Why Life Insurance Is Vital for Entrepreneurs

Why Life Insurance Is Vital for Entrepreneurs

Without proper life insurance protection, the sudden death or disability of a founder could derail a company, resulting in layoffs, bankruptcy and possibly the collapse of the business itself.

It may be because we are natural optimists, but it is remarkably common for entrepreneurs not to take out life insurance. In fact, according to LIMRA’s Life Insurance Barometer study, 41 percent of business owners and individuals do not have life insurance, meaning they likely don’t have the necessary funds earmarked to support their business, employees and their loved ones in the event that something happens to them.

Entrepreneurs have a unique mindset and perspective that sets them apart from other professionals or even artists. Their company is born with a mission in mind, and this creates individuals who tend to be both persistent and impatient, yet disciplined. When launching a business, entrepreneurs are supported by investors, teams and their families who all share in their company’s vision, but these groups are also the most at risk should that vision be cut short by an unforeseen event. Without proper life insurance protection, the sudden death or disability of a founder could derail a company, resulting in layoffs, bankruptcy and possibly the collapse of the business itself.

There are various reasons that entrepreneurs may neglect to take out an adequate life insurance plan. Establishing protection for themselves is rarely a top priority when starting a business, as finances are stretched and owners are subject to a never-ending to-do list.

When I started BizEquity, I was newly married and knew that I was going to be bootstrapping my business. I also knew that, like many other entrepreneurs in my position, at the onset, my income would be non-existent. As with most small business owners, I’d be drilling into my own savings in order to invest in my venture. Yet, I was determined that somehow, some way, I was going to make my business work — and the only thing that could get in my way was time. In order to feel good about risking my short-term financial future, I knew I couldn’t put my new family — including my wife, dog Briggsy and future children — at risk.

No one likes to think about the unexpected events that could occur, such as an injury, disability or even death, to yourself or a business partner, but a good business person should anticipate all possibilities whether they are positive or negative. However, we should as entrepreneurs recognize that from the onset we are putting ourselves, our business and our family at risk if we fail to take out adequate insurance. From a business perspective, it’s a smart idea to take out life insurance, which can protect your company from financial loss, liabilities or instability in the case of death. It can also assist you in maintaining your business through turbulent times, by providing short-term cash flow, keeping your operations running and suppliers happy.

From a personal perspective, life insurance is one of the best decisions you can make on behalf of your family, yet Deloitte found that only 59 percent of family-owned businesses have a detailed contingency plan in the case of death or disability.  In my case, it gave me great peace of mind as I built my business knowing that my family and my legacy would be protected should the worst happen to me.

Just like buying a tailored suit, a life insurance police should be a good fit, reflecting the scope and scale of your business. To that end, when purchasing life insurance, business owners need to evaluate their individual insurance needs based on a number of factors, including their level of debt, income replacement and future obligations. One of the main reasons that U.S. business owners are underinsured and 41 percent don’t have life insurance is that they do not know how to adequately measure their financial risk. This is where entrepreneurs should seek help, as being unaware of vital financial measurements, including the value of their business, leads to business owners receiving inadequate cover or no cover at all. What’s worse, when a company is underinsured, any claims pay-outs will be insufficient to help get the business back on its feet.

Luckily, advancements in technology and big data now provide business owners and advisors with accurate and reliable business valuations that help to identify an adequate level of insurance coverage. Using digital valuation tools, the industry now has the means to evaluate business valuation data with actual underwritten insurance policies, historical insurance trends as well as the industry’s best practice, generating a holistic report.

Just as no entrepreneur is the same, no startup is the same. It begins with a thorough understanding of how much insurance they actually need based upon their business value and their equity stake in that business. Armed with this information, entrepreneurs can accurately incorporate vital components into their insurance plan, including buy/sell, key person, life, disability, and property and casualty, to help establish a safe and secure business.

This will also give entrepreneurs peace of mind that their business and loved ones are covered, and provide them with the satisfaction of being able to cross off one more task on that never-ending list of jobs to be done.




Health Plans Rip ‘Skinny Repeal’ As Disaster For Insurance Markets

Senator John McCain (R-Arizona), who was recently diagnosed with brain cancer, and Senator Lindsey Graham (R-South Carolina) head for the Senate floor for a vote at the U.S. Capitol July 26, 2017 in Washington, D.C. (Photo: Chip Somodevilla/Getty Images)

But without an individual mandate that requires Americans to have coverage, people would only buy insurance when they got sick. Thus, individual responsibility is needed to make sure the risk pool has healthy people paying claims to help cover costs of the sick.

“A system that allows people to purchase coverage only when they need it drives up costs for everyone,” the Blue Cross Blue Shield Association, which represents Anthem, Health Care Service Corp. and dozens of Blue Cross plans across the country, said. Eliminating the individual mandate would “increase the number of uninsured individuals by 15 million by 2026 and increase premiums in the individual insurance market by 20%” the Committee for a Responsible Federal Budget said this week.

Coverage losses are common in all of the Senate plans being floated this week and losing support among senators. Already defeated in a Senate vote was Senator Mitch McConnell’s Better Care Reconciliation Act (BCRA), which is similar to House Speaker Paul Ryan’s American Health Care Act (AHCA). Each bill would cause more than 20 million Americans to lose coverage in less than a decade. Those coverage losses come largely from a rollback of the ACA’s Medicaid expansion in 31 states.

America’s Health Insurance Plans (AHIP), another large lobby for health plans,  Thursday added to concerns about the GOP Senate-led “skinny repeal” saying it “opposes an approach that eliminates the individual coverage requirement,” AHIP CEO Marilyn Tavenner said in a letter to McConnell and Democratic Senate leader Chuck Schumer. AHIP represents Humana, Centene, Oscar Health and dozens of Blue Cross and Blue Shield plans.

“Policies that do not stabilize the market and simply drop incentives for people to buy coverage will repeat what we have seen in the past: premiums will rise rapidly, few or no affordable coverage options will be available and more people will be uninsured ,” AHIP CEO Tavenner said in her letter to Senate leaders.

Insurers, like doctors groups led by the American Medical Association and other providers such as the American Hospital Association, would instead like to see Congress shore up the public exchanges. One way to do that would be for the Donald Trump White House and the GOP Congress to commit to funding cost-sharing reductions that low-income Americans who buy Obamacare policies use to pay their out-of-pocket costs.

“Immediate funding for the cost-sharing reduction program also is essential to help those individuals most in need with their out-of-pocket costs, so they can access medical services,” the Blue Cross Blue Shield Association said. “And dedicated funds must be provided to help pay for the care of those with significant medical conditions.”

Health insurers are optimistic Congress will eventually come around to funding the cost-sharing reductions, which help low-income Americans who buy Obamacare pay out-of-pocket costs like copayments and deductibles.

“If you read through many of the comments made by the people and listen to it, they talk about stabilizing the insurance market,” CenteneCNC -0.55% CEO Michael Neidorff said on the company’s second-quarter earnings call earlier this week. “It’s not destroying them. We are corporately convinced that when all with that settles, there will be subsidies in some form, CSRs, tax credits…a pass-through tax credit that will protect the low-income, vulnerable citizens.”



Wells Fargo Clients Want Credit Repair for Insurance Debacle

Wells Fargo & Co. customers suing the bank for forcing them to pay for unnecessary auto insurance that drove some of them into default on their car loans asked a court to order the bank to immediately take steps to repair their credit reports.

The consumers said in a court filing Friday that as a result of negative and false reports Wells Fargo made to credit reporting agencies, their credit scores plummeted. They want the bank and National General Insurance Co., which they allege was also involved in the scheme, to investigate and correct any inaccurate information reported to Equifax, Experian, TransUnion and other credit bureaus.

An internal review of the bank’s auto lending found more than 500,000 clients may have unwittingly paid for protection against vehicle loss or damage while making monthly loan payments, even though many drivers already had their own policies, Wells Fargo said last week. The firm said it may pay as much as $80 million to affected clients — with extra money for as many as 20,000 who lost cars to repossessions, “as an expression of our regret.”

The bank’s offer of refunds to customers who unwittingly bought collateral protection insurance isn’t enough, according to the consumers’ filing in Manhattan federal court.

“Customers have been damaged by their unlawful scheme, which has ruined credit scores, depleted bank accounts, and resulted in cars being repossessed,” the consumers’ lawyers said in the filing.

The bank said Friday it already promised, in a July 27 statement, to report all rating errors to the credit bureaus as part of a broader remediation effort with consumers.

Adam Levitt, a lawyer for the plaintiffs, responded that he has “no faith they’re going to do anything without the force of an injunction, court order or jury verdict.”

Representatives of National General couldn’t immediately be reached.




One Year In, Five Lessons Learned

The new year has already brought about significant changes to our world, including the way some of us travel. It also commemorates, less significantly, the one-year anniversary of my taking over the Frugal Travelercolumn. (No applause, please.) The old cliché “time flies” rings true: It really does seem like yesterday that I wrote my first column from Las Vegas. I’ve also spent entirely too much time actually flying this past year. But at least all that airtime has yielded lessons — some more painful than others. Here are five of them, picked up during my travels through 10 countries and a dozen states in 2016.

CARRY VALUABLES ON YOUR PERSON When my Megabus from Chicago to Milwaukee burst into a fireball on the side of the highway, I was among the lucky ones. I had settled on a budget carrier that loudly advertises fares as low as $1 (mine was a still-cheap $11). We quickly realized something was wrong when the bus turned around halfway through the trip and headed back to Chicago, and some passengers noticed a burning smell. A fire had started in the wheel well and, within minutes, had consumed the entire bus, along with people’s luggage.

While the experience was harrowing, I was traveling with only a backpack, and so didn’t lose any of my possessions in the ensuing blaze. Others lost thousands of dollars in property, including clothes, laptops and schoolbooks. One man I spoke with lost nearly everything he owned, including credit cards and personal identification. A good rule of thumb, regardless of method of transit, is to carry particularly valuable or irreplaceable property — phone, Social Security card, passport and the like — on your person. No matter how brief the trip — it’s only 90 miles between Chicago and Milwaukee — a lot can happen in a short distance.

TO EAT LIKE A LOCAL, GET IN LINE Travelers frequently ask me for tips on finding good, cheap meals overseas. I typically recommend thinking like a local: going to grocery stores, farmers’ markets and, if your stomach can handle it, eating street food. Another good tip is simple but effective: Follow the crowds. The idea is that if there’s a long line of locals outside a restaurant, that’s usually a sign that there’s something good being cooked inside.

I did that during a trip to Osaka, Japan, with great results. I spotted a long line outside a dingy storefront near the train station. It was approaching lunchtime, so I hopped in line, not knowing what to expect. After a short wait, we were taken upstairs to a cramped, atticlike restaurant with a flat-top grill, behind which stood a man casually ladling a mixture for okonomiyaki — a pancake with cabbage, dashi, pork, onions and seafood — onto the grill. It was hearty, satisfying and delicious: a perfect example of the casual home-style specialties Osaka is famous for.

The best-case scenario with this approach is that you make a wonderful new food discovery, as I did. Worst-case, you’ve waited for the Japanese equivalent of a Cronut, and at least have a good story to tell when you get home.


If something happens to your rental car, even a flat tire (or two), you are responsible for the damage.CreditH. Armstrong Roberts/Retrofile/Getty Images

MAKE SURE YOUR RENTAL CAR IS COVERED The question of whether or not to get rental car insurance baffles many travelers, and while there is no hard and fast rule for every situation, I learned a valuable lesson the hard way. In a remote area of the Big Island of Hawaii, I blew two tires and had to be towed over 100 miles back to the Hilo airport. I had not bought the liability insurance from the rental company and paid for the two tires out-of-pocket. Little did I realize that wasn’t the end: Over a week later, I received an email from Hertz demanding more than $1,400 because of scratches on the wheels.

What was I to do? Fortunately, the credit card I used to make the rental, a Chase Sapphire Preferred card, came with built-in coverage for the rental car itself (but not liability insurance for other parties). Through a somewhat arduous process of submitting every receipt and document under the sun, I was able to have the card’s insurance cover the cost. Had that failed, I could have asked my personal auto insurance to step in. The bottom line: Know your coverage before you begin driving. If you don’t have personal insurance, you’ll definitely want to make sure you either buy the rental company’s insurance (which can be very expensive) or make the purchase on a credit card that includes vehicle coverage (and you may want to supplement with liability coverage, which often isn’t included).

WITH AIRBNB, STAY WITH A LOCAL Airbnb is a fraught topic in some major urban centers, particularly New York City, where it’s effectively illegal for short-term rentals of entire apartments (as opposed to sharing a space). But the app is an undeniable force in the travel world. And while it’s definitely nice to have your own space, I’ve found that Airbnbs contribute far more to the value of a trip when they’re shared with a local. If you’re truly looking for a “local” experience, why not let an actual local guide you?

It’s important to understand that, strictly speaking, that’s not the job of your host. You’re paying him or her for a place to stay, not to be a tour guide. But more often than not, when I’ve stayed in an Airbnb with a longtime resident (check owner bios on the site, which are frequently full of useful information), particularly a retiree, they’ve been extremely eager to share knowledge and tips, even going so far as to personally take you places. My host in Moscow, Natalya, took me to a local market and gave me advice on bathhouses in the area. When I traveled to New Zealand, I stayed in the home of a kind woman who drove me around the northern island, taught me the names of local trees and plants, and even a bit of New Zealand slang. It’s not something you can expect from every host, but it’s an added perk that can tremendously improve a traveler’s experience.


The Fathom Adonia, from Carnival. CreditFathom

GREAT DEALS? BOARD A BOAT It’s easy to focus on flights and hotels, but some of the best bang-for-your-buck deals today are actually found on the open seas. I took a seven-night cruise to the Dominican Republic in September that cost $250 — a price so low that some passengers were wondering out loud if they might be allowed to move onto the ship permanently. While taxes and fees (and a single supplement if you’re traveling solo) will certainly raise the price, this cruise aboard Fathom’s Adonia, which includes a room and all food, but not alcohol, is still amazingly cheap. (The lowest price currently available is $299 for an interior cabin.)

And it’s not your typical booze cruise. While you’ll still be expected to dance to “Y.M.C.A.” every now and again, the focus was volunteer work in communities around the Dominican town of Puerto Plata. Passengers were given the option to teach English, help in a women’s cooperative, install cement floors, and plant trees, among other activities.

My activity, teaching English, was brief but rewarding. I helped a girl learn the English alphabet and numbers one afternoon in the sweltering heat of her family’s home. The volunteer experience raises questions about the efficacy of untrained passengers coming to work for a very short period of time, but the value of the person-to-person experience was undeniable.



Genworth’s Acquisition By China-Based Firm Faces Another Regulatory Delay

Imagini pentru Genworth Acquisition By China-Based Firm Faces Another Regulatory Delay

The proposed acquisition of Henrico County-based Genworth Financial Inc. by a China-based company is facing a regulatory delay that is likely to push the deal past its planned completion date.

Genworth, an insurance company with thousands of employees in Virginia, announced in October that it had agreed to be acquired for about $2.7 billion by China Oceanwide, a privately held financial company based in Beijing.

Genworth shareholders approved the deal in March, but the companies also must get various U.S. and foreign government regulatory approvals. That includes a review by the Committee on Foreign Investment in the United States, or CFIUS, a federal government committee that reviews transactions resulting in control of a U.S. business by a foreign entity.

Genworth and Oceanwide said late Thursday they have re-filed a joint notice with CFIUS to provide the committee with more time to review the transaction. It is the second time that the companies have re-filed the notice with CFIUS. The first time was in April.

The re-filing gives CFIUS a new 30-day review period, which may be followed by an additional 45-day investigation.

Genworth said Thursday that it and Oceanwide “continue to actively engage in discussions with CFIUS; however, there can be no assurances that CFIUS will ultimately agree to clear the transaction.”

The companies had initially planned to close the deal by mid-2017. On Thursday, Genworth said the companies are discussing an extension of the Aug. 31 deadline set in the merger agreement.

The top executives of both companies issued statements reiterating their support for the deal.

Thomas McInerney, Genworth’s president and CEO, noted that the proposed deal is the best option for shareholders.

“This transaction also achieves the best outcome for the policyholders of our insurance companies and other important stakeholders,” McInerney said. “In addition, Genworth believes this transaction provides significant benefits to Americans because it allows Genworth, the leader in long term care insurance in the U.S., to remain a viable and strengthened competitor in the long term care insurance industry.”



Genworth’s Acquisition By China-Based Firm Faces Another Regulatory Delay