Better Business Efficiency With Insurance

By Sarah Martin

When you eliminate risk from the equation, businesses are able to operate more efficiently. Here is a look at why.

Price equals efficiency

One thing to consider when you are looking at insurance and how it improves efficiency is the cost. The cost of an item directly impacts how efficiently the creation and distribution of the product is. The less risk, the lower the price of an item, while the higher the risk, the higher the price. If you are too concerned with the risk of a product, the whole system slows. Take away some of the risk, and you are able to focus on the smaller details that help a business to run efficiently.

An example - exports

Let's pretend that you have decided to invest in an exporting business. You know that the business will be successful and that you will easily make your money back and then some. However, you then think of all of the risks entailed - what if the ship catches fire or sinks? The delivery trucks are robbed? Products are damaged by the weather? Now the investment seems more like a gamble. With insurance, however, these risks are eliminated and you can invest freely without worry.

Many businesses would not want to risk shipping their items across the ocean if they didn't have some form of insurance, similar to the idea that somebody would not want to drive across the country without some kind of cheap auto insurance. It also goes further than that. No one would trust money or important duties to someone else, wasting valuable time doing the jobs themselves. Small businesses would go under with one workman's comp claim.

Employers and employees

Thanks to insurance, business partnerships are more attractive. This is because the heirs of a business may not want to continue if one partner dies. They would then ask for their share of the assets. Without insurance, the partners would have to try to come up with money, which could lead to difficulties for the business. However, if the business owner had a life insurance policy, the heirs are able to collect their money immediately without putting the business at risk.

In addition, some businesses opt to pay for insurance for the employees. This often causes the employees to believe that the company is interested in their well-being, which can lead to improved employee retention and productivity.

Merchants and loss

If a company extends credit to a customer, they are making the assumption that the customer will pay them back. They know that this doesn't happen, however, and a certain percentage of money will be lost. Therefore, the smart business thing to do is to factor this loss into the cost of the product.

However, there is always the worry that the cost increase will not match the losses. One or two bad customers can cause an otherwise good business to go under. By having a credit insurance policy, the business owner can help reduce this risk and make sure that his business continues to operate.

All forms of insurance, whether it is no medical exam term life insurance or private health insurance, can help a business to work more efficiently. By reducing risks and reducing fears, insurance can help a business take bigger risks that lead to bigger profits.

Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in business, finance, and insurance. For cheap auto insurance please visit http://cheap-insurance-rates.com/.

Is Your Insurance Safe?

By H Craig Rappaport

In this environment it is fair for families to question whether or not the insurance that they have paid into for years and years will be there when they need it. The upheaval of the financial services industry which sparked the demise of Bear Stearn's, Lehman Brothers, Fannie Mae, Freddie Mac Merrill Lynch and AIG, the first insurer to go off the board, is sparking fear amongst the owners of insurance policies and it is quite understandable.

While Senator's Obama and McCain are running around trying to make political hay from the situation by blaming this person or that for the problems we find ourselves in, many of us are looking for real answers to real questions that will affect our lives and our families. We're not looking for a promise to do this or that that will probably be forgotten in a week or two.

So lets clear a few things up.

State laws are designed to protect the interest of policyholders first, before investors. The number one job of state insurance regulators is to make sure that the insurance companies that operate within their state are financially sound. If there is the possibility that a company will not be able to fulfill the promises it made to it's policy holders, the regulators will step in.

The regulators have numerous actions they can take to prevent failures. This includes taking over management of the insurance company through a conservation or rehabilitation order with the goal of being able to get the company back into a strong financial position.

Claims from individual policyholders are given priority over other creditors. In the event that there is not enough money in the insurance companies accounts to pay a claim, the state has a safety net in place to protect the consumer and it's called the state guaranty fund.

Every state has a fund of this type. Insurance companies pay for the fund with a fee of 1-2% of the net insurance it sells in that state. So every state is different. If an insurance company is unable to pay a claim, the guaranty fund will pay instead subject to certain limits. These limits are different for every state but upon investigation $300,000 for property casualty and $500,000 for life insurance and annuity contracts seem to be the norm.

Each state has its own plan though and it can vary substantially from those limits I mentioned above. For instance, some states don't cover annuity benefits at all, and some do. Some may have a limit per person, or a limit per policy so someone may own three policies and get paid for all three.

It is important to remember that these do not replace your current policy, more so back up your policy with another type of substitute coverage. If you have a $2,000,000 life insurance policy, you may only collect $500,000 if the state is required to use the state guaranty fund to pay you.

Client's assets invested in variable annuity separate accounts are not subject to creditors and are segregated by law and protected although still subject to market performance.

Fixed annuity accounts and all fixed products are invested in the insurer's general account and subject to creditors. These assets may be used upon the approval of state regulators for liquidity concerns of the insurance company.

Death benefits on both annuities and life insurance are funded in part by the insurers' general account and may be reduced if the insurer goes into receivership.

If there was ever a time to educate yourself about your state's policies for paying a claim from the state's guaranty fund, it is now. Insolvency is an unfortunate reality. Things may calm down or may get worse. I will not be the one to predict that, but I want all to understand that when it comes to your ability to collect a claim from a troubled insurance company, your state has an option and it's best to understand your states particular rules and claims paying practices.

Visit http://www.livelongliverich.com for the latest information on retirement issues, planning and income generation.