What type of insurance should I be concerned about being in business?
The insurance industry has evolved over the years to provide innovative products that can be integrated into your business structure. These insurance products can provide you with the necessary funds to cover an assortment of contingencies while adding additional assets to your bottom line. There are a number of insurance products that can be utilised in a business environment; for example, key person life insurance, executive disability insurance, critical illness insurance, long term care, and universal life and group insurance. As corporate counsel we work closely with an independent insurance advisor to ensure that your business is equipped with insurance policies that will benefit your business, your staff, your customers and your family.
I am not sure if I have proper insurance, what should I do?
Whether you are at the start up stage or a successful owner/operator you should undergo an insurance audit. An insurance audit will provide you with a summary that will focus on the ownership of the policy, premium payer, beneficiary, current and future premiums, ratings, exclusions and other crucial information.
With this information you will then be in a position to analyse your insurance needs (with an independent insurance advisor familiar with the permutations and combinations of business needs) and then make a cost assessment decision as well as identify possible holes within your existing program.
We recommend that you review any Agreements previously entered into to ensure your current coverage meets your needs. Bringing your legal, accounting, and insurance professional into the same meeting to structure and improve your business will provide you with integrated solutions to protect all stakeholders.
What purpose does insurance serve?
Simple answer is peace of mind. As Lawyers, we are not in the business of marketing or selling insurance. However, our many years of experience as business Lawyers have exposed us to clients who have successfully integrated insurance policies into their business structure. Shareholder and Partnership Agreements often contain a number of provisions, which make specific mention to Life insurance coverage. A disability policy will alleviate the need to carry someone’s salary while paying a second salary for his or her replacement. Or, in the alternative, the possible guilt feelings of stopping someone’s salary when they are most in need. Proper coverage can save your business many thousands of dollars in taxable benefits. In addition, a qualified independent insurance advisor may be able secure coverage for clients who thought they and/or their business would never be able to obtain appropriate coverage.
Who pays the premium?
This is often a tax based question that is best answered by your insurance broker in consultation with your Accountant. It is often a question of what is being insured and for whose benefit. For example a life policy that is required by the Company’s lending institution is a corporate expense. A disability policy paid by the company becomes a taxable benefit to the insured if disabled while it is tax free if paid by the insured. Similarly, if the shareholders have a right to buy each other’s shares on the death of a shareholder as opposed to the company having an obligation to buy the shares then criss cross insurance owned by the shareholders is preferable to the company owing and paying for the policy. The reverse is true if the company is going to be buying back the deceased shareholder’s shares. The answer of who pays therefore is dependent on a number of circumstances which differs from business to business.