Protecting Your Business from the Loss of a Key Person

Charles de Gaulle once remarked, “The graveyards are full of indispensable men.” While we know that life goes on regardless of the loss of any “indispensable” person, for a small business, the loss of a key person is not only a human tragedy, it can also represent the potential for significant financial loss.1

Though business owners cannot protect themselves from the unexpected and sudden loss of a key employee, they may be able to protect themselves from the financial consequences of such a loss through the purchase of what is called “key person insurance.”

Who’s Key?

There is no legal definition for who a key person is, but he or she is someone whose loss, due to death or disability, would cause a material financial setback to the business. For example, a key person may be a top salesperson whose production would take considerable time to replace. Or perhaps it’s someone who is guaranteeing the business access to needed future capital.

Key person insurance is a standard insurance policy that is usually owned by the business and whose premiums are paid by the business. These premiums are generally non-deductible. The benefits of the policy are paid to the business in the event that the insured key person dies or becomes disabled. (Coverage for death and disability are separate policies.)2

Calculating Costs

When considering the coverage amount, the business owner should first calculate the financial impact of the loss of a key person. The next step is to ascertain the cost of insurance for that amount. With that information, the business owner will then be able to make a decision that balances his or her protection needs with what the business can afford.

The proceeds may be used in any manner deemed appropriate. For example, the proceeds may be needed to meet day-to-day expenses, pay off debts, or to recruit new talent to the organization.

For most businesses, their most important asset is their people. Yet, while they insure their other assets—such as buildings and cars—they often overlook the wisdom of doing the same for those individuals who are critical to their success.

What Determines Car Insurance Rates?

Your auto insurance premium is based on more than your driving history.

The amount you pay for auto insurance is determined by a complicated algorithm that takes many factors into consideration. Your driving history is just one variable used to calculate your rate. Read on to learn more about what auto insurance carriers look at when they determine your premium.

Age is a key factor.

Younger drivers are considered the riskiest to insure due to their lack of experience behind the wheel. Most insurance carriers consider a “young driver” to be someone under age 25. Drivers older than 25 typically pose less risk, so your car insurance premiums may drop as you get older.1

Your location makes a difference.

Your location is one of the biggest factors in determining your car insurance premium. Insurance carriers use data from more than just your state and county; they often use information from your specific zip code. Insurance providers don’t just look at whether you live in an urban or rural area, but also at the motor vehicle theft and crime rate statistics where you live and park your vehicle.1

The car you drive may also factor into the calculation. There is a direct correlation between the cost of the vehicle you drive and your car insurance rates. If your car were damaged or totaled in an accident, it would cost the insurance company more to replace it. But other factors, like if the make and model of your car is a frequent target of thieves or prone to passenger damage, will also cost more. Vehicles with a high safety rating, lots of safety features, and theft-deterrent systems, however, may help offset these costs and lower your rate.1

Married couples typically save more on their premiums.

Being married can be a plus when it comes to auto insurance rates. Some insurers think that married people lead less–risky lives. Married couples save 4% to 10% on car insurance, although you may save even more depending on your state of residence.2

Primary vehicle use.

The typical insured driver has a personal use policy, which means that their car is used to commute to work and run personal errands. But if you’re using your vehicle for business and to drive between clients, you may want to consider a business auto insurance policy to make sure you have adequate coverage.3

Insurance carriers run these variables through their own refined algorithms. Car insurance companies have different ways of calculating the cost of insurance, which is why rates may vary so much from carrier to carrier. You may be able to save significantly by comparing auto policies and shopping around.

Why Does Auto Insurance Not Cover These Things?

Are you confused why insurance companies like us at CG Insurance Agency don’t cover certain problems for your Williamston, MI vehicle? Please read on to learn more about why you have some policy limitations and (if applicable) ways that you may work around them.

Performance Cars 

High-quality performance or exotic cars are not covered by a standard car insurance policy. Instead, they must be protected with specialized insurance plans designed specifically for them. Make sure you talk to your insurance provider to learn more about this facet and what to expect from it. 

Wear and Tear Damage 

Your insurance provider does not cover wear and tear problems because they are considered a natural part of your car’s use. And if your negligence causes any troubles with your vehicle, they are likely to not cover these repair costs, so make this fact in mind before finding a policy. 

Other People Driving Your Car 

Insurance companies set up your policy with the assumption that you’ll be driving it. They set their prices and their coverage to suit specific people. So, if someone else is driving your car and damages it, your policy does not cover the problem because it does not apply to them. 

Ridesharing Situations 

Providers often refuse to cover ridesharing because it is another scenario in which you are sharing your vehicle with others. You may need to get specialized commercial auto insurance for this type of protection, though you may have limited choices in some situations. 

Get Your Car Protected 

Working with us at CG Insurance Agency will help to keep your Williamston, MI automobile protected and secure. By getting high-quality coverage, you can ensure that you don’t end up experiencing real problems and can avoid the long-term complications that you may otherwise experience. 

The Benefits of Umbrella Insurance

Umbrella insurance is valuable insurance for any business to have. It can be beneficial to the individual policyholder as well, particularly if you have many valuable assets. Umbrella insurance is commonly referred to as excess liability insurance and is, as the name suggests, a type of liability insurance. The CG Insurance Agency serving the area of Williamston, MI would like you to know about three benefits of this type of policy.

Excess Legal Liability

Umbrella insurance is there to protect you from a deluge of liability when your standard liability provisions in your primary policies are exhausted. An umbrella insurance policy is precisely what it sounds like. It is additional or excess liability insurance providing cover over and above your standard policies.

Broader Coverage

An umbrella insurance policy correctly worded could provide broader liability coverage than your underlying policies. It may also cover gaps that your standard commercial liability policies cannot. This is normally accompanied by a self-insured retention amount that is payable before the policy comes into effect.

Peace of Mind

Umbrella insurance may provide greater peace of mind when it comes to liability. One of the best ways to plan for the unexpected is to purchase insurance. It may help prevent enormous financial loss that could destroy your business or your personal life if you are not sufficiently insured. Umbrella insurance on a personal level can apply beyond the liability provisions of your homeowners and automobile policies. And, from a commercial perspective, it can sit above your general liability and employers’ liability policies.

Don’t delay. If you think you are inadequately covered for liability, then contact the people at the CG Insurance agency serving the area of Williamston, MI today and ask them to help you assess your needs and liability coverage.

Assess Life Insurance Needs

If your family relies on your income, it’s critical to consider having enough life insurance to provide for them after you pass away. But too often, life insurance is an overlooked aspect of personal finances.

In fact, according to a 2019 study conducted by Life Happens and LIMRA, which closely follows life insurance trends, nearly 50 percent of Americans say that they have no life insurance coverage at all, even though over two-thirds of Americans recognize the need to obtain it.1

Role of Life Insurance

Realizing the role life insurance can play in your family’s finances is an important first step. A critical second step is determining how much life insurance you may need.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Rule of Thumb

One widely followed rule of thumb for estimating a person’s insurance needs is based on income. One broad guide suggests a person may need a life insurance policy valued at five times their annual income. Others recommend up to ten times one’s annual income.

Famliy under umbrella

If you are looking for a more accurate estimate, consider completing a “DNA test.” A DNA test, or Detailed Needs Analysis, takes into account a wide range of financial commitments to help better estimate insurance needs.

The first step is to add up needs and obligations.

Short-Term Needs

Which funds will need to be available for final expenses? These may include costs of a funeral, final medical bills, and any outstanding debts, such as credit cards or personal loans. How much to make available for short-term needs will depend on your individual situation.

Long-Term Needs

How much will it cost to maintain your family’s standard of living? How much is spent on necessities, like housing, food, and clothing? Also, consider factoring in expenses, such as travel and entertainment. Ask yourself, “what would it cost per year to maintain this current lifestyle?”

New Obligations

What additional expenses may arise in the future? What family considerations will need to be addressed, especially if there are young children? Will aging parents need some kind of support? How about college costs? Factoring in potential new obligations allows for a more accurate picture of ongoing financial needs.

Next, subtract all current assets available.

Liquid Assets

Any assets that can be redeemed quickly, and for a predictable price, are considered liquid. Generally, houses and cars are not considered liquid assets, since time may be required to sell them. Also, remember that selling a home may adjust a family’s current standard of living.

Needs and obligations – minus liquid assets – can help you get a better idea of the amount of life insurance coverage you may need. While this exercise is a good start to understanding your insurance needs, a more detailed review may be necessary to better assess your situation.

1. Life Happens, 2019

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.

A Brief Guide To Condo Insurance

The ownership structure of a condominium unit is different from that of a single family house. Here’s what you need to know when purchasing insurance for your condo.1

1. Understand the Master Policy

Since the ownership of all common areas is shared with other condo owners, the association of owners typically purchases insurance coverage (a master policy) for the common areas, e.g., hallways, exterior walls, etc. The condo association’s policy will outline what is covered and what is not.

2. Three Types of Coverage

There are three basic types of coverage under a master policy.

  • Primary buildings and common areas
  • Your unit and any items within your unit, other than personal belongings
  • Building, unit, and any fixtures

The individual coverage you may consider depends upon the scope of coverage of the master policy. Start by determining what is and isn’t covered under the master policy – this can influence the coverage you may need.

3. Know the Master Policy Deductible

Generally, an association’s master policy has a deductible that is charged pro-rata among unit owners in the event of a claim. Determining that obligation is important because while it may never materialize, it could represent a meaningful financial commitment.

4. Consider Additional Coverage

Similar to any homeowner, you will need to make decisions about other coverage options, such as cash value or replacement coverage, adding personal liability coverage, and whether flood insurance may be appropriate.

1. Several factors will affect the cost of condo insurance, including the insurance coverage provided by the homeowners association. You should consider the amount of your deductible and level of coverage before purchasing a condo insurance policy. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.

Buying vs. Leasing a Car

Some people approach buying a car like they approach marriage, “‘til death do us part.” Others prefer to keep their options open, trading in every few years for the latest make and model, the most cutting-edge technology, or the highest horsepower. Whichever describes you best, we all face a similar decision when it comes to acquiring a car: finance, lease, or pay cash.

About one-third of people lease their cars, but most choose to finance, and some still pay cash.¹ From an investment perspective, which choice is best? That depends on your lifestyle, cash flow, and personal preferences.

Buying vs. Leasing a Car

For many, paying cash for a car is the simplest way to get one. When you drive off the lot, you own the vehicle outright and are free to do whatever you want with it. You face no penalties or mileage restrictions, and you have no monthly payments. However, you have paid cash for a vehicle that is expected to depreciate over time.

Financing a new car requires a smaller initial outlay of money, usually 20% or more of the vehicle’s value, in the form of a down payment.2 When you drive off the lot, the bank owns the car, not you. As with most loans, you make monthly payments of principal and interest with the promise of eventual ownership. The amount of your payment depends on a variety of factors, including the value of the car, the length of the loan, and the interest rate offered by the lender. Car dealers sometimes will offer “no money down” or low annual percentage rate loans, which can make financing more manageable.

If you like to have a new car every few years, leasing is an approach to consider. Leasing a car is like renting an apartment. You pay a monthly fee to use the car for a specific amount of time, usually two to three years. Monthly payments are typically lower than when you finance, since you are paying for the depreciation on the car while you drive it. In certain situations, lease payments may also have tax considerations.3 However, there are caveats to leasing. For one, a lease typically stipulates the number of miles you are permitted to drive during the course of the lease. At the end of your lease, you may face penalties if you have exceeded the total number of miles in the contract.4

Whatever your relationship with your car, it may eventually come time for a new one. Familiarize yourself with your options. You may find that changing your strategy makes sense in light of your lifestyle or financial situation.

1. CarsDirect, 2019
2. Autotrader, 2019
3. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
4. Bankrate, 2019

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.

Tips For Filling Out a Home Inventory

If your home should be subject to a fire, theft, flood, or another disaster, an up-to-date home inventory will make the situation much easier. A home inventory will be key to verifying any losses and getting your claim settled faster. It will also help you purchase the right amount of insurance.

If you would like to create a home inventory, here are some steps to get you started:

Describe each item: You will need to note the type, color, make, model, and size of each item. You should also list where you purchased the item. 

Inventory your clothing: For clothing, you don’t need to list each and every piece. Instead, you can make note of how many items you have per category — how many jeans, how many pairs of sneakers, how many dresses, etc.

Look for serial numbers: On any major items, such as large appliances, be sure to check the backs and bottoms for any serial numbers and list those numbers with the descriptions.

Your home is full of items that should be part of the inventory. This means the process is not a simple one. You’ll need to take your time moving through the process, so you don’t get overwhelmed. Consider starting with one room, one closet, or the kitchen and moving on from there. 

In addition, it’s important that you also inventory any items that might be covered by your homeowner’s insurance and that are in off-site storage. 

Finally, make sure you speak with your agent about separate coverage that is in your home and might require its own policy. This includes art and jewelry. 

Once you have a home inventory, you will be better prepared in the event of a disaster. 

Are you interested in homeowner’s insurance?
If you need coverage for your home, the expert and caring team at CG Insurance Agency in Williamston, MI can help create a plan that is best for you. Contact our office today for more information. 

Disability and Your Finances

The Social Security Disability Insurance program is projected to pay out approximately $133 billion in benefits in 2020. And with new applicants each year, the system is expected to exhaust its reserves at the end of 2035 if changes aren’t made.1,2

Rather than depending on a government program to protect their income in the event of a disability, many individuals prefer to protect themselves with personal disability insurance.3

Disability insurance provides protection by replacing a portion of your income, usually between 50 percent and 70 percent, if you become disabled as a result of an injury or illness. This type of insurance may have considerable benefits since a disability can be a two-fold financial problem. Those who become disabled often find they are unable to work and are also saddled with unexpected medical expenses.

What About Workers Comp?

Many people think of workers compensation as a disability safety net. But workers compensation pays benefits only to individuals who become disabled while at work. If your disability is the result of a car accident or other off-the-job activity, you may not qualify for workers compensation.

Even with workers compensation, each state makes its own rules about payment and benefits, so coverage may vary considerably. You might consider finding out what your state offers and plan to supplement coverage on your own, if necessary, especially if you have a high-risk profession. Likewise, if you have an active lifestyle that puts you at a higher risk of disability, considering an extra layer of protection may be a sound financial decision.

If you become disabled, personal disability insurance can be structured to pay a benefit weekly or monthly. And benefits are not taxable, if you have paid the premiums in full.4

When you purchase a policy, you may be able to tailor coverage to suit your needs. For example, you might be able to adjust benefits or elimination periods. You might opt for comprehensive protection or decide to define coverage more specifically. Some policies also offer partial disability coverage, cost-of-living adjustments, residual benefits, survivor benefits, and pension supplements. Since coverage is designed to replace income, most people choose to purchase protection only during their working years.

Even as changes are made to federal disability programs, they typically provide only modest supplemental income, and qualifying can be difficult. If you don’t want to rely solely on Uncle Sam in the event of an unforeseen accident or illness, disability insurance may be a sound good way to protect your income and savings.

Out of Commission

According to the most recent data available, about 19.2 percent of working-age disabled Americans are employed.

Source: ACLI Life Insurers Fact Book, 2019

1. Social Security Administration, 2020
2. Barron’s.com, 2019
3. Disability insurance is issued by participating insurance companies. Not all policy types and product features are available in all states. Any obligations are dependent on the ability of the issuing insurance company to continue making claim payments.
4. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Federal and state laws and regulations are subject to change, which would have an impact on after-tax investment returns. Please consult a professional with legal or tax experience for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.

Insuring Your Second Home

An estimated 721,000 vacation homes sold last year. That’s down nearly 22% from the year before.¹

When it comes to insuring your second home, you may find that the coverage you need is quite different from what you have on your primary home.

The Unique Risks of a Second Home

Your current homeowners policy may allow for coverage of two properties under one policy, but because there are unique risks with a second home, a separate policy may be more conducive to obtaining the coverage you need.

Here are some of the special risks you may need to cover:

  • Long Periods without OccupationAn unoccupied home can invite trouble. Without a presence, there is no one to fix a leak, respond to weather damage, or even report a fire. It also may become a target for burglars.
  • Isolated LocationWhile seclusion may be a top priority for a vacation home, it also means that you may be far removed from the services that can prevent larger losses, such as a fire hydrant or fire department.
  • RentersRenting out your home when you’re not using it may be a good idea to offset the costs of ownership. However, having renters (or even guests) may increase your liability to any damage or injury associated with their stay.

Be sure to work with an agent to secure the right coverage. Also discuss the benefit of raising your personal liability coverage to protect you from any increase in risk to your personal wealth that may come with offering your home to guests and renters.

  1. National Association of Realtors, April 2017
  2. The information in this material is not intended as legal advice. Please consult a legal professional for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.