Of course you’re not.

Small business owners have been living the health benefit nightmare for many years now, perpetually caught between a rock and health coverage.

Happy Employees

Small businesses are no different than large businesses when it comes to providing a work environment that is conducive to happy employees… And small business owners strive to have the same high quality employees that large companies have.

However, providing the benefits that attract top-tier talent is often a struggle.  This is because a small business employee’s salary, vacation time, and health benefits have more significant impact the business’s bottom line.

So as a business owner, you either pay the high cost of health coverage or lose top-tier talent to large companies that can afford the benefits higher caliber employees desire.

Health Benefit Hope is Not Lost

Fortunately, all hope is not lost.  Health carriers are starting to realize the strain that high health insurance premiums are putting on America’s small businesses.  In an effort to decrease the health benefit burden health carriers are rolling out new benefit options such as hybrid and high-deductible plans in addition to the traditional HMO, EPO and PPO plans of the ’80s and ’90s.

These hybrid and high-deductible health plans do not by any means have rock bottom, bargain basement prices, but the savings on a monthly basis can be substantial as compared to a traditional HMO.

So What’s the Catch?

The catch is this, these alternative health insurance plans make force the employee to take on some of the upfront cost for any health related issues that may arise.

One of the most popular high-deductible plans right now has a $1,500 upfront deductible.  This means that the employee is responsible for paying the full upfront cost for all health care for the first $1,500 spent during the policy period.

That sounds like a lot of money.  However, you might save twice that per employee in monthly health care expense.  This is why when choosing a health insurance program it is crucial to review your workforce demographics.

For a healthy, young workforce that does have many medical costs beyond an annual check-up the high-deductible is a fantastic option.  For an older workforce that relies heavily on health benefits, this might not be an appropriate solution.

Hybrid health insurance plans may also be a good option as they have reasonable co-pays for doctor visits, but use a deductible for hospital visits.

Another popular option is taking a high-deductible plan and using supplemental voluntary benefits to fill in the gap in coverage, this is sometimes referred to as a medicalbridge.  This allows employees who do not need the bridge to save and employees that do still have the option of being covered.

The Rub

Basically it comes down to this, health insurance is a major expense for any business, there is no denying that.

But if you take the necessary time and work with your insurance broker and allow them to show you non-traditional, non-HMO options there are opportunities to save cash flow every month and still provide a more than adequate health benefit to your employees.

Good luck!

Health Care Photo via Shutterstock

From Small Business Trends

Small Businesses Pay More For Health Care Coverage

“The termination of an insurance policy because a renewal premium is not paid by the end of the grace period.”

The term “Lapse in Coverage” might send a shiver down the spine of many small business owners and well it should.  Most small business owners fight tooth and nail, scraping together dollars, explaining away their late payments, and in some cases signing waivers of subrogation and statements of no loss just to avoid a lapse in insurance.

A lapse in insurance coverage can happen for a couple different reasons.  Examples include:

• Unintentionally (or intentionally) not paying your bill (a.k.a. Cancel for non-payment).
• Your business may not meet the inspection requirements of new insurance carrier.
• You may not get your renewal paperwork back to the carrier by the due date.
• You may be saddled with a huge audit bill and not be afforded coverage until your audit adjusted premiums are paid off.

There are also cases where a small business may purposefully cancel coverage for a set amount of time in order to save cash flow during periods of inactivity.  A good example is an exterior contractor closing up shop for the winter.

And for all intensive purposes canceling your insurance or not paying your bill or being too busy to get your paperwork in the insurance carrier in time might be completely legitimate and honest and to some extent the right thing to do.

What I want to make you aware of today are the repercussions of an insurance lapse because no matter what your reasons for incurring a lapse in insurance there are penalties that you are most likely not aware of.

3 Reasons an Insurance Lapse is Bad for Business:

A lapse of more 30 days can lead to the loss of a “Continuous Coverage” discount given by most carriers.

• Most insurance carriers both personal and commercial lines give a discount for maintaining constant coverage.  This includes when switching from one carrier to another. Continuous coverage shows stability within a business which is something insurance carriers reward.

A lapse in coverage can result in the loss of long-tail Products / Completed Operations Coverage.

• If you are with an insurance carrier for say five years, the Products / Completed Operations portion of your liability policy covers you for work done throughout those five years.  So if you are sued for something you did four years ago even if it’s not an ongoing project your liability carrier will respond.  If you have a lapse you lose that long-tail coverage.

A lapse will cause your business to lose goodwill with insurance underwriters.

• This is especially painful for small business owners who must deal with commercial insurance underwriters.  In most instances, commercial insurance is written on a case by case basis.  Insurance agents, such as myself, must sell (in a matter of speaking) the underwriter on why that particular business is a good fit that particular insurance carrier.  If your small business has a lapse or a couple lapses over a period of time the number of underwriters who want to write the policy will be less.  Which means your premiums will most likely be higher.

Obviously all three of these scenarios assume that you have insurance, then have a lapse, and then get insurance back.

The repercussions of having an insurance lapse and not getting new coverage is that you don’t have any insurance.  Which means no defense costs, no general liability, no property coverage, no nothing.  We won’t get into that nightmare today.

The Rub

What I’m trying to get at here is that a lapse in your insurance is Bad. Far too often I see insurance consumers, especially small businesses, have a relatively cavalier attitude towards their insurance.  Insurance is not an expense is it a necessity to the small business. Without insurance your business is exposed to an infinite number of catastrophic loses and that is bad for business.

Insurance Lapse Photo via Shutterstock

From Small Business Trends

3 Reasons an Insurance Lapse is Bad for Business

Some of you are nodding your head saying:

“Yeah, if we lost so-and-so our entire business would be turned upside down.  An adequate amount of life insurance would certainly help us bridge the gap between losing so-and-so and hiring/training so-and-so’s replacement.”  

You are an enlightened insurance soul. You can skip down to the third section of this article if you like.

Some of you are reading and saying:

“Life insurance is a waste of money.  Our business could survive if we lost the owner.  He doesn’t do anything anymore, anyway.”

You have some learning to do.  Pay special attention to the next section of this article.

Learning About Life Insurance the Hard Way

Let’s say you and your business partner own a successful small business that manufactures retail goods on a regional level and employs 40 people from the surrounding community.  You’ve been in business for 20 years and have a solid relationship with your raw material suppliers, your distribution channels and the retail stores that sell your product. Both you and your partner share a common vision for the business, sales are growing, and life is good.

Then you get that awful call.  Your business partner has passed away suddenly after a car accident.  A few months later you get a call from your late business partner’s spouse asking to set up a meeting to discuss the future of the business.

After a lengthy, emotional meeting, you find out your business partner had racked up mountains of personal debt financing some commercial property deals on the side that didn’t pan out.  Your business partner’s spouse, now saddled with that debt, is freaking out and demanding you sell the business to pay the obligations.  Now a 50 percent shareholder in the business, the spouse has the legal right to make such demands.  Now you either have to spend a boatload of money to buy out the spouse or sell the business you’ve worked 20 years building.

Either way, life is not so good anymore.  You wish that you had listened to your insurance professional about purchasing a Buy-Sell Agreement Life Insurance Policy (see below).

3 Types of Business Life Insurance

Individual Life Insurance

• Technically, individual life insurance is coverage for a business owner’s family.  What makes an individual life insurance policy important for a business is defense against a distressed sale.  Many small business owners take loans out using their personal assets as collateral.  When the business owner dies, the surviving family members sell the business to cover the loan obligations.  This creates a distressed sale situation where the business might be sold for significantly less than actual value.  An individual life insurance policy on the business owner for an amount equal to obligations defends against this type of situation.

Buy-Sell Agreements (solution to scenario above)

• In the simplest terms, a buy-sell agreement is a contract created so a deceased business owner’s share of the business is bought at a predetermined price through life insurance.  This is a protection against the deceased business owner’s family members taking ownership of a business they may not have the desire or skills  to operate.

Key Person Insurance

• Key person insurance provides the business with cash if a critical leader or revenue-producing employee were to die.  There are many unacknowledged costs that come with losing a crucial member of a business.  The business may lose clients, contacts or connections that drive revenue. Additionally there is cost to search, hire, and train a replacement. All of these costs add up very quickly, and without the proper life insurance to provide needed cash, the gap between employee loss and replacement can critically injure a small business.

The Rub

Life insurance is a headache and hard to rationalize spending money on.  But the simple truth is that a life insurance policy has the power to change the course of the lives of the people you care about and the business you help build.  Your family and your business are important enough to take the time to do the right thing.  Your independent insurance agent can help you get the necessary and appropriate coverage.

Good luck and be safe!

Image from Arkady/Shutterstock

From Small Business Trends

The Small Business Owner’s Guide to Life Insurance

Maybe the term nightmare is a little strong, but certainly a headache, and maybe even a pain in the . . . you know where I’m going.  The reason workers’ compensation can be such a difficult insurance coverage to manage is that the premiums can be very dynamic.

Workers’ compensation premiums are determined through an equation based on the amount of payroll per job function within your business.  Each job function is assigned a class code rate per $100 of payroll.  These rates are set by the state in most states (there are also statutory states where only state-run funds can write workers’ compensation policies).

Each insurance carrier will write workers’ comp insurance through several different underwriting companies.  Each underwriting company is given a different multiplier, often ranging from 0.97 to 1.50.  The underwriting company chosen is based on the industry of the business and the specific insurance carrier’s appetite for that particular industry. Finally, the insurance carrier will apply to each individual business a modification factor, or “mod factor,” based on that business’s unique loss history.

Got all that?  Don’t sweat it if you’re confused.  Here’s what you actually need to know:

Problem #1: Your  premiums are based on estimated payroll that is audited on a regular basis by either your insurance carrier or your state workers’ compensation fund.

• It is of the utmost importance that your payroll figures are as accurate as possible, as this is the basis for your premium.
• If you short your payroll estimates at the beginning of a policy term, you will have to pay the premium shortfall at audit time.  In most states, if you don’t pay the balance owed after an audit within 60 days your business gets a Stop Work order.  Not good!

Solution: Contact your insurance professional for a “pay-as-you-go”  solution run through a payroll service or the insurance carrier.  This drastically reduces the chance of shorting your payroll, as figures are updated on a weekly or monthly basis.

Problem #2:  Because carriers use different underwriting companies, rates  can vary significantly from carrier to carrier even though your job class code rate is set by the state workers’ compensation fund.

• Every insurance carrier has a unique appetite for certain types of business.  Find a carrier that is looking to write business in your industry and you will most likely find the most competitive rate.

Solution: Work with an insurance professional who specializes in or at least has experience in your particular industry of business. When it comes to workers’ comp ,an intimate knowledge of the available markets can mean dollars in your pocket.

Problem #3: Your loss experience can play a major role in the premiums you pay.  Mod factors can range from 0.80 to 1.50 or more depending on how good or bad your loss experience has been.

• This means that you need to look at risk management as more than just a sexy job title.  Take the time to implement procedures in your business that limit exposure to employee injury.

Solution: Encourage healthy living.  In general, healthy, fit employees are less likely to get injured.  Additionally, do not set yourself up for failure.  Try to assign employees to tasks that they can physically handle.  Always provide training and continually update employees on the latest safety procedures.  A little bit of preparation can mean serious savings when it comes to your mod factor.

Get Professional Help

Are you feeling a little bit better about workers’ compensation now?  No?  Listen, accidents happen–that’s what workers’ compensation insurance is for.  But there is hope for your budgetary concerns. Use the advice I suggested above and contact your insurance professional.

Trust me, if you tell your insurance professional you’re willing to implement risk management practices, he or she will bend over backward to help you.

Good luck and stay safe.

From Small Business Trends

Everything You Really Need to Know About Workers’ Compensation

Independent insurance agents are the Jedi of the insurance industry.

The Force Is Strong…

“Cheapest insurance you want not… proper coverage you seek… find you a independent agent we will!” ~ Yoda

When working with an independent agent on your business insurance program, the size of the agency (within reason) has little to do with the quality of service and coverage you will receive.  Independent agents are trained (look to work with a Certified Insurance Counselor or CIC if possible) and time-tested in their art and dedicated to upholding the values of the people and businesses they protect.

In this way independent agents are much like Jedi, the fictional heroes of the “Star Wars” saga. (They are not exactly alike, as most cannot move objects with their minds or handle a light-saber.)

So if the size of an independent agency doesn’t matter and all independent agents are trained and dedicated, how can a business owner choose the right agent to do business with?

Here are the three factors I would recommend considering when selecting an insurance agent:

• Expertise: Look for an agent who specializes in the insurance concerns of your industry.  For some main street businesses (such as liquor store, laundromat or gas station), this may not be a concern as risks are fairly uniform.  But if you have a specialized business (i.e., contracting, manufacturing, professional office), you need an agent that specializes in your industry.
• Experience: Experience is relative.  I have been in the insurance industry for four years, so most people would say I’m still very new.  However, I’ve probably written 100 professional liability policies (my niche), so I would say I’m experienced.  In my opinion, this is the least important of these three characteristics, but it is certainly worth considering.  My first year in the business, relatively speaking, I didn’t know squat.
• Attitude: This is the most important characteristic to consider when choosing an independent agent.  Is the agent hungry?  Is he or she actively looking for new insurance solutions to solve your insurance concerns?  Does the agent’s philosophy on insurance match your own?  Does the agent communicate coverage concerns well?  Is the agent responsive to your questions?  These are attitude characteristics and when it comes to the success of your insurance program I feel they are the most important decision point.

The Rub

You know your business better than anyone, but that doesn’t mean that you know the proper way to insure your business.  Take the responsibility of choosing an insurance agent seriously, then lean on the expertise of the agent you chose.

If you could only send one person into battle, you wouldn’t send a Storm Trooper, you’d send a Jedi.  Partner with an insurance agent who shares your business philosophy, knows your industry and has the experience to handle your risk.

Then your business will “Live long and prosper.” Oops, wrong sci-fi analogy. . .

Image from Anneka/Shutterstock

From Small Business Trends

How to Choose a Jedi Insurance Agent

However, general liability is not the only coverage crucial to the success of a small business.  There are other, relatively well-known coverages like property and loss of income that many small business owners are quite aware of.  But there are many more beyond general liability, property and loss of income that, if left out of a small business insurance program, can have a nasty effect on a business should a loss occur.

Below is a list of important “additional” coverages every small business should consider:

• Professional Liability
  • If your product or service includes expert advice, you have a professional liability exposure that is not covered under general liability.
• Workers Compensation
  • Workers compensation should not be considered an obligation that must be purchased when you hire employees but rather a protection for your business against frivolous lawsuits brought on by desperate employees.
• Hired and Non-Owned Auto Liability
  • If your employees run business errands throughout the day with their personal autos, your business is exposed in the event that the employee gets into an accident.
• Employee Dishonesty
  • I’d like to believe that everyone is honest, but…
• Electronic Data Processing Equipment
  • Computers and electrical devices often have their own (low) property sub-limit.  Add this coverage to ensure your electronic equipment is adequately insured.
• Property In-Transit
  • For those of you who travel, your business property may not be covered while it’s moving.
• Employment Practices Liability
  • Your employees are not your friends and even if they are, they still might sue you.
• Cyber Liability
  • If you have confidential or personal information on a business computer, there is a hacker trying to get at it right now.

These are just a few of the types of coverage you should consider in addition to your general liability coverage.  I work for and with small business owners every single day.  I know the constant cost/benefit analysis associated with every decision.

Business insurance is not “one size fits all.”  Find your greatest needs and address those first. Then work your way into the additional types of coverage necessary for future growth.

Good luck!

From Small Business Trends

Small Business Insurance: More Than General Liability