Insurance…a lot or a little….disaster or lifeline approach?
It depends because it does require good analysis and a proper needs assessment.
Then, what types of insurance do you get?:
- Life insurance
- Key man insurance
- Disability insurance
- Professional Liability insurance
- Workman’s compensation
- General Liability insurance
- Commercial Auto insurance
Hang on…this is just a small sample of the types of insurance that may apply to you and your business because there’s a whole lot more.
That’s why despite the cute avatars and TV commercials about how little time you need to get insurance for a cheap price, that shouldn’t be the driving consideration for you.
A good doctor, lawyer and accountant are worth the money you spend with them because they keep you healthy, on the right side of the law and in the good graces of the governmental agencies. So too does it makes sense to invest your time, energy and money to find the right insurance agent to help you plan out what types of insurance you need and in what amount at what cost.
The line on who’s the right insurance broker can get blurred as you think about what you need for your personal insurance needs and what you need for your business insurance needs. They can and typically are more intertwined than you think.
That makes sense. Right?
To me, the key is to first find a Certified Financial Planner [aka CFP] who can help you make a cohesive plan that takes into account both your personal and business picture today and in the near future. When this inclusive strategic financial plan is in place, it starts with knowing what you have, what you need to protect and what are the potential risks you have so a smart plan can be made when it comes to insurance that fits you and your business.
Many times a good CFP will have a network of referrals to both personal and business insurance agents that can help carry out your plan for smart insurance that fits your financial goals.
Like stock investing, everyone should know their own level of risk tolerance when it comes to what to insure and for how much.
If you’re a conservative person who wants to sleep better at night, you might want to be more heavily insured than someone who is a bit more of a risk taker. Either way, the money has got to come from somewhere. So, where’s it going to come from for you?
My suggestion is once you know what you have to protect in the way of both personal and business assets and how well you’re protected today, you can make a better approach to insurance needs.
Exposure is tricky. You may have an LLC or be incorporated but if you speak with a good lawyer they might tell you that the corporate veil can be pierced under certain circumstances. That’s again why you want to look at the whole exposure you have and what goals you have for your insurance with the whole advisory team involved. That team begins with a CFP and then your lawyer and accountant being in the mix. The best way I’ve found to keep this sound approach from spiraling out of control when it comes to complexity and money spent is to have the CFP be in charge.
The right insurance can be instrumental in helping you overcome extreme circumstances like those of you who may have faced the full fury of Hurricane Sandy or some other type of catastrophic event. Without good insurance and a good agent, it can wipe you out. But with the right insurance and right agent, it can restore you to financial health. A key factor is examining what it does and doesn’t cover so once again you can assess the risk you take because you are unlikely to be able to insure everything from all events that can happen.
Insurance can be pivotal when a key person is incapacitated or dies. The business can otherwise come to end but with good “key man” insurance it can buy time to recover and make a smooth transition.
Insurance can help overcome the inability of you or a partner to work in the business if one or both of you become disabled and it’s setup properly.
Insurance can be used to fund a buyout if it’s tied to a buy-sell and spelled out as to who owns what insurance policies on whom for how much and under what circumstances.
There are potential tax and legal issues so it is wise to huddle up the team once again to examine it from all perspectives. Once again, the CFP should be leading the efforts to minimize devastating tax and legal issues.
Here’s a link to learn more about the types of business insurance that are out there so you can jump start a discussion with your trusted advisors:
In the end, only you can make the right decision once you’ve done your due diligence because you have to be comfortable with what are the right types of insurance at the right levels. This will give you the comfort you need for your type of personality and needs without overly burdening yourself and your business with too much overhead cost attributed to insurance.