Why Insurance Should Be Part of Corporate Financial Planning

Unforeseen losses can have a devastating financial impact on corporate entities if there is no insurance protection. It is, therefore, prudent for entrepreneurs to include insurance as a part of their financial planning for the following reasons:

1. Insurance minimizes loss to the business and entrepreneur, arising from fires, natural disasters, subsequent business interruption, robbery, employee dishonesty, and legal liabilities or responsibilities among other risks.

2. It reduces the disruption of cash flow due to losses as insurance helps to quickly restore the business to its prior position before the loss occurred.

3. Insurance helps to ensure the continuity of your business by providing funds to rebuild the business operation after a major loss or total loss.

4. By selecting insurance as a method of transferring risk, vital capital can be better instead of being put aside to fund the uncertainty of loss. The insurance carrier relieves the business of this burden.

5. Insurance is a cost-effective method of managing risk. The cost of annual insurance is minimal (often less than one percent of the limit insured) when compared to interest rates on a bank loan (20 percent), to restore the business in the event of loss.

6. Insurance acts as a guarantee for financial institutions whenever the business assets are used as security for a loan.

7. Insurance protects the business and individuals from extraordinary losses that can arise from their legal liabilities (obligations) to employees and third parties out of the operation of the business.

8. An insurance partner can assist the entrepreneur to improve management of the business operation by providing expert advice and prevention and control of risk factors, and the improvement of processes. This can ultimately result in reduced susceptibility to losses and reduction in certain operating costs.

9. Insurance coverage provides a level of comfort and trust among your business partners and clients that the business partners and clients that the business will honor its obligations even in the event of unforeseen circumstances.

10. Insurance protection helps to preserve and maintain the profitability and financial viability of corporate entities as losses do not have to be borne from business earnings.

Life Insurance – The Platform For Financial Security

In developing one’s game plan for life, there are some losses that cannot be prevented or transferred, but the economic effect of the loss can be lessened by sharing the cost. Life insurance is an ideal vehicle for offsetting the economic loss that derives from the death or disability of a person. This it does by providing a payment of a sum of money called the sum insured or the coverage, upon the death of the insured or the occurrence of a specified event.

When one gets that inevitable call that a loved one has passed on, cash is needed immediately. This is where the power of life insurance is seen and felt as it provides cash when it is needed most. Significantly, the cash it provides is what the insured intends to save as opposed to what they have actually saved to that fateful moment. Life insurance is then the ideal platform for every financial security management plan as it can also be used as a means of investment and saving.

First Things First
It is said that there are two certainties in life – death and taxes, and so it makes good financial sense to do first things first. Life insurance provides the cash to take care of these certainties of life. It also takes time out of the picture: time to save or time to invest is therefore irrelevant, because from the moment of purchase, one would have created an estate, a monetary value on your life, which will be paid to your beneficiaries on death or a specified eventuality. As with all insurance, the insured transfers the risk of death or disability to the insurer (the insurance company).

Life insurance is essential for the protection of the family. It is a safeguard for dreams and aspirations because it ensures the continuity of both cash and income by covering the final expenses (cost of the funeral, personal loans, medical bills) and replacement of family income (rent, mortgage, light, water, food).

Cash and income will always be needed in life and so having life insurance ensures that one discharges his/her responsibilities admirably. It should be noted that debts do not necessarily die with death and so the bills of life continue after someone has passed on, even though the income has stopped. With life insurance, one must have it before it is needed, because when you need it, if you don’t have it, you cannot get it.

There are different types of insurance, with ‘term’ being the most inexpensive form of cover as it provides for protection only; it is temporary coverage ideal to protect loans and when you need insurance but your current income is a constraint. Term insurance can be later converted to a permanent plan without doing a medical at that time.

Critical Illness
Critical illness causes devastation. It derails the plans of families when one is diagnosed with cancer, heart attack, stroke or any other dreaded disease and so it is absolutely important that everyone addresses these risks. Insurance companies have responded to alleviate this devastation by introducing critical illness insurance plans. Critical illness plans are ideal for assisting with high health care costs during the period of recovery as they provide living benefits with a cash payout on the diagnosis of a specific critical illness.

Life insurance also assists with estate preservation. All persons with estates, no matter what the value, are concerned with the conservation of the largest possible portion of their estate in the process of passing it to their loved ones, and the distribution of the estate in the most efficient manner consistent with their desires.

Since estates normally pass through many hands before it reaches the beneficiaries, one should identify the causes of estate shrinkage which may range between 15 and 30 percent of the value of the estate.

These costs include funeral and administration expenses, debts, attorney’s fees, valuation, stamp duty, transfer tax and death duties. It is therefore, prudent to minimize these settlement costs and any forced liquidation of assets. This you can do by the preparation of a will and the purchase of life insurance to provide the cash to pay the costs that cannot be eliminated or further reduced. Life insurance prevents a forced sale of estate assets as funds are provided for the estate – not from the estate.

Ideal Will
Life insurance is then an ideal will when a beneficiary is named, as opposed to naming ‘estate’ as the beneficiary, since no cash will be taken from the sum insured – that is, the payout by the insurance company – and very importantly it avoids a lengthy administration process.

Not many people going on a journey would travel in a vehicle, or consistently travel in a vehicle, without a spare tyre; one never gets up in the morning hoping to get a puncture, but if do, you are able to change the tyre and continue along your way – that’s insurance. Life insurance is no different as it allows our families, our loved ones to continue along life’s pathway.

When making your plans for financial security, contact an agent to discuss your life insurance needs as it should be the foundation on which you build.