!  Here at Shubert & Associates  we’re constantly on the prowl for ways for you to save money and get better protection.  Remember, changes in the law…changes in insurance products…changes in your personal or business life demand a constant review of your protection.  Take a minute and give us a call today.    205 640 5892 or shon@shubertinsurance.com

Save money on car insurance in Alabama

Monday, May 24th, 2010 | auto Insurance | No Comments

When it comes to car insurance, a little research ˖ the right questions = money in your pocket.

Rates can differ widely from company to company, so it pays to shop around. Independent insurance agents represent more than one insurance company, so they can compare multiple carriers and policies to find the one that’s right for you.

In addition to shopping around, there are other steps you can take to lower your insurance rate.

Is your policy up to date? If you’ve moved, gotten married or if it has been at least three years since your last driving violation, check with your independent insurance agent or broker. You may be eligible for a rate reduction.

Is your coverage right for your car? Owners of older or inexpensive cars should consider dropping comprehensive and collision coverages. That can often save hundreds of dollars each year.

Know before you buy. Before you buy a new car, research what it will cost to insure. Generally, smaller cars with lower horsepower are less expensive to insure.

Do you carry excess coverage? Many auto insurers give you the option to add rental coverage to your policy, which pays for a rental car while your vehicle is being repaired. While conditions and costs vary from company to company, it may be unnecessary if you can find other transportation.

Raise your deductible. According to the Insurance Information Institute, raising your deductible from $200 to $500 could reduce your Collision and Comprehensive costs by 15 to 20 percent. Your agent can show you how raising your deductible can lower your premium.

Do you qualify for any discounts? Ask your independent agent whether any of the carriers he or she represents offer reduced premiums for certain car features like anti-lock brakes.

Are your policies all “bundled” with the same company? This may not be best for you. Your independent agent is uniquely qualified to quote your policies with “best-in-class” carriers that offer specialized coverages and services. “Unbundling” your policies might save you a bundle!

To learn more, talk to 

Shon Messer, MSFS,RFC

Senior Partner/Your lifetime Insurance Partner

http://www.shubertinsurance.com

Phone: 205-640-5892

Questions Consumers Want Answered

Wednesday, May 19th, 2010 | Agent Value | No Comments

Insurance comes in a wide array of choices for a variety of consumer and business needs. Even the best-educated consumer who spends time researching insurance issues will come across a topic he or she doesn’t understand.

 Let’s take a look at what consumers say when asked: “What’s one thing you don’t understand about insurance?” Here are  common questions that Trusted Choice^® insurance agents and brokers hear:

 Q: Why do I need insurance?

 Insurance is for the uncertainties of life. Accidents and catastrophes happen. What can’t be predicted is when they will occur, and whom they will affect. Most people understand they’ll get sick at some point in their lives, but they can’t predict the severity and extent of the illness nor the cost of the treatment.

 Catastrophes strike: In 2005, there were 24 weather-related or other disasters causing a total of $61 billion of insured losses. Hurricane Katrina alone caused $41 billion in damage from 1.75 million insurance claims.

Even the safest drivers face the risk of an accident, and even the safest homes can catch fire. In 2006, about 5 percent of insured homes had a claim, according to the Insurance Services Office. About 94 percent of these homeowners insurance claims were for property damage, including theft.

Lawsuits are another uncertainty that businesses and homeowners face. They’re costly: In the 56-year period from 1950-2006, the costs of the tort lawsuit system in the U.S. increased an average of 9.2% each year, reported Tillinghast-Towers Perrin. While most lawsuits are settled before they reach the courtroom, Jury Verdict Research data show that the median plaintiff award in personal injury cases was $45,000 in 2005, compared with $32,000 in 2002. Insurance provides two benefits to those who are sued: It pays for the cost of defending the lawsuit and pays for any liability payments for which the insured is found responsible.

 Q: How do you define what insurance is … or does?

 Insurance is simply a vehicle for transferring risk from one party to another. You need insurance if you have financial risk (and everyone does) and you want to reduce that risk. To do so, you pay someone else (e.g., the insurance company) to assume much of the risk for you, in return for a payment known as a “premium.”

 Because American consumers hold a tremendous amount of wealth in property—ranging from homes and cars to collections of baseball cards and Christmas ornaments—they have a basic need to protect themselves from losing that value.

 Insurance is designed to “make people whole” after their property or assets are damaged or stolen, or if they are responsible for harm caused to another party. An insurance policy is a contract under which an insurance company agrees to pay a certain amount of money to the policyholder if certain events happen (and their property is damaged or they cause harm to someone else or someone else’s property).

Best in company

Wednesday, May 12th, 2010 | Uncategorized | 5 Comments

In the Money section of the Birmingham News on 5/12/2010

Shubert & Associates was named best in Company by Encompass Insurance Company.   His firm has offices in Moody and Calera,   The award recognizes Shubert’s role in leading a successful local business and serving the protection needs of customers and the community.  Best in company is the highest honor an agent can receive in the Encompass awards program.

Life Insurance For Key Employees

Thursday, May 6th, 2010 | Life Ins | 5 Comments

Who Is a Key Employee?
A key employee is someone whose knowledge and skills contribute significantly to your business income. Losing a key employee would most likely cause substantial negative financial consequences for your business. According to a survey of small businesses by the National Association of Insurance Commissioners, 71 percent of the firms surveyed said they were very dependent on one or two key people for their success. However, only 22 percent of respondents had key person life insurance in place.

What Is Key Employee Insurance?
Life or disability income insurance can compensate your business when certain key employees die or become disabled. These coverages cushion some of the adverse financial impact that results from losing a key employee’s participation.

How Much Life Insurance Is Advisable?
There is no set formula for putting a dollar value on the financial impact of a key employee’s death. Nevertheless, you need to come up with a figure as a guide to how much insurance coverage to buy. Some life insurance companies provide formulas for this which may or may not have a realistic relationship to the employee’s worth to your business.

In some cases, a look at the employee’s responsibilities can facilitate valuation. If, for example, the employee is responsible for a certain volume of sales, the loss is the profit derived from the person’s sales, less the profit that could be expected from a replacement.

Also to be included is the expected cost of replacing the employee, including employment agency fees and moving expenses and possibly a higher salary for the replacement.

Who Owns the Life Insurance Policy?
Usually, your organization owns the policy, pays the premium and is the beneficiary. Alternatively, your business and a key employee may agree to split the premium payments, cash surrender and death benefit value.

The employee must agree to the company’s purchase of this insurance. The insurer may also require a resolution from your board of directors stating the policy’s purpose.

What Kind of Life Insurance Should I Buy?
Businesses usually use term insurance when the only purpose is to compensate for losses caused by the key employee’s death. Policies that accumulate cash value are appropriate in some circumstances. Discuss which is better for your business with your life insurance agent.

What Is Key Employee Disability Income Insurance?
Key employee disability income insurance is less well known than key employee life insurance. Nevertheless, the risk of a key employee experiencing partial, total or permanent disability is actually much greater than the risk the person will die. Should a key employee suffer permanent total disability, the loss to your business will be just the same as if the person had died. Key employee disability income insurance protects the business from this loss exposure by paying you anywhere from 40 to 70 percent of the disabled employee’s earned income.

If the disabled person is a partner or sole proprietor, a business overhead expense disability policy provides some protection. This pays, up to the policy limit, office expenses including rent, utilities, salaries and depreciation that continue when a partner or sole proprietor is disabled.

Certificates Of Insurance

Monday, May 3rd, 2010 | Commerical Insurance | 1 Comment

Business transactions frequently require insurance coverage. A Certificate of Insurance is a document that is often requested as proof that adequate insurance exists. A certificate is not the same as a policy and certificates do not affect the coverage provided by a particular insurance policy. Therefore, requests to “endorse the certificate of insurance” are inappropriate and misleading. A certificate is a separate document used to comply with a common contract requirement to verify certain types and amounts of insurance.

Certificate holders, the entity or party requiring the certificate, often demand that they appear as “additional insureds.” This requires an endorsement (change) to the policy and it gives them coverage for injury or damage resulting from the contract.

Example: Tenant A leases a building from Property Owner B. Property Owner B demands that the tenant changes its insurance policy to also show the property owner as an additional insured. If a tenant’s customer is injured on the premises and sues both the property owner and the tenant, the tenant’s liability policy would provide coverage for both parties.

Construction contracts require certain forms of insurance, certain insurance limits, a hold harmless agreement and additional insured requirements. A “hold harmless” agreement is a contract provision that states how much responsibility each party accepts for damages arising out of the agreement.

A Certificate of Insurance can confirm that the appropriate policies were issued and that the other requirements were also met. It is important to have a system for monitoring receipt of the Certificates of Insurance BEFORE any sub-contractors are allowed to begin work. If Certificates are not obtained or kept up-to-date, when the contractor’s Workers Compensation and General Liability policies are audited, the payroll for the sub-contractors without Certificates will be included with the contractor’s resulting in an additional premium charge.

Ask your insurance agent to help determine if you should be obtaining Certificates of Insurance from your business relationships. In addition, when you’re required to provide a Certificate, send your agent a copy of the contract. The contract allows the agent to assist you in determining what liabilities you are accepting and what can be done to modify your insurance program to best protect your financial well-being.