What Does Insurance Have To Do With Business Succession?

Remember the first time you considered building your own business? It was probably an exciting moment. Did you imagine a hole-in-the-wall bar or diner? Or did you imagine an expansive retail empire? Whatever you imagined, the likelihood of achieving those goals depended entirely on your motivation, and, of course, that you made the right choices at the right time.

Most people who start their own business are in it for the long haul — and they want that business to survive and thrive long after they die. Business succession planning is one of several ways to achieve that. The concept is simple, and it works much like planning your estate.

For example, most people know they should have a last will and testament in case they die unexpectedly (even though many don’t follow through). These documents determine how our assets are divided when we die, and who gets what. Business succession planning works the same way, except for your business. How will you pass control when you retire, sustain a disability, or die? Like all legal affairs, you will need a business attorney to walk you through each step and make sure the right documents are in order.

Many business owners who plan for the future will want to consider a life insurance policy. Most people believe this type of insurance provides a benefit to those you leave behind — primarily so they can pay for funeral expenditures or unpaid debt. But life insurance can be used in other ways. 

For the sake of our discussion, we’ll talk about partnership buy-sell agreements, family buy-sell agreements, and then how life insurance factors into either one.

This type of buy and sell agreement is a covenant between business partners that determines what happens to a partner’s share of the business upon his or her death. In general, the agreement results in the sale of that share to the surviving partner.

A family buy-sell agreement works the same way. In general, though, the goal is to pass the deceased’s share of the business to surviving family members so the business continues to be passed down from one generation to the next. Talk about pressure, right?

There are both advantages and disadvantages to using a life insurance policy to complete business succession. 

Here are the pros. When you own a life insurance policy, the death benefits are almost always non-taxable. They are also paid relatively fast to reduce pressure on a family. They aren’t paid in installments. The benefits can be used by a surviving partner (or family member) to pay for lost shares. 

Here are the cons. Life insurance policies cost money, thereby increasing a business’s expenses. Because the policy needs to be big enough for a partner to pay for the deceased’s share of the business, the premiums will be more than you might expect. They could become even more expensive as a person’s health declines due to injury, old age, or disease. And you might need a lot of coverage depending on how big the business is.

Does Vaccination Change Health Insurance?

Many workers have resisted vaccine mandates out of fear or stubbornness about the lack of freedom. These workers — and their opponents — wonder whether or not vaccination will change health insurance premiums. It probably won’t come as a surprise that many companies are punishing workers who decline free vaccines by forcing them to pay more for health insurance benefits.

This push is meant to increase vaccination rates without attracting attention. For example, Delta Airlines said that unvaccinated employees will be charged an extra $200 a month for health insurance. This change started earlier this month.

Is it legal?

Courts will have the ultimate say, of course, but…yes, it is legal. Unvaccinated workers have a higher likelihood of contracting coronavirus and coming down with COVID-19. When they get sick and end up in the hospital, they are at least partially financially protected by their health insurance policies. But because the costs are the result of a personal decision not to receive the vaccine, health insurance providers are much more likely to increase the costs shared by an employer. This is why most employers are completely on board with the vaccination push.

Delta CEO Ed Bastian said, “This surcharge will be necessary to address the financial risk the decision to not vaccinate is creating for our company.”

Many people believe that this is an overreach on the part of governments, employers, and health insurance providers. Law firms have compared the increased premiums for some people to those incurred by new drivers. A 16-year-old driver pays higher premiums than a driver who has been on the road for ten years without an accident. It all comes down to risk.

Other employers have started a new COVID-19 “risk pool” to share the costs with employees. Everyone contributes. When an employee comes down with COVID-19 and misses work, that employee takes funds from the pool — but they’re safe.

What To Know About The Affordable Care Act In 2022

Shopping for health insurance on the Obamacare marketplace in 2022? There are a few changes to the law you might want to know about. First, most healthcare options became cheaper once the marketplace opened back up for business when President Biden took office. Those cheaper options are still available through next year — and more than likely, the savings will continue over time.

No matter what kind of plan you choose, ensure that it is an ACA-compliant plan. Those that are not do not offer the same protections. ACA-compliant plans offer the “10 essential health benefits.” These include many preventative practices and coverage for new parents. 

Another thing to keep in mind? There are many copycat websites trying to take advantage of new enrollees in order to steal sensitive information like date of birth and social security number. This allows them to take a person’s identity or hack into bank accounts. Be sure that you’re on the right website!

Before selecting a plan, you will be asked for information such as household income. Make sure  you do the math right because premiums are based on these numbers.

Because the mandate for health insurance was discarded under former president Trump, you don’t need to purchase insurance. But you might want to anyway. Healthcare subsidies are the largest they have ever been and might very well eliminate the cost of purchasing a plan completely. It’s worth the peace of mind.

Don’t worry about the ACA’s future. Many conservative politicians have expressed continued interest in dismantling the law, but even the conservative-dominated Supreme Court has continually discarded these arguments. Most Americans like Obamacare now that we know the conservative scare tactics are nonsense, so the law will be extremely difficult to throw in the trash. And even if it were, you will still have coverage through 2022. Sign up!

You can find additional information on the ACA and available plans at www.healthcare.gov.

What Does The Economic Relief Package Do To Supplement Health Insurance?

One of the biggest deficiencies in the American system of health insurance is that there is very little standardization. Each plan is different. And the devil is in the details, as they say. Your plan might not cost much in weekly or monthly premiums, but it probably won’t provide much of a benefit either. A yearly checkup and a few prescription drugs? No problem. But an emergency room visit that leaves you responsible for paying off a high deductible before your health insurance kicks in a dime? Huge problem.

The harsh reality is that a person can be insured on any plan and still be financially ruined due to COVID-19. The economic relief package passed into law by Democrats addresses some of these concerns.

Director of the National Center for Coverage Innovation at Families USA Stan Dorn said, “If Congress can circle back and make these improvements permanent, it will go a long way toward making insurance affordable in this country.”

Civil rights attorney John Stackett said, “One of the biggest issues with previous relief packages was that they provided protections that disproportionately left minority groups out in the cold. The Biden package does better, but it probably still doesn’t go far enough. Right now, families living below the family line will receive a small payment monthly for the rest of the year. We needed that terribly, and we hope to see an extension in the future.”

What does all this mean? Essentially, it means that health insurance is still far too expensive for many working families in the United States. But by providing what is basically a universal basic income (UBI) for parents, Democrats have found a round-about wait to make insurance payments more manageable. The trick is getting the payments renewed after this year — but as we already know, it’s very difficult to take away this kind of benefit once people have it. And Republicans will have to struggle for how to respond to this when they’re running in the midterm elections next year.

Biden has also ensured that open enrollment for the Affordable Care Act will stay available for months, which is great for people who lose employer-provided coverage. Many citizens are still out of work, and they need healthcare coverage now more than ever. 

The American Rescue Plan Act also removes repayment requirements for premium tax credits, which should go a long way into helping families who don’t have any extra funds on hand to pay them. It’s worth noting that those who use the ACA to find coverage must update demographic information now in order to guarantee these changes have the desired effect. 

Stimulus Payments Delayed For Social Security Recipients — Because Of Trump?

We already knew that payments for the economic relief package most recently passed by Congress and signed into law by President Joe Biden were delayed for certain groups of people — but now we may have a better idea of why. House Democrats believe that delays for the $1400 individual payments may have been purposely delayed by former Trump employees in the Social Security Administration.

Those waiting on social security disability checks are accustomed to long wait periods — even being approved for SSDI can take two years — but experts warn that lives could be lost in the interim.

House Ways and Means Committee chairman Richard Neal (D-Massachusetts) said, “We understand that these beneficiaries are waiting because the Social Security Administration has not sent the necessary payment files to the Internal Revenue Service.”

An SSA spokesperson said, “Social Security staff is working day and night with Treasury and IRS representatives to ensure that the electronic file of Social Security and SSI recipients is complete, accurate, and ready to be used to issue payments.”

Once the SSA provides the requisite information, it could be a week or two before anyone currently on social security receives a check.

IRS Commissioner Chuck Rettig provided his testimony at a Ways and Means Committee hearing: “Many of these folks are also entitled to an [earned income tax credit]. They’re also entitled to a child tax credit. We did not get that information from the non-filer portal.”

The current head of the SSA wants to implement deep cuts to the organization, which is a non-started for Congressional Democrats. If it seems strange that a Trump appointee would want to make cuts to the programs he oversees, don’t forget that he also appointed a climate change denier to head the Environmental Protection Agency (EPA). When Trump wanted to gut funding for a particular organization, he attacked from within.

Those still waiting on relief payments can visit the “Get My Payment” portal to find out if the check has already been sent.

The House Ways and Means Committee released a written statement to explain the delays: “The American Rescue Plan was intended to provide much-needed economic stimulus and assistance to people across the country — immediately — and we are counting on your agencies to ensure that beneficiaries are not left behind in the seamless delivery of those payments.”

It continued, “However, we were alarmed to learn recently that most Social Security, SSI, RRB, and VA beneficiaries who are not required to file a tax return have not yet received their payments and the IRS is unable to provide an expected timeline for these payments. Some of our most vulnerable seniors and persons with disabilities, including veterans who served our country with honor, are unable to pay for basic necessities while they wait for their overdue payments.”

Are you an SSDI or SS recipient? There’s no need to worry if you normally file taxes with the IRS. Your information should be on file and your payment should be scheduled normally.

Insurance Terminology You Need To Know: Part V

We believe that people should know and understand exactly what their insurance policies say and mean. But insurance companies purposely use a lot of jargon and complicated terminology that the average person could never (or would never want to) wrap their heads around. That’s why we’re going to do it for you. Here are a few insurance-related terms that you might find in any policy you’ve purchased, and what they mean.

Actual Cash Value

This term refers to the value of repayment requested after a financial loss (most usually due to property damage). You’ll also see it coupled with the word “indemnification,” which refers to the protection of one party when a third party is damaged. 

Actuary.

This term refers to the professional responsible for determining the level of risk that an insurance company might be willing to accept. The actuary determines the equations for calculating premiums, dividends, etc.

Adjuster. 

If you ever need to cash in on a policy, then the insurance adjuster is the one who will investigate your claim. Basically, the adjuster’s job is to never give you an inch and not give you the company’s money unless a certain standard is met. They determine the claim’s worth in relation to the policy’s cash value.

Admitted Assets

These are an insurer’s valuations for specific assets. You’ll find them on the balance sheet.

Advance Premiums.

Normal premiums are the price you pay — usually once a month — once you’ve agreed to purchase a policy. An advance premium means you’ve paid…in advance. 

Affiliate.

Insurers refer to anyone who is under the insurer’s control as an affiliate.

Agent.

These are the insurance lackeys who sell their services. They don’t always work for the insurance provider. Sometimes providers will ask a third-party for sales work.

Aggregate.
This word refers to the most money you can have returned from a single loss (total coverage).

Life Sentence Given To Man After Insurance Collection Plot

Most rational people on planet Earth would recognize the futility of planning a murder (or two or three) in order to collect a massive life insurance settlement. And yet, it keeps happening. Hawthorne resident Ali F. Elmezayen, 45, was sentenced to 212 years in federal prison after the buffoon took out accidental death life insurance policies on his two kids and wife — and then partially carried out the plot when he drove his vehicle off the Port of Los Angeles.

His wife survived, but his two disabled sons died. 

Judge John F. Walter imposed the maximum sentence available when he ruled for 212 years. Walter said, “He is the ultimate phony and a skillful liar…and is nothing more than a greedy and brutal killer. The only regret that the defendant has is that he got caught.”

Elmezayen was also slammed with $261,751 in restitution fees that were paid out as part of the accidental death policy.

An anonymous lawyer for a personal injury law firm (https://www.socalinjurylawyers.com/) commented that these types of cases were surprisingly plentiful: “People don’t realize that they can’t possibly get away with it. The first person they suspect is the closest person in the deceased’s life.”

Acting United States Attorney Tracy L. Wilkison said, “Mr. Elmezayen conceived a cold-blooded plan to murder his autistic sons and their mother, then cash in on insurance policies. He now has ample time to reflect — from the inside of a federal prison cell — on where his greed and self-interest took him. We continue to grieve for those two helpless boys who deserved better from their father, who will never again walk among us as a free man.”

The scheme was poorly planned from the beginning. Before the plot was executed, Elmezayen contacted the relevant insurance companies a number of times — sometimes posing as his wife — in order to ensure the eight insurance policies he had purchased for more than $3,000,000 would pay out without much scrutiny. Prosecutors say one of his motivations was a bankruptcy he filed the year he purchased the policies (which he couldn’t even afford). 

Assistant Director in Charge at the LA FBI Field Office Kristi Johnson said, “Fathers are supposed to protect their children but instead, Elmezayen drove his boys straight to their certain death in exchange for cash. The defendant maliciously planned the death of his autistic sons and gave them virtually no chance of survival. The investigation that led to today’s sentencing won’t give them their lives, but affords them justice in death.”

Insurance policies have a “contestability” period. Once it expires, there are no longer any investigations into the cause of death. Theoretically, Elmezayen could murder his family only days after the contestability window expired and no one would bat an eye. He waited only 12 days. Funny thing: the FBI tends to take notice of such aberrations in the system. Who knew?

What Are “Nuclear Verdicts” And How Do They Affect Insurance Rates?

We rarely think about how the transport industry works. But maybe we should. Every year, millions of trucks — gasoline-fueled missiles, rather — travel from one end of the United States to the other. We’re talking hundreds of millions of miles traveled on an annual basis. With those kinds of numbers, accidents are inevitable. And what happens when those accidents lead to massive lawsuits that wind up in court?

Mike Card is president and CEO of Combined Transport. He took over the business from his father, who started it in 1980. And suffice it to say, business is better than ever. This is in part because of the reliance on material goods during the coronavirus pandemic. The government relies on some trucking services to get vaccines and PPE from one region to the next. But Card says the bigger the business gets, the more he worries.

He commented, “If someone wins $20 million from the jury, my insurance companies only pay the first $5 [million]. I would have to pay the next $15 million. We couldn’t afford that. We’d have to shut our doors.”

It’s a legitimate concern. From 2010 to 2019, the number of trucking accidents with fatalities blew up 43 percent. Overall injuries rose 7 percent. Needless to say, most of the casualties were passengers or drivers in other vehicles.

Combine that with the epidemic of “nuclear verdicts” — or the ballooning costs and jury awards from those crashes in excess of $10 million, and you get a lot of worried business owners. The aforementioned 43 percent increase in fatalities doesn’t come close to the whopping 1000 percent increase in jury awards during the exact same time period.

Why are the awards getting so high so fast? Liberty Mutual Insurance says that the main reason is the idea that the system in general is broken (and hint: it is). 

But the trucking industry is more likely to receive a punitive judgement (i.e. a punishment from the judge) for gross negligence than many other industries. That’s because truck drivers are often fatigued behind the wheel. Coupled with the fact that some drivers are allowed to keep their drives even without a flawless driving record, and it’s easy for a personal injury lawyer to win a case for injured plaintiffs.

An anonymous lawyer from Koonz McKenney Johnson & Depaolis LLP (https://koonz.com/) said, “99 percent of the time, it’s the business owner’s fault. It’s the hiring practices, the overtime hours, the broken laws and regulations that lead to the majority of these accidents. Ordinary people are the ones who pay the price with their lives. Why shouldn’t we take the owners to town for their mistakes? Someone has to reimburse victims for the damage done, and it’s got to be the ones responsible. The drivers are just tools for those business owners. And so we target the business owners.”

But senior vice president of the American Transportation Research Institute Dan Murray says, “In most states there’s a disconnect between your level of negligence and your level of liability. There are states where you can be identified as 10 percent of 15 percent negligence and still be vulnerable for 100 percent of the financial liabilities.”

Insurance Terminology You Need To Know: Part II

Welcome to part two of our series on insurance terminology. Some of these definitions are common knowledge, while others might be more obscure. If you’re a new buyer, then you’ll want to know what you’re getting yourself into before you make any final decisions. That’s where we come in. Here are a few more terms to know before exercising your purchasing power!

What is an allowed amount?

The allowed amount is the highest dollar amount that an insurance company will ever pay. Here’s an example of the world’s worst healthcare plan: 75% coinsurance, $9,900 deductible, with a $25 allowed amount. This scam means the highest amount the company would pay is $25, and only after you’ve paid the $9,900 deductible. Plus, you’ll have paid another $75 to obtain their $25 via coinsurance. Whoops! Buyer beware.

What is a condition?

In healthcare, a condition is the illness or disease covered or not covered by insurance. Be wary of insurance contracts that don’t cover common health problems like heart disease or cancer. They might serve for a broken leg, but nothing else. 

What is a copayment? 

Many insurance contracts involve some sort of a copayment when you use a particular service. Let’s say you need to visit the doctor for a health problem you recently noticed. The plan might note that the deductible is irrelevant for this service, but that there is a $25 copay. That means the visit is covered by insurance, and all you’ll have to pay is the $25. Not too shabby.

What is a covered charge?

Covered charges are exactly what they sound like: they’re charges made to the insurance provider for covered services. This is of particular relevance to those who might be traveling, because they’re more likely to need the healthcare services of an out-of-network establishment. Most insurance providers will place a strict limit on the covered charges when venturing out-of-network.

What Is Divorce Insurance?

Divorce insurance is something that many married couples “Google search” for when tying the knot — and no wonder, because 9 out of 10 people will marry by the time they reach age 50 and up to half of those couples will inevitably divorce. But unfortunately divorce insurance doesn’t actually exist. There was a sort of divorce insurance “test” back in 2010, but big shock: it didn’t work out for the insurer. The theory was simple enough. Married couples can experience financial upset during divorce, so why not offer them a backup plan?

Probably the biggest problem with the actual “divorce insurance” concept is that there are already fail-safe measures that can be preemptively taken by couples if they want to protect their financial interests against divorce. But even those measures are scrutinized and stigmatized because marriage is supposed to be a lifetime vow — a commitment. Take the prenup, for example: the legal contract can stipulate what would happen should divorce take place, and is signed before the marriage licenses are obtained.

The difference between a prenup and the doomed divorce insurance was simple enough, though. A prenup is an agreement between two committed partners, while divorce insurance was an agreement between a business and just one of those assumedly committed partners.

But the problems with divorce insurance are equally obvious. Do you think an insurance company willingly pays out a settlement unless forced? Not a chance. When you’re in a car accident between two or more parties, the insurance company literally sends out highly qualified and well paid individuals to make sure the story you provide is the right one. If you were the cause of the accident, don’t expect to get anything that isn’t owed.

But how do you make an agreement that basically says “if you divorce this person, you’ll receive this benefit”? The coverage basically becomes about what would happen under set conditions, just like any other insurance. Your spouse cheated on you and you want a divorce? Great. Your divorce insurance benefit should pay up. But first you need to provide beyond any shadow of a doubt that your spouse actually cheated. Any footage of that event? Hint: you’re probably breaking a half-dozen laws by having footage of that event, much less sharing it.

So you can see why the coverage options were likely doomed from the beginning.

But there’s probably no replacement for a traditional divorce attorney. Looking for one? You can visit website of any local attorney you choose, and most will always offer a free consultation to see if you’re a good match.

An attorney can also help relevant parties come to a marriage settlement, which is typically an agreement made to iron out details of who pays what (think alimony or child support) after marriage. The might also include more immediate concerns like assets, child custody, child visitation rights, etc. It’s always a good idea to know what you want out of a marriage — and what you want out of a divorce.

Check out some of the coverage when divorce insurance was first offered: