Does your business need Kidnap Ransom Insurance? (image via google)

When it comes to insuring your business, there is basic coverage and what is called specialty coverage.  Basic coverage is the standard type of insurance almost every business needs to have, property, liability, business auto, and worker’s comp.  Specialty coverage is less standard and is provided to cover specific types of risks some businesses face and therefore must mitigate.

There are a wide range of specialty insurance products that are industry specific.  If you are an exporter, you will need Ocean Cargo coverage.  If you are a financial advisor, you might need special coverage specific to any fiduciary responsibilities you might have.  As these products can be very industry specific, you will want to talk to your agent, check with any professional organizations you belong to, and ask your industry contacts for more information on the specific types of coverage you need.

There are also a few specialty products that may be needed across a variety of industries.  Here is a brief overview of each of these types of coverage and information on what kind of businesses may need to secure it.

Key Employee Life Insurance

Regardless of how big your business is, there are likely people within in, including yourself, that may need separate life insurance policies in order to protect the company.  Generally when we talk about life insurance as it relates to an employee, it is the life insurance policy the company provides or arranges for the employee.  The beneficiary is chosen by the employee and the intent is to take care of the employee’s family in the event of their death.  Key employee life insurance is exactly the same except that the beneficiary is the business and the intent is to help the business recover from the loss of a key employee.

Businesses whose income is completely generated by or reliant on the participation or involvement of specific people may need to purchase this type of policy.  Law firms, doctor’s offices, financial advisors, and small business owners are all examples of the type of business that can benefit from this type of policy.   Generally, this type of policy is a term life policy and it only remains in effect so long as the employee is employed by the business.

Kidnap and Ransom Insurance

Around the world, research shows that criminal gangs kidnap an estimated 25,000 people each year with the sole intent of collecting ransom payments and making money.  In many countries, kidnap and ransom is an industry bringing in millions of dollars a year.   For businesses operating in these countries, this fact can pose significant risks to employee welfare and financial health.

A kidnap and ransom policy is designed to provide a limited amount of protection for businesses operating in these areas of the world.  The type of policy determines what expenses and costs are covered.  Most individual polices will not cover the cost of the actual ransom payments but does include the expense of negotiating the ransom and securing the safe return of the person who was kidnapped.   Most corporate policies cover negotiation expenses, ransom payments, and lost wages owed to the kidnapped employee.

Companies of any size that are operating in parts of the world where kidnap and ransom activities are prevalent need this kind of coverage.

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Elderly Couple

What type of life insurance is right for you? Image via John Starnes on Flickr

When it comes to insurance, people often wonder how much is enough.  For life insurance, the answer can be a little more complex than for other types of insurance.   When you are looking for coverage for a car or house, you can formulate things like replacement value and estimate how long it would take to rebuild in order to determine the right amount.  But when you are talking about your life, it can be harder for people to turn the magnitude of that loss into a monetary amount.

Life insurance also differs from other types of insurance because different people have different goals and different needs.  When someone buys a homeowners insurance policy, their goal is to enable them to replace their home and belongings in the event of a catastrophic loss and to protect them from liability claims if someone is injured on their property.  Life insurance goals are not that clear cut.  Some people are looking to their life insurance to provide for their children while others may be looking at it as an investment opportunity.  There are a variety of reasons that people purchase life insurance policies, so the answer to how much life insurance do I need is- it depends.

Here are some things to consider that will help you figure out how much life insurance you need.

  1. Your Goals

The first thing you need to decide is why you want life insurance.  Ask yourself these questions to help define what you want to achieve by purchasing life insurance policies.

  • What do I want my life insurance to provide?
  • Will any of those things change as I grow older or will they be the same as they are today if I live to be 100?

Some of the most common goals people have are enabling a spouse to pay-off the mortgage or other debt, providing funds to raise children or send them to college, and supplementing their investment portfolio.  It is important to understand what you want to accomplish with your life insurance because those goals will drive the type of policies you purchase and the amount of coverage you need right now and in the future.

  1. Your Life Stage

The life insurance needs of a married couple will change over the course of their lives, even if their life insurance goals remain the same.  This is why considering your life stage is a crucial factor in determining the right policies for you.  Let’s say the life insurance goals of a married couple are to ensure there is enough money for final expenses, to pay off any debt, and to provide income replacement for at least 3 years to give the family time to adjust to the loss.  If that couple is in their early thirties with two small children, two incomes, and a mortgage, they will need a much higher payout at that point than if they are retired with no debt and two grown children.  Considering how your financial obligations will change over time ensures you buy the right amount of coverage at the right time to achieve your goals.

Once you have thought through your goals and the anticipated fluctuations of your financial obligations, sit down with your life insurance broker or agent to discuss what you want to accomplish.  They can help you find the mix of policies that will provide the protection and peace of mind you need at the best possible price.

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Are you adequately insured? image via Flickr

When it comes to life insurance, this is one of the most important things you need to understand in order to protect your family, assets, and/or business.  One of the most common mistakes people make when they buy life insurance is purchasing the wrong type of policy or the wrong mix of policies.  In order to purchase the policies that will meet your needs, you need to understand the difference between these two primary types of life insurance.

The main differences between these two types of life insurance are how long the policies last and whether or not they become more valuable over time.  To help you understand these differences and make it easy to decide which policies you need, here is an overview of both types of policy.

Term Life Insurance

If you have life insurance through your employer, it is more than likely a term life policy.  This kind of coverage pays a specific death benefit to your beneficiaries for a loss that occurs during a specific amount of time.  This timeframe is referred to as the term of the policy which is where this coverage gets its name.  Typically, term policies are less expensive than whole life policies but become increasingly more expensive to renew as you get older.  Term policies are generally used to provide protection for those left behind.  For this reason, many people purchase a term life policy when they buy a house or have a family.  Securing a policy that provides enough money to pay off the mortgage, pay for college tuition, or cover other debts and obligations can give you the peace of mind that comes from knowing you have taken care of those that depend on you.  Most insurers offer term life policies in a variety of amounts and time frames which allows you to customize your policy to meet your exact needs.

Whole Life Insurance

Whole Life Insurance coverage provides coverage throughout your lifetime, as long as the premium is paid.  Although it is generally more expensive than term coverage, the premium remains the same as you age.   Whole life coverage also carries a cash value which increases over time and can be used as an investment vehicle rather than just as a mechanism for protection.   A whole life policy may also allow the policyholder to take out loans against the cash value and some offer opportunities to increase the cash value through investment gains.  Universal life and variable life policies are variations on a base whole life policy.

The Difference

There are three main differences between Term Life Insurance and Whole Life Insurance coverage.  First is the primary purpose of the coverage. Is it to be a protection or investment?  Term policies are primarily used for protection while whole life policies are used as investment vehicles.  Second is the amount of time the policy covers.  Term life is a specified timeframe designated by the term.  Whole life policies cover you throughout your life and never have to be renewed.  Third is the price to benefit ratio.  Term life policies are almost always less expensive but generally carry a higher death benefit whereas whole life policies have smaller death benefits with higher price tags.