Who’s Your Star?

key man insurance

Small and medium-sized businesses often have employees that are “stars.” Sometimes the star is the CEO or president, other times there is a salesperson who consistently outsells every other sales team member by a two to one margin. Maybe you’re a software company that has a star coder whose ideas led to your product being a number one editor’s choice. The point is that most companies have an employee or two that helps their business thrive. What happens to your business in the short-term if a star employee, referred to by the insurance industry as a “key man,” dies?

According to a study conducted by the National Association of Insurance Commissioners (NAIC), only 22% of small businesses carry this type of coverage.

Death is an issue that most people do not like discussing, so many small and medium-sized businesses do not have detailed succession plans, and key person life insurance remains an unresolved issue. It is a discussion that helps your company survive the difficult times that can follow the death of a key person.

What is Key Person Life Insurance?

Key man life insurance protects a business from economic loss relating to the death of a key employee. The company buys the insurance, owns the policy, and is the beneficiary of the policy in the event of the sudden death of the insured. Payment from the insurance company to the business is a lump sum, and there are no restrictions on how the company can use the money. Most companies use the money to stabilize the business until they find the key person’s replacement.

Types of Key man Life Insurance

Businesses gravitate to two kinds of policies for key employee life insurance.

Term Life Insurance. Startups favor this type of policy. Startups always try to conserve cash, term life insurance is cheaper than any other kind of personal life insurance.

Policies that build cash value. Whole life or universal life insurance builds cash value that increases the cash value of the policy and is an asset on the company’s book. The company can get access to the excess cash value of the policy at any time for any purpose since the money from the cash buildup belongs to them.

Life insurance premiums vary between companies and smart companies comparison shop for the best insurance program.

The discussion is uncomfortable, but if you do not have key man insurance, it’s worth talking about. Give us a call.

Goldilocks Insurance: Coverage that’s “Just Right”

Business Owners PolicyWe’ve all heard the story about Goldilocks and the Three Bears, right? Hungry little girl breaks into the bears’ house and makes herself at home. She tries all the chairs to find the best one (and breaks it), then eats the food, and climbs into each of the three beds until she drifts off to sleep in one that’s “just right”. Hoodlum.

What does that have to do with insurance? I’ll tell you.

Once upon a time, the insurance industry wanted to design a policy for small, typical Main Street businesses. These businesses had some property, maybe their building and stock, and a low risk of liability claims. Insurance companies designed the Business Owners Policy (BOP) for these businesses. With this type of policy, the insured bought a package which included property, liability, some crime coverage, and other incidental coverage at one low cost.

From a risk perspective, these Main Street businesses were very similar.

In the modern era of BOPs, many businesses now qualify for specialty industry coverage. Restaurants, small manufacturers, small contractors, and artisans can all qualify for this type of policy.

BOPs cover property similarly to conventional policies. Typical options are extended as part of the package. For example, crime coverage is included in many BOPs rather than having to add this coverage on. Investigate the limits of these add-on coverage to be sure they are adequate. We would be happy to discuss the details with you to design a program to meet the specific needs of your business.

Liability coverage follows the general liability format, except again, some extensions of coverage are included. These extensions may have lower liability limits, so again, review these with your insurance professional.

If your business does not own cars or trucks, but you occasionally use your personal auto in your business, consider adding non-owned and hired automobile coverage to your BOP. This coverage pays for your company’s liability while you use your car for your company’s benefit.

Business owners policies began as a one size fits all retail risks insurance form, but they have evolved into an important small business — and now not so small business — policy, to cover industry typical businesses. There are a number of options to choose from, and policies can be tailored until they are “just right” for you.. not “too big” or “too small”.

Your business does need to qualify for this coverage. Please give us a call. We can discuss the specific needs of your business and find coverage that’s designed to help increase the likelihood of you living happily ever after.

Environmental Concerns and D&O

Directors & OfficersDirectors and Officers (D&O) coverage protects company and individual assets from claims regarding the management professionalism of the upper levels of companies.

The leading cause of D&O claims and payouts concerns financial reporting. The books don’t have to be cooked necessarily… they just need to be inaccurate to provoke a claim.

Relatively new accounting standards require real property values to properly reflect environmental impacts and potential clean-up costs. For example your company purchases a piece of land for $50 knowing it is environmentally impacted with an anticipated clean-up cost of $950. The book value of the property is $50 because that is what you paid, and it is the net value including clean-up. Now let’s assume new regulations require an additional $49 of remediation. You must either write down the value by $49, or if the property is held for sale, you can optionally write down only actual costs reflected in the sales price.

Of course, as with most future conditions, it can be difficult to predict what costs will be when we re-mediate the site.

Unfortunately, directors and officers must make management decisions in real time while arm-chair stakeholder quarterbacks get to review results with the power of hindsight. Will the Chief Financial Officer (CFO) decide on a conservative cost structure and reduce the value of the stock? Or, will he choose a more optimistic scenario and not reveal the full extent of the environmental impact thus falsely inflating values?

In today’s regulatory and transparent business environment, adequate D&O limits are a requirement of good management. Also, the CFO might want to consider environmental impairment insurance.

In the spirit of insurance and great risk management, the CFO can swap a premium (known expense) for a future potential claim (unknown loss), thus transferring the loss on the asset, to an expense. The asset value remains unchanged.

These valuation rules are very complex and you should consult with both a licensed insurance agent and a CPA regarding your specific needs. Give us a call… we’ll be happy to make introductions.

No Shave November (for Jennifer Mimms)

No Shave November

Sometimes you hear a story and it just touches your heart.  That’s what happened when I learned that Jennifer Mimms had a tumor growing in her spine, which turned out to be lymphoma. And she has three young children. I mean… can you imagine?

Actually, I can. Five years ago (to this week) doctors found a tumor encased in my husband’s spinal column – just like Jennifer. The diagnosis was lymphoma - just like Jennifer. We had (have) three children – just like Jennifer.

I remember feeling overwhelmed, first by the circumstances, and then by the way our friends and family — our community — surrounded us with love and prayer, and financial support at a time when our family desperately needed it. We could not have gotten through that difficult ordeal without all of you.

When I learned what my son-in-love’s sister Jennifer was dealing with, I wanted to make sure she and her family received the same kind of support we did. And so the Mason & Mason “No Shave November (for Jennifer)” event was born. The rules are very simple, and there are so many ways you can help.

1. Join the “No Shave November (for Jennifer Mimms)” Community on Facebook.

2. Donate $10 (or more) to support Jennifer Mimms and her family (mail to PO Box 750, North Conway, NH 03845 – Attention: Heather Clement)

2. DO NOT SHAVE.

3. Invite your friends to get in on the action by telling them about the event and sending them the links.

4. Post your pics in the community facebook page.

 

It’s that easy. Won’t you join us in helping this family? SHAVE THE DATE!
Jennifer Mimms No Shave NovemberAbout Jennifer Mimms:

Jennifer Mimms is a young mom of three awesome kids who are her entire life, along with her long time partner, Evan. Not too long ago Jenn started having some symptoms that made her visit her doctor. Shortly after her visit she received the shocking news that she had a tumor on her spine. After the removal of the tumor and more testing, she learned that she does in fact have cancer, a form of Lymphoma. Jenn still has a lot more tests ahead of her to figure out exactly what is wrong and where the cancer is coming from. As if life isn’t tough enough trying to raise three children in the world today, add in a medical problem this serious and it could be enough to sink a young family. Your generous donations willgo towards the basic needs of the family, such as bills, groceries and gas to get to and from treatments. Jenn is currently in the hospital for chemo treatments, five days per week.

Telematics – Because Safety Matters

telematicsHow safe are your company’s drivers behind the wheel – and what can you do to help them make safer decisions on the road?

More and more auto fleet managers are using wireless telematic devices mounted inside company vehicles to monitor the speed, location, and braking information of their employees.

Businesses that have installed these systems have reduced their accident rate 15% to 20% by educating drivers, according to industry experts.

“We’ve always tried to individualize training, but in-vehicle information was hard to capture,” says Beth Lowrey of Mercury Associates, Inc., a fleet management consulting firm based in Fort Smith, AR. “Now, if we see somebody who has had a hard braking event or irregular shifting patterns, we can monitor this behavior in real time through technology and train accordingly.”

To help the cause, more sophisticated telematics systems are using in-vehicle cameras and active alarms that alert drivers immediately when they violate road safety standards “When a driver sees a light flashing, they will know that they have to take action,” explains Nancy Bendickson, senior consultant with Aon Global Risk Consulting (Minneapolis, MN).

Domique Bonte, Vice President and Director of Telematics of London-based ABI Research, believes this instant feedback empowers drivers by removing the sense that the telematics system is only there to monitor them. As Bonte sees it, “This way, a driver can improve himself without his boss or fleet manager having to do so. It’s important to reward drivers for good behavior. It can’t all be about punishing the bad ones.”

To learn how telematics can help keep your drivers safe behind the wheel – and reduce your Commercial Auto premiums – feel free to get in touch with us.

Employee Lawsuits – Curb Your Liability

employee lawsuitsDisgruntled workers can sue your business at any time – and even if you win, you’ll be out time, money, and energy defending yourself from employee lawsuits.

The first step in reducing this risk is to ensure that every hire is “clean”, and made purely on the basis of job requirements. The Americans with Disabilities Act has very strict ruleas about what employers can and cannot ask during the hiring process.

To help the cause, industrial relationship experts recommend these guidelines:

  • Avoid discriminatory language when advertising job opportunities. For instance, an advertisement stating “young” or “recent grad” might discriminate against older job applicants, while “’salesman” implies discrimination based on gender.
  • Have a specific job description that gives the essential functions and abilities of the job.
  • Use a standardized interview form that asks all applicants the same questions – which must be related to the job.
  • Don’t ask applicants questions that might identify their membership in a protected class such as age, religion, or national origin, unless it’s essential to the job (For example, a parochial school can ask about the religion of a potential teacher, but not a maintenance worker).
  • Never ask whether an applicant is married, pregnant, has children, or is planning to do so.
  • Ask only questions related to the applicant’s ability to perform specific job functions, not personal items such as past history as such as drug addiction.
  • If an applicant is otherwise fit for a position, don’t refuse to hire him or her based on presumed susceptibility to injury. You can, however, set bona fide physical criteria required by a job, such as the ability to lift a certain weight.

Although these “ounce of prevention” tips can help curb hiring-related discrimination claims, your business also may need a comprehensive Employment Practices Liability Insurance (EPLI) policy to protect against employee lawsuits.

For more information, just give us a call. We’re in the business of protecting you.

Having a Breakdown?

equipment breakdownIt’s a sign of the times. In today’s high-tech world, every business depends on increasingly complex electronic and electric equipment to stay in business. But what happens when these systems break down? Thanks to Equipment Breakdown insurance, YOU don’t have to have a lose it when things get rough.

Consider this nightmare scenario: You’re facing a deadline under a major contract when a voltage spike surges through your electrical lines, burning out its computers and telephone networks, and shutting down your operations. In addition to lost productivity, you’ll need to spend time and money repairing or replacing the damaged systems – not to mention the revenue you’ll lose until you can get back up to speed. The total cost could easily run into six figures.

Equipment Breakdown insurance to the rescue! “Think of this policy as Accident, Health, and Disability insurance for your equipment,” says Mark MacGougan, Assistant Vice President of The Hartford Steam Boiler Inspection and Insurance Company. The coverage, also known as Boiler & Equipment Insurance, can pick up the tab for: 1) repairs and replacement of equipment damaged (some policies will even cover green construction and disposal and recycling expenses); 2) expenses of limiting the loss or expediting the restoration process; and 3) income lost when a covered breakdown causes a partial or total business interruption.

Many businesses carry Equipment Breakdown coverage under their Commercial Property insurance. More sophisticated operations might prefer a stand-alone policy. Some insurance companies offer such preventive services as infrared scanning technology or onsite inspections to identify maintenance needs.

The coverage you need depends on the nature and size of your operation, the exposures you face, and the type of equipment you use. As insurance professionals, we’d be happy to tailor an Equipment Breakdown policy to fit your needs, at a price you can afford. Give us a call!

 

Pay As You Go Workers Compensation

pay as you go workers compensationPay as you go workers compensation (sometimes called “pay as you owe”) helps smooth the audit process and provides cash flow to the business.

Workers compensation premiums are calculated by multiplying the rate by each one hundred dollars in payroll. Historically, workers compensation premiums were estimated in the beginning of the policy year; and audited for accuracy at the end of the policy year.

As a result of this estimate and audit process, sometimes a business would tie up capital on overpaid premiums to receive a return months later; and sometimes a firm would receive a large audit bill, followed by an increase in the then current year’s workers compensation.

Unless the business is very predictable, these audits were difficult to budget.

Pay as you go workers compensation contemplates this issue and offers an option to pay premium based on actual payroll. The business, or more often, their payroll service, sums payrolls in each class and either applies the rate or sends the payroll figures directly to the company for billing.

The business knows its workers compensation cost for that pay period immediately and with a great deal more accuracy. Budgeting is as easy as payroll budgeting since the two are tied together.

An audit will be conducted at the end of the year, but the effects should be much smaller.

Who should use pay as you go?

* Businesses with seasonal income and payroll so expenses tie to income more easily and
budgeting is easier.

* Businesses with large payrolls which benefit from the cash flow of this system.

* Businesses which assign payroll to different jobs to more easily tie payroll
expenses to specific sites.

At Mason & Mason, we work with several insurance companies that offer pay as you go Workers Compensation. If this is an option that appeals to you, give us a call. We can help you find a policy that provides comprehensive coverage that works for you.

Singing in the Rain

umbrella liabilityI love that scene from the 1952 classic “Singing in the Rain” where Gene Kelly belts out the title song while twirling an umbrella, splashing through puddles and getting soaked to the skin. I recently discovered that he was actually ill during the filming of that sequence – with a fever of 103! You know what they say… “The show must go on!”

The same is true for your business. Unfortunate circumstances come into our lives, and we must deal with them. Life doesn’t stop just because it would be convenient for us, does it? Enter the Umbrella policy.

What do umbrella policies do?

Insurance professionals can’t help themselves. We rely on wonk-ish diatribes to describe umbrella policies because they are technical in nature.

So let’s try to simplify.

Most companies buy insurance because they are required by law. Workers’ compensation and automobile liability allow companies to hire employees and use public highways. If they own property, their lender requires insurance. If the company leases space, the landlord requires premises liability.

But the real reason to buy insurance: trade a known loss (premiums) for unknown losses (claims). Your company can budget for the acceptable level of known loss which protects against normal, everyday losses associated with entrepreneurship.

With an umbrella policy, you’re buying catastrophic loss coverage for imaginable claims. Imagine the multi-passenger near fatal car wreck or the nightmare products liability claim that costs millions in damages.

You’re also buying coverage for unimaginable claims. Claims not covered by your automobile, general or employer’s liability:

  • Do you promote your company through social media? Libel and slander losses are covered by personal injury liability, usually excluded in general liability policies, usually covered on umbrellas.
  • Do you send employees out of the country? The stated territories for coverage under standard general and automobile insurance is the United States and Canada. For umbrellas, it’s worldwide. Now, some umbrellas specifically expand territory language to include “anywhere” because of commercial space travel.
  • Any possible sexual harassment in your organization? Again, usually excluded by general liability, but included under umbrella coverage.

These examples of rare occurrences give a taste of the importance of umbrella liability. Your company can be blindsided by large liability claims that are not anticipated by your typical liability coverage. Broaden the territory, widen the safety net, spend a little more premium, get more peace of mind.

Trade a little more known loss, your umbrella premium, for a lot of protection against the unimaginable loss. Then you too will be able to sing in the rain.

Data Breach – You’ve Been Hacked. Now What?

No matter how prepared you are – or you THINK you are – you can still suffer a cyber-security  data breach. According to a recent report released by the Online Trust Alliance, over 740 million records were exposed in 2013 alone, making it the worst year for data breaches to date. What you do next can have a profound impact on the reputation of the business, customer loyalty, employee morale, and, ultimately, your bottom line.

An effective communication strategy should follow these guidelines:

  1. data breachNotify key regulatory and legal authorities as soon as possible, unless this might impede a criminal investigation. Even if notification isn’t required by law, it’s an important courtesy.
  2. Make sure that staff roles and responsibilities for communicating the data breach are outlined and understood clearly.
  3. Tailor the notification process to the audience – high-value customers, senior employees, or individuals who might be particularly vulnerable (such as the elderly, the disabled, and minors) and to the nature of the breach; Handle the theft of confidential client information differently than the stealing of employees’ Social Security numbers.
  4. Have legal counsel review the method and content of all communications.
  5. Prepare for media inquiries to deliver a clear message for parties affected directly or indirectly. Be sure that your spokesperson is qualified and trained to deal with the media.
  6. Provide ways for victims of the data breach to ask additional questions and/or learn how to minimize potential harm.
  7. Test the plan: If you had to execute it, how well did it work, and how did you update it? Many businesses have discovered holes in their response plans after failing to consider the impact of a cyber security data breach on daily operations, or underestimating the attention the event drew.

To learn more about spreading the word after a data breach, please get in touch with us.