Term provides life insurance protection for a specified period of time. If you do not currently have life insurance, term can be a good place to start. It’s generally less expensive than permanent life insurance, and is available in varying term periods with fixed premiums from a one – (annual renewable term) to 30-year period (level term). Furthermore, term insurance is sometimes convertible to permanent coverage, providing you with flexibility as your needs change.
Whole life is a form of permanent life insurance that remains in force during the insured person’s lifetime, provided premiums are paid as specified in the policy. Whole life insurance can build cash value.
Universal life is a form of permanent life insurance characterized by its flexible premiums, flexible face amounts and unbundled pricing structure. Universal life can build cash value, which earns an interest rate that may adjust periodically, but is usually guaranteed not to fall below a certain percentage.
Life insurance provides income tax-free money to your named beneficiary(s) that can be used to pay funeral expenses, debt, tuition, estate taxes or virtually any financial need you leave behind. Life insurance can also provide business security by enabling partners to buy out the interests of a deceased partner and prevent a forced liquidation.
The cash value growth of a permanent life insurance policy is tax-deferred1, which means you do not pay taxes on the growth of the cash value unless the money is withdrawn. Loans2 or withdrawals can be taken against the cash value of a permanent life insurance policy to help with expenses, such as college tuition or the down payment on a home.
1Accumulated growth may be taxable upon withdrawal. If the policy is a Modified Endowment Contract (MEC), tax penalties may apply prior to age 59 ½. Consult a tax advisor on your specific situation.
2Policy loans and withdrawals reduce cash value and the death benefit and may be subject to other charges outlined in the contract.
Workers’ Compensation laws are designed to ensure that employees who are injured or disabled on the job are provided with fixed monetary awards, eliminating the need for litigation. These laws also provide benefits for dependents of those workers who are killed because of work-related accidents or illnesses. Some laws also protect employers and fellow workers by limiting the amount an injured employee can recover from an employer and by eliminating the liability of co-workers in most accidents. State Workers Compensation statutes establish this framework for most employment. Federal statutes are limited to federal employees or those workers employed in some significant aspect of interstate commerce. The Federal Employment Compensation Act provides workers compensation for non-military, federal employees. Many of its provisions are typical of most worker compensation laws. Awards are limited to “disability or death” sustained while in the performance of the employee’s duties but not caused willfully by the employee or by intoxication. The act covers medical expenses due to the disability and may require the employee to undergo job retraining. A disabled employee receives two thirds of his or her normal monthly salary during the disability and may receive more for permanent physical injuries, or if he or she has dependents. The act provides compensation for survivors of employees who are killed. The act is administered by the Office of Workers’ Compensation Programs.
You need Directors and Officers Liability insurance when you assemble a board of directors. They will frequently make the requirement.
Investors, especially Venture Capitalists, will also usually require that you show evidence of Directors & Officers Liability insurance as part of the conditions of funding your company. Also having employees opens management up to employment practices lawsuits – which usually can be covered under D & O insurance. Directors and Officers Insurance is often confused with Errors & Omissions Liability. The two are not synonymous; Errors & Omissions is concerned with performance failures and negligence with respect to your products and services, not the performance and duties of management. Generally it is a good idea to carry both Directors and Officers Liability Insurance and Errors and Omissions Liability Insurance.
First, you need Directors & Officers Insurance because claims from stockholders, employees, and clients will be made against the company AND against the directors of the company. Since a director can be held personally responsible for acts of the company, most directors and officers will demand to be protected rather than put their personal assets at stake. Secondly, you need Directors and Officers Insurance because investors and members of your board of directors will not be willing to risk their personal assets to serve as a corporate director or officer, no matter how heartfelt their belief in your company. Lastly, employment practices suits constitute the single largest area of claim activity under D&O policies. Over 50% of D&O claims are employment practices related.
It is generally recommended that Errors & Omissions Insurance be obtained as the foundation of every company’s insurance portfolio. Usually it is wise to purchase the coverage prior to product launch, or when you have customers. It can be required by investors, particularly Venture Capitalists.
Professional Liability – Errors & Omissions Insurance – coverage is not provided by a Commercial General Liability policy. Commercial General Liability does NOT provide coverage for errors, contract performance disputes or any other Professional Liability issues. Companies who have General Liability without Professional Liability – Errors and Omissions Insurance – coverage are taking a serious risk. It’s like a doctor practicing medicine without Malpractice Insurance. Mistakes happen. Every company messes up at some point. You can’t be everywhere. Sometimes you can’t personally handle every job. Errors and Omissions coverage insures not only your mistakes, but also the mistakes of the employees and Independent Contractors you hire. Most Importantly, Errors and Omissions insurance might save you from extreme embarrassment, a lost client, or worst of all, a bad reputation.