You and your business partner or partners have a clear and common vision of how to run your business, where it’s going, and how it’s going to get there. As a team, you’ve worked together each and every day to share the daily demands and shape the success of your business. That said, have you thought about what would become of the business and all your hard work if you or one of your partners became ill, was injured, or died?
A business doesn’t have to become disabled or die just because one of the owners retires, dies, or becomes too sick or disabled to work. Whether the transition of business management or ownership needs to take place after death or during life, it can be orderly accomplished through appropriate business succession planning.
A buy-sell agreement is a tool commonly used in business succession planning. This planning feature, when correctly funded and designed, can orderly establish the value at which the business will be taken over and who will be doing the taking over. The owner can have a peace of mind from knowing that the business has a predetermined basis for which it can be sold in a ready market, thereby giving the owner a source of funds when they need it, such as when they are ready to retire. If the owner was to die prior to the above predetermined basis occurring, then the buy-sell can be used to meet the survivor’s needs or pay hefty estate taxes.
Although there are several ways that a buy-sell agreement can be established, an entity purchase agreement and cross purchase are the two most often used:
Due to favorable tax results, this is a highly used approach by many small businesses. It’s generally used by businesses that only have a small number of owners. The cross purchase is typically funded with a life and/or disability insurance policy that each of the owners must maintain on their co-owners. The death benefits from the life insurance policy aren’t subject to taxation since the owners, not the business, actually own the individual life insurance policies. Each of the business owners are legally obligated to purchase the ownership interest of the other co-owner(s) upon death.
The deceased owner’s estate sells the owner’s interest to the surviving owners in exchange for the proceeds from the life insurance policy. The surviving owners will get a step-up in the business’s tax basis. Alternatively, the insurance cash value can also be used if one of the co-owners was to need to fund a buyout during their lifetime. One point to remember regarding a cross purchase is that administration is smoothest when there are only a limited number of owners and will become increasingly difficult to administer as the number of owners increase.
Entity Purchase Agreement
This type of buy-sell agreement works somewhat like the cross purchase, but it’s the business, not the owners, that will maintain an insurance policy on each owner and agree to purchase any deceased owner’s interest in the business. As such, the taxation is different.
The death benefits under both an entity purchase and cross purchase agreement, whether being paid to the business or an individual, are exempt from federal income taxation. However, unlike with the cross purchase, there are certain situations that a C corporation can be subject to the corporate alternative minimum tax under an entity purchase. There’s also not a step-up in basis under the entity purchase plan.
Hopefully this brief overview of the entity purchase and cross purchase types of buy-sell agreements has spurred you to think about how vitally important business succession planning is to your business. Of course, this short article couldn’t possibly cover all the factors to consider when developing a business succession plan. As you begin the preparations for you business succession plan with your attorney, accountant, and insurance agent, they should be able to answer any additional questions or concerns you might have.
Do you live within five miles of your workplace like half of all American workers? If so, the 20-minute ride one way burns 3,000 calories and provides key health benefits you’ll appreciate.
Boost Your Energy
Instead of waking up with coffee, tea or energy drinks, ride your bike. A recent study found that a low to moderately paced bike ride releases endorphins that boost your energy level by up to 20 percent and decrease your fatigue by 65 percent. That’s a big wake up call.
Increase Your Heart’s Health
Ride at a moderate to high intensity speed for 30 minutes at least three times a week, and watch your cholesterol and blood pressure drop in one year. You can easily achieve this goal simply by riding the long way home.
Protect Your Joints
Riding your bike is one low-impact exercise that’s perfect if you have joint conditions or leg, ankle, knee or hip injuries. If your knees aren’t bent at a 25-degree angle on your down pedal stroke, ask your bike shop professional for a saddle adjustment.
Improve Your Mental Health
There’s no denying that work and even daily life can be mentally challenging. Use your bicycling commute to regulate your emotions, combat depression and anxiety, prepare for the day or unwind after the day and improve your overall mental health.
Tone Your Muscles
Want to tone your arms, thighs and calves for summer? Riding a bike tones muscles you didn’t even know you had. The pedaling works your lower body, and you’ll tone your triceps and core by pedaling uphill while standing.
Boost Your Immune System
Exercise and fresh air support a healthy immune system. Plus, your body will be stronger and better able to fight germs inside and outside of the office.
Are you ready to jump on your bike and ride to work? Today and every day, gain healthy benefits and have fun simply by cycling. For additional tips on way to stay healthy, talk to your health insurance agent.
Your life insurance policy provides financially for your family, but you obviously want to live as long as possible. Pet ownership can help you achieve that goal.
Improve Heart Health
Your blood pressure and cholesterol could drop when you own a pet. Care for a cat, and your heart attack risk could drop by one-third. With these benefits, you improve your heart health and may prolong your life.
Obesity remains a top health concern because it can cause heart disease, diabetes and other health concerns. Your pet could help you maintain a healthy weight as you walk it, spend time cleaning its cage and perform other pet-related tasks each day.
Because your pet likes to exercise, you will move, too. Whether you walk your dog outdoors, play ball with your cat or chase your goat around the barn, the movement helps you reach your daily exercise goals and stay active. Plus, exercise boosts your immunity, decreases anxiety and improves your overall mood.
Erase the effects of a bad day when you spend time with your pet. A friendly greeting and social interaction can decrease your cortisol level and calm your nervous system.
Your body can fight off germs and illness thanks to your pet. As you laugh with your pet and groom it, your immunity gets a boost, and your body produces antibodies that fight germs.
Trained dogs can detect epilepsy, certain cancers and other illnesses in their owners. You can rely on your pet to provide an alert that allows you to seek medical help right away and address ongoing health problems.
Receive Disability Support
If you suffer from a disability, a pet can offer life-saving support. Use your seeing eye dog or another pet to improve your mobility and mental health.
Gain a Purpose
Feeding, walking and caring for your pet gets you out of bed each day. With a purpose, you’re more likely to avoid depression and choose to stay active and engaged in your life.
Cope With Trauma
If you face a serious illness or other trauma, turn to your pet for support. Your furry friend will listen to you, love you unconditionally and remain loyal throughout the ordeal.
Alternatives to Pet Ownership
Pet ownership improves your health. However, you may not want the financial or time obligations that accompany pet ownership. In this case, volunteer at an animal shelter, pet sit for friends or walk dogs after work.
Pet ownership can help you live longer. Whether you adopt a dog, cat, fish or snake, consider adding a pet to your home as you improve your health and quality of life.
If you’ve ever shopped around for insurance, you’ve likely been asked if you want to bundle your policies—in other words, combine your home or renters, auto and life insurance policies with the same carrier. Although you have the option to shop around individually for each policy, it almost always makes sense to have the same carrier cover as many of your policies as possible.
Benefits of Bundling
- The discount—Most policyholders bundle their policies because of the promise of a discount. The amount varies by provider but can generally range between 5-25 percent.
- The option of a single deductible—With bundled policies, your deductible may be cheaper in the event of a claim that affects multiple policies. For example, if your home and auto policies are with two separate carriers, and a hailstorm damages your home and your car, you’re responsible for paying both your home and auto deductibles before receiving payment. But if you bundle your policies, your provider may offer you the option to pay only the higher of the two deductibles.
- Less chance of being dropped—If you’ve made claims or gotten tickets, having your policies bundled with one provider can decrease the chance of them dropping you.
When it Doesn’t Pay to Bundle
It isn’t always better to bundle your policies with one insurance carrier. Here’s when it may be better to split them up:
- If you have tickets or past claims that make your auto insurance expensive—In this case, it may be cheaper overall to buy each policy from separate providers.
- When premiums increase—Bundling discourages people from price shopping, which makes it easier for providers to increase their rates. Most assume that you won’t go through the effort of shopping around when your policies renew.
- If policies aren’t technically bundled—Some carriers may insure you with an affiliated company. Although you may get a discount with that company, you’ll lose the convenience of paying your premium with one familiar provider.
A Few Tips to Consider
Although discounts are the main reason people bundle their insurance policies, never assume that bundling is the cheapest option. Your needs and circumstances will dictate whether you should combine your policies with one carrier. Consider the following tips:
- Shop for new coverage when your policies renew, and ask for the price of the individual premiums as well as the price of the bundled premium so you can decide whether it is worth it. Just make sure you compare the same coverage when shopping for quotes from each carrier.
- Ask if the provider uses a third-party insurance company. Remember that you may save money but lose the convenience of dealing with one provider and a combined bill.
- Ask an independent insurance agent to get prices from multiple companies so you don’t have to do the legwork. An agent that is loyal to a particular carrier may be able to offer discounts that you can’t get alone.
With multiple factors contributing to the price of your insurance premiums, it is important to shop around in order to get the best rate for your insurance needs. Feel free to contact Scurich Insurance to determine if bundling is right for you and help you take advantage of all available discounts.
Your commercial insurance policies protect your business, making your insurance agent an essential resource for your company. While you may not have your agent on speed dial, you will want to contact him or her in several circumstances.
Verify Coverage Details
You can purchase a variety of different policies for your business, and need to understand your exact coverage. Contact your insurance agent to verify which types of coverage you have and your policy limits.
Update Your Policy
When you add a vehicle to your commercial fleet, sell a piece of equipment, move to a new location, or make other changes to your business operations, call your insurance agent. These updates could affect your insurance needs, policy and premium.
File A Claim
If you need to file an insurance claim, contact your agent immediately. You may call the agent’s office, send an email or text, or fill out an online claim form on the company’s website. Remember to submit pictures, too, as you get your claim process started.
Ask Questions About a Claim
After you file an insurance claim, you may have questions about the adjuster’s findings or the settlement timeline. Feel free to contact your agent and ask any questions you may have.
Discuss Your Bill
Whether you pay your insurance bill annually, semi-annually or quarterly, you may inspect your bill and realize that you have questions about one of the charges or fees. Most insurance agents remain transparent about billing, and they can explain anything you don’t understand about your insurance charges, fees or payment date.
Pay Your Bill
If you experience any issues when you pay your insurance bill, call your agent. You may also ask for a change in the policy due date or a change in payment frequency.
Initiate an Annual Review
You should receive a notice a few weeks before your commercial insurance policy’s renewal date. Ask your agent for a meeting to renew your coverage. During this meeting, discuss details about your business and the types of insurance you need, including coverage limits and cost, as you verify that you have the right insurance for your needs.
Request a New Quote
Based on your insurance policies you purchase and your loyalty to your commercial insurance company, you may qualify for discounts or a more competitive rate. Your agent can rework your coverage limits, check for discounts and give you a new quote that meets your budget.
Throughout the year, you may wish to contact your commercial insurance agent for several reasons. Always feel free to reach out and discuss your needs as you purchase the right coverage for your business.
Are you confident that your loved ones would have financial security if you were to die today? If not, consider purchasing life insurance. It pays a death benefit to your loved ones when you die, and it provides peace of mind and financial security to your survivors. Smoking, however, can limit your ability to afford life insurance.
Life Insurance is Based on Risk
Insurance companies offer a variety of policies, but they reserve the right to adjust rates based on risk factors. If you smoke or engage in other behavior that’s considered high-risk or unhealthy, expect to pay more for coverage.
Why is Smoking a Risk?
Whether you’ve smoked for years or recently picked up the habit, life insurance companies see you as high-risk. They base their perspective on two factors.
- Smoking increases potentially fatal health issues like cancer, heart disease, emphysema, chronic obstructive pulmonary disease (COPD) and asthma.
- Smoking is the leading cause of premature death in the U.S. How Much More do Smokers Pay?
Every policy is different, but on average, smokers can expect to pay around 15 percent more for life insurance. So, if a non-smoker with a similar demographic and health pays $50 per month, a smoker could pay as much as $57.50.
Is There an Affordable Solution?
Before you give up on finding affordable life insurance, shop around. Your insurance agent can assist you in finding the most affordable life insurance premium.
Additionally, remember that insurance companies factor in how long you’ve smoked and how much you smoke. While their preferred rates may not go into effect until you’ve been nicotine-free for 12 or more months, you can start maintaining a smoke-free lifestyle now by enrolling in a smoking cessation program.
You may also find affordable premium rates if you bundle your life insurance with other policies like health, home and auto.
Talk to your insurance agent today. Find the most affordable life insurance policy for you, and give your loved ones financial peace of mind.