One of my favorite things about my job is that it affords me the opportunity to work with successful business owners from a vast array of industries. That said, I’ve found that some of my best business insurance clients, while willing to commit time and resources to their corporate insurance and risk management programs, give relatively little thought to protecting their personal assets. The purpose of this article is to identify some common pitfalls and issues I’ve run across with some of my clients when we examine their personal insurance.
1. The Company Car A common scenario is that a business owner and his or her spouse both drive company cars furnished by their business. Unfortunately, this can lead to a gap in personal liability insurance when either rent a car if the correct endorsement (drive other car coverage) hasn’t been placed on the business auto policy. A far more prevalent issue is that these “company” cars are actually titled or leased in the owner’s name, rather than the name of the company. If the name on the title of the vehicle (or lease) doesn’t match the name on the insurance policy, you are furnishing a great opportunity for your insurer to exit through the back door in the event of a claim. There are multiple other pitfalls with company cars, so be sure your agent has a clear understanding of the cars you drive and how they are used and owned.
2. The LLC/Trust Issue Business owners tend to be entrepreneurial all the time, not just at the office, and therefore may find themselves as owners of speculative land or rental properties. Those who consult attorneys with specialties in asset protection frequently place these assets in entities such as LLC’s, trusts or limited partnerships. As in the company car illustration above, it is crucial that your agent be informed when these assets are acquired or moved into separate entities. Asset protection mechanisms such as separate entities and liability insurance are far less effective when they are not synchronized.
3. The Umbrella Some of the smartest, wealthiest, most successful business owners I know won’t spend $500 a year to purchase a personal liability umbrella. Believe me, as a business owner and insurance consumer, I get insurance fatigue after purchasing my business insurance along with employee benefits for my staff and my own personal insurance. But, I’m quickly re-invigorated as I’m subjected to the preponderance of personal injury attorneys advertised on television. If I were to wind up in one’s crosshairs some day, I would want a large pile of my insurance company’s money and its experienced defense attorney standing between that plaintiff and the assets I’ve worked very hard to accumulate.
4. The Exit Most business owners like to feel in control, so introducing the notion that they may one day pass away without agreeing to do so is always a tough talk to have. That said, none of us gets out of life alive, and many of my clients who are business owners have a great deal of their net worth wrapped up in their companies. This is fine while they’re alive and spinning out profits, but should they pass away, their families may be incapable of operating the business. Life insurance on this type of business executive is essential. It buys time for the family to liquidate the business, sell to a qualified buyer or hire a suitable replacement to run the business. Without it, the remaining family may be forced to accept an inferior proposition out of fiscal desperation.
As a successful business owner, you’ll be deluded with offers to assist you on your business insurance, and if you’ve read any of my past articles, you know I support a very conscientious approach to your corporate insurance in tandem with an experienced, qualified insurance agent. But, I hope that after reading this article, you’ll also agree that it is equally important to spend some time analyzing your personal asset protection and your insurance plan. Call your agent today and get the ball rolling!