Tag Archives: business

Great Tips For Keeping Your Cyber Information Secure

Technology provides us with great opportunities to make obtaining and sharing information easy, both in the workplace and our personal lives. While the below video from IIABNY refers to the insurance industry, it’s important for us all to be careful when communicating with others. You can come up with proper risk management procedures to prevent cyber liability. With October being National Cyber Security Awareness Month, this video is a great reminder with tips for the best practices.

Key Man and Buy Sell Insurance Simplified

business-meetingWhile each and every employee has an opportunity to provide your business with value, it’s up to you to protect the business in the event of losing someone who proves so vital to your success.

If the success of your business is primarily dependent on one specific individual, what would happen if they were to die unexpectedly? How can your business maintain continuity, for the benefit of your employees and clients, in the interim?

One way to do this is choosing to take out Key Man Insurance on a specific employee.

Such protection can go a long way towards helping your business stay afloat, specifically in the event of the death of a key employee. This type of life insurance includes a death benefit that would cover certain losses. Additionally, this benefit is often used to recruit a key man’s replacement.

Choosing to protect someone who serves as a primary income producer and/or generator is a smart business decision, because their contributions will be difficult to duplicate. This can apply to non-revenue generating employees like office/operations managers as well, because they, too, can be critical to your business functioning smoothly. Their overall skill and/or knowledge may not be as seamlessly replaceable.

Now that you know the benefits of Key Man Insurance, what’s the difference between that and a Buy Sell agreement?

As mentioned, Key Man Insurance is purchased to help preserve the financial viability of your business, in the event that the key person passes away. Buy Sell Agreements are legal contracts that dictate how the firm’s equity is handled in the event a partner leaves the business, retires, dies or becomes disabled. However, a Buy Sell Agreement is incomplete without the mechanism to fund a transfer of ownership.

This insurance only covers the owners. In the event a business owner passes away, the death proceeds are either paid to the business, or to the surviving partners, who in turn use the proceeds to “buy out” the estate of the deceased owner.

The Buy Sell Agreement insurance benefits the deceased partner’s estate by liquidating the shares of the business and releasing their family from the burden of managing a business they are likely unqualified to run.  This insurance also benefits the surviving business owners by relieving them of the burden of being in business with someone they wish not to be, while also providing the means to buy them out.

What type of insurance is best for Key Man and Buy Sell? 

A permanent policy is an asset that grows in value and is often out of the reach of creditors. This makes sense for a key person with an ownership stake in the business. The cash value is accessible during the insured’s lifetime and can help fund the buy-out of a departing owner. Business owners also enjoy the tax advantages of permanent life insurance.

For non-owner key persons, term policies are generally recommended because they are inexpensive and easily cancelled if the employee leaves the firm.

To speak with a trusted insurance advisor who can design a policy that best fits the needs of your business, contact us today.

How Does a “Buy Sell Agreement” Help Your Business?

signing-contractYour business is likely to be your most important asset. Many business owners are relying on this asset for retirement as well as planning to pass the business onto their children. However, this plan can be quickly derailed in the blink of eye.

What would happen to the business if you or your business partner were to die unexpectedly, contract a chronic illness or have a permanent injury?

This is not something you want to think about with so much riding on your ability to go to work. Without a succession plan, a business partner can find themselves sharing ownership and operations with the deceased partner’s spouse or children. How do they find the liquidity to buy them out?

How does one replace the owner to keep the business viable and ensure future success of the business?

If the spouse relies on the business for their retirement income, where does this leave the spouse financially?

All too often, families discover too late that their businesses were built on a house of cards.

According to the Conway Center for Family Business, 80 to 90 percent of U.S. businesses are family owned, yet less than a third of these companies succeed into the second generation. Less than a tenth make it to the third generation. According to a Price Waterhouse Coopers report, a whopping 47 percent of companies have no succession plan in place.

Given the volatility of the economy and local industry, it comes as no surprise that small business owners focus their energy on the survival and future growth of their enterprises.

Having a succession plan is essential to maximizing the value of your business for your family.

A Buy Sell agreement is a key component in this plan. This is an arrangement that outlines what happens to the business in the event that an owner retires, sells their shares, passes away, or becomes disabled.

However, the Buy Sell agreement is not complete without a means to fund the transfer of ownership. In the case of a death or disability, the most cost efficient way is often to fund the transfer through a Life and Disability insurance policy.  For example, if a partner were to die, the insurance policy would pay the surviving partner(s) the death proceeds to “buy out” the estate of the deceased owner.  In doing so, the decedent’s family is compensated for their stake in the business, while the surviving partners absorb full equity of the business with little to no financial burden, if funded correctly.

Once established, a Buy Sell agreement and the insurance policies to fund the agreement need to be updated to account for the changes in business valuation and ownership. Contact us today to discuss the scenario for your business.

* The examples in this post are intended to educate the reader generally about the benefits of life insurance, through the use of hypothetical “details” including coverages, cash values and premium costs. These are approximations based on the author’s experience, but are not facts that would necessarily apply to the reader’s own situation or to that of any other person. Reliable information regarding such items as coverages, cash values and premium costs may only be obtained through formal communications with your broker.

Certificate Of Insurance 101: What Business Owners Need to Know

contractor certificate of insurance

One of the first priorities for a new business owner is negotiating a lease with the landlord. Regardless of whether a business operates out of an office, store, or showroom, a lease agreement typically obligates a tenant to carry specific limits of insurance. Landlords often request proof before the tenant takes possession of the space. This proof is called a Certificate of Insurance.

Sometimes a landlord’s insurance requirements appear difficult to meet. Forthcoming tenants initially may not realize that the terms of a lease and its required limits of insurance can be negotiated. Most leases minimally request that the tenant carry General Liability limits of $1 million per occurrence and $2 million in the aggregate. Some leases require the tenant to provide for coverage for Improvements and Betterments made to the space.

Once a policy is bound, an agent or broker will provide the insured with documentation naming their landlord as the Certificate Holder. It is very important to understand, however, that the certificate of insurance is only a snapshot of the coverage put in place.

Frequently asked questions from those looking to obtain a Certificate of Insurance include:

  • Why all this emphasis on who, what, where, how, and when to get a certificate?
  • Who should you provide with a certificate? What should it say?
  • How do you know what should be included?
  • When can you push back on a landlord asking for unreasonable inclusions?
  • Why do landlords request the name of each officer, director, member, agent, representative, and successor that appear on a certificate of insurance?

As new business owners begin to encounter all of this and more, it’d be well worthwhile to call their insurance agent. Contact us today!

Does Your Insurance Representative Understand Your Business?

Organize. (1)

During a recent Commercial Lines Insurance survey, clients were asked, “What is the most important thing you want from your Commercial Insurance Provider?”  The respondents overwhelmingly replied that they wanted their insurance agents to have a thorough understanding of their business operations.

How do you know if your agent is really trying to understand your business? Can you answer YES to all the following questions:

  • Is your broker performing onsite visits?

  • Is your broker available to meet key principals whenever needed?

  • Is your broker conducting a pre-renewal meeting?

  • Are they providing you with risk transfer options?

  • Do they provide you with claims assistance?

  • Do they perform loss analysis and loss control?

A no response to any of these questions should set up a red flag.  Is this the right person to protect your assets?

At Petschauer Insurance, we make it a priority to understand your business and make sure that all the above questions are answered “yes” by our clients. Contact us to find out how our consultative service can fulfill your business insurance needs!

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377 Oak Street, Garden City, NY 11530
516-419-5050
info@jpins.com