Lower-Income Gen Xers, Baby Boomers Will Run out of Money in Retirement: Study

Recent research showed that baby boomers and Generation Xers who are in the lower income brackets are more likely to fall short of their retirement goals, which will leave them lacking enough money to live on.

Researchers at Northwestern Mutual Planning & Progress found that that some people may run out of funds within their first year of retiring, and that 22% of Americans have less than $5,000 saved for retirement.

Even some people who fell in the highest income brackets would likely run out of money at some point during retirement.

The outlook for many of their futures remains grim. The survey found:

  • 22% of Americans have less than $5,000 saved for retirement.
  • 15% have no retirement savings at all.
  • 56% don’t know how much money they need to retire comfortably.
  • 41% are taking no steps to prevent themselves from running out of retirement savings, though many see this as a possibility.

After gathering these findings and analyzing them, researchers point out that people who are in the lowest income bracket are extremely vulnerable.

With the possibility of not only running out of funds but running out quickly, people who are in this category should be concerned and take steps to enhance their retirement preparedness.

People in all categories, however, can find themselves at risk, and each person’s likelihood of running low on funds will depend not only on their current financial status, but also on their health status. Not all health issues are predictable, and what exists now may be complicated later.

Some people may need extra funds for health care. Even if health facilities for skilled nursing care will pay 100% of costs, some households will still run out of money far before they should.


What to do

First off, do not expect Social Security to keep you afloat in your golden years. It won’t provide enough income for you to live off in retirement. If you’re like the typical recipient, your benefits will cover roughly 40% of your previous income, assuming that Congress doesn’t move to slash future Social Security benefits.

If you have not started saving for retirement, regardless of your age, start doing so now. Thanks to compounding interest and earnings, the more you start socking away now, the more money you can earn in your retirement funds in the future.

If you begin setting aside a decent chunk of money each month, and continue doing so consistently for the remainder of your career, you have more than enough opportunity to catch up.

The following shows how much money you would have when you retire at the age of 67 if you start putting away $500 a month at different ages:

  • 37 years old: $567,000
  • 42 years old: $379,000
  • 47 years old: $246,000
  • 52 years old: $151,000
  • 57 years old: $83,000


You should review your retirement plan and accounts annually and increase how much you set aside if you feel you are not meeting your retirement savings goals. It’s never too late. Update your options as needed, and take into account any long-term changes in health conditions.

To learn more about your options, call us.

Can You Legally Refuse to Hire Nicotine Users?

U-Haul International Inc. made a big splash recently when it announced that, starting Feb. 1, 2020, it would not hire nicotine users in the 21 states where barring someone for the habit is legal.

While its decision made headlines since it’s a national company, more and more employers have been opting to forgo hiring people who smoke, vape or use chewing tobacco.

The moves make sense as employers look to trim their health insurance costs, but also because studies have shown that nicotine users are less productive, take more breaks and miss more days off work than non-users – not to mention they face significant added health risks.

Already, some hospitals have instituted similar policies, and Alaska Airlines has had a policy of not hiring smokers since 1985. But with U-Haul making the move, other companies, both large and small, are weighing the choice of whether they should implement a similar policy.

Although U-Haul subsidiaries operate in all 50 US states, the policy will be implemented in the 21 states that do not have discrimination protections for smokers on their books.

Those states are: Alabama, Alaska, Arizona, Arkansas, Delaware, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas, Maryland, Massachusetts, Michigan, Nebraska, Pennsylvania, Texas, Utah, Vermont, Virginia and Washington.

Benefits of a no-nicotine policy

A 2013 Ohio State University study that reviewed smoker absenteeism, productivity and health insurance, found that they cost their employers an average of $6,000 more per year than those who have never smoked.

Smokers overall are less productive. A 2007 Tobacco Journal study by Petter Lundborg of University of Amsterdam found that smokers took 11 more sick days per year than nonsmokers did – eight days when you factor in variables like a smoker’s tendency to take more risks and have poorer health.

There also are other indirect effects on productivity, such as an increased rate of early retirement in smokers, the study found.

Other studies have found that tobacco users have an increased risk of short-term illness, and a higher risk of developing chronic illness, resulting in even more missed days and significantly higher health care costs.

Smokers can also have a negative impact on employee morale, as non-smoking colleagues may perceive that they abuse their breaks and do less work as a result.

Tough choice for employers

Employers who are considering similar policies need to tread carefully. Twenty-nine states and Washington, D.C. have laws on the books that bar employers from discriminating against an employee’s lawful off-duty activities (such as nicotine usage) or prohibit discrimination based on tobacco use.

Also, if you have operations in multiple states you would have to roll out different policies in different jurisdictions, which ends up costing your organization more money.

On the other hand, there are no federal laws barring action against nicotine users. For example, nicotine addiction is not a disability under the Americans with Disabilities Act. Attempts by government employees to gain protection for their right to use nicotine products have routinely been shot down by courts.

Given the state-specific nuances associated with this issue, you should consult an attorney if you are thinking about implementing a nicotine-free hiring policy, to make sure you can do so under the law.

Additionally, employers who have tough rules on nicotine use may have a harder time attracting talent, potentially causing them to miss out on strong candidates who use nicotine products.

All this said, employers can still regulate and limit an employee’s on-site nicotine use in the workplace. It’s wise to have policies in place that bar smoking and vaping on the premises to protect customers, the general public and your non-smoking employees from second-hand smoke and vape.

Studies have shown that the best way to get someone to quit smoking is not through punitive measures, but through incentives. Many wellness plans include smoker cessation programs that provide incentives to employees who quit smoking.

Some of these programs impose surcharges on nicotine users that are then used to cover claims and pay for administrative expenses under the employer’s group health plan.

Dog Owners Liable When Their Pets Bite

There were over 90 million dogs residing in people’s homes across the United States in 2018, according to the American Pet Products Association.

Unfortunately, there are more than 5 million dog bites reported each year, according to the Centers for Disease Control. Of that amount, almost 900,000 require medical care, and about 50% of those cases involve children.

While insurers will cover most dogs, some will not insure a long list of specific breeds. Dobermans and pit bulls are on many of the exclusion lists. Some insurers do not discriminate by breed and instead determine a dog’s status by individual evaluation.

If their pets bite guests or people who come on their property, owners are almost always liable for the damages. A dog does not have to be on a list of vicious breeds to make an owner liable.

If an owner knew of a dog’s tendency to bite and it can be proven through records of similar incidents, the owner may be sued for negligence and the damages are likely to be higher than if the bite was unexpected and the dog had not shown aggressiveness to humans in the past.

That said, the owner may not liable if the dog did not have a known propensity to bite and was not considered a vicious breed. For example, a mellow basset hound biting a person for the first time may not result in responsibility by the owner. However, a pit bull biting a person for the first time would likely result in the owner being held liable.

In some states, insurers are not allowed to deny coverage to people with certain breeds of dogs, and they are not allowed to cancel policies if people obtain questionable breeds. However, dog owners are required to buy additional liability insurance in some states if they own certain breeds of dogs.

There are three types of laws that put liability on dog owners:

  • A bite statute places automatic liability on the owner for any injuries.
  • A one-bite rule places liability on the owner only if they knew of the dog’s propensity to bite.
  • Negligence laws place liability on an owner if the owner is careless in controlling the animal.

Impact of dog bites

In 2018, dog bite claims accounted for about 35% of all liability claims among homeowners. The total amount paid by insurers in claims was over $600 million.

The average cost in the US in 2018 for claims of this type was more than $39,000. Costs have risen steadily over the past few years, which is mostly due to the rising costs of medical care and the larger settlement awards for lawsuits.

Not all claim amounts are attributable only to dog bites. In addition to biting people, dogs also knock down children and elderly individuals, which results in additional injuries. They also knock cyclists off of their bikes and cause damage to both the cyclists and their bikes. Other factors also increase the severity of some incidents and lead to higher claim amounts.

What you can do

Dog owners can help reduce the number of claims made by being responsible. Keep pets in crates or in a locked room when guests visit or when service workers come to the house.

For outdoor pets, provide sturdy fencing and a locked gate. Always display signs that alert people of the dog’s presence. If there is no fence around the yard, keep the dog on a leash when taking it outdoors.

To be safe, do not let strangers pet your dog. One incident can be costly, and may even result in the animal being put to sleep in some places.

To learn more about preventing costly dog bites, call us.

IRS Continues Ramping Up ACA Compliance Efforts

Despite lawsuits aiming to overturn the Affordable Care Act, the law is still very much in play for large employers who are required to provide health coverage for most of their full-time and full-time-equivalent workers.

The IRS has continued to ramp up enforcement of the ACA’s mandate that large employers provide affordable health coverage to their full-time employees.

For the 2018 plan year, the IRS sent around 90,000 letters seeking to collect approximately $12 billion in employer shared responsibility payments (ESRPs), up from $4.4 billion and 30,000 letters in 2015.

Applicable large employers (ALEs) that fail to comply with the mandate are liable for employer shared responsibility payments, which are essentially a penalty in the guise of a tax.

If the IRS, through a company’s tax filings, concludes that an employer is skirting their responsibility under the law, it will send them Letter 226-J, which is essentially the agency’s first step toward enforcing the ACA mandate and imposing liability for failing to secure coverage for their workers.

But if you are one of the employers who receives this letter, you will need to brace yourself for compliance reporting if you want to prove that you are not in breach of the law. The key to coming out unscathed from this is to have solid evidence of compliance. Such evidence should be shared across departments in your organization.

The ACA large-employer mandate requires that any employer of 50 or more workers (or full-time equivalents) must offer at least 95% of its full-time employees health coverage that is affordable (a percentage of their family income) and provides certain essential benefits as prescribed by the law.

Sometimes the letter has been generated because:

  • An employee made a mistake and claimed a tax credit for the cost of their employer-sponsored health insurance.
  • The IRS thinks you may not be offering enough of your employees’ health coverage.


ESRP fines can vary depending on the infraction

  • Failure to offer minimum essential coverage: $2,500 per employee for the 2019 policy year. This penalty applies if in any month in the tax year, the minimum coverage is not offered to at least 95% of a company’s full-time employees (and their dependents), and if at least one full-time employee receives a premium tax credit (PTC) for purchasing coverage through the marketplace.
    How it works: If a company in 2019 has 300 full-time employees, and one of those employees receives a PTC for 12 months, the cost of the penalty would be $675,000.
  • Failure to offer coverage that meets affordability and minimum value: $3,750 per employee in 2019. This penalty is assessed if Internal Revenue Code Section 4980H(a) does not apply for a given month.
  • Failure-to-file penalty: $270 per return in 2019. This applies to employers that do not file correct information returns for 2019.


What should you do if you receive Letter 226-J?

You will have to act fast. You have 30 days to develop a comprehensive response to the IRS’s assertion of liability. The IRS will initiate a collection process if you fail to respond on time.

Here’s what health compliance attorneys recommend:

  1. Call the IRS number included on the ESRP Response Form 14764 and request a 30-day extension to respond.
  2. Contact the entity your accounting or law firm (whichever you use to communicate with the IRS).
  3. Contact your benefits agent or the brokerage that you use for your group health plan and for ACA reporting. They can help collect data necessary to respond to the IRS.

11 Steps To Improving Truck Driver Safety

In 2017 there were 4,761 people killed in crashes involving large trucks, a 9% increase from 2016, according to the National Highway Traffic Safety Administration.

The increase shows that this hazardous occupation is growing even more risky.

However, there are several steps drivers can take to reduce their risk of injuries, including:

Practice good vehicle maintenance – Check the truck’s condition every morning, especially the condition of the brakes. Report anything unusual to the dispatcher.

Stack cargo in low piles spread evenly through the trailer – This reduces drag on the truck and makes it easier to handle.

Always wear seat belts – Passengers not wearing seat belts make up the majority of those killed in car accidents. Government data shows that drivers who do not wear seat belts are 25 times more likely to be killed if they are ejected from their vehicles.

Slow down in adverse conditions – These include poor weather, at night, on curves and highway ramps, in work zones, and when hauling loaded trailers. One quarter of speeding-related large truck fatalities occur when the weather is poor.

Another 40% occur on curves, and 20 to 30% of large truck crashes occur on entrance and exit ramps.

Plan out routes on unfamiliar roads in advance – Avoid making sudden corrections after missing a turn or exit, and always signal when changing lanes or turning. Statistics show that 22% of large truck crashes happen when drivers are not familiar with the roads.

Drive defensively and be aware at all times – Be alert to cars that may be in the driver’s blind spot. Watch for brake lights. Use caution when approaching intersections.

Change lanes infrequently – If you must move over, do so carefully, checking mirrors and staying aware of what may be in blind spots.

Avoid driving while tired – Get plenty of sleep before a trip, eat healthy meals, watch out for signs of fatigue, and take naps when necessary. Tricks such as turning up the radio or unrolling windows may help for a short time, but they do not solve the problem. Also, coffee takes time to provide an energy boost.

Resist distractions – Dialing a phone, texting, using a dispatching device, reading maps, eating and drinking, and watching objects outside the truck can all divert the driver’s attention and increase the risk of a crash.

Leave plenty of space between the truck and the car ahead – Experts advise one second of driving time for every 10 feet of vehicle length, plus one extra second at speeds above 40 mph. Double that in poor weather.

If possible, avoid driving during heavy traffic times – This would include rush hours as well as holidays.


The takeaway

Driving can be dangerous, especially when piloting a loaded rig. Any driver may be prone to acting in ways that increase the hazards of driving. Following these suggestions will reduce those hazards and better protect drivers if crashes happen.

How Your Staff Can Save on Childcare, Health Services

One of the most underused employee benefits available is the “cafeteria” plan ― which can benefit both the employer and the employee.

These plans allow workers to withhold a portion of their pre-tax salary to cover certain medical or childcare expenses. The benefits are free from federal and state income taxes, employees’ taxable income is reduced and that means that employers don’t have to pay FICA on those dollars.

Cafeteria plans enhance your employee benefits package, while boosting your margins. They have three specific flexible benefits for your employees to choose from:


  1. Pre-tax health insurance premium deductions

Premium-only plans allow your employees to elect to withhold a portion of their pre-tax salary to pay for their portion of the premium contribution to their employer-sponsored plan. The plan offers a simple way reduce the cost of their benefits.


  1. Flexible spending accounts

An FSA allows you to fund certain medical expenses on a pre-taxed basis through salary reductions to pay for out-of-pocket expenses that aren’t covered by insurance (think: deductibles, copayments, prescriptions, over-the-counter drugs and orthodontia).

Each paycheck, a certain amount is withheld pre-tax and put into an account. Employees pay for medical expenses up front out of pocket and then seek reimbursement from their FSA.

The average U.S. worker spends more than $1,000 every year on these types of benefits.

And there’s one more benefit: By participating in an FSA, your employees’ taxable income is reduced, which increases the percentage of pay they take home.


  1. Dependent care FSAs

The dependent care FSA is an attractive benefit for employees who have to pay for childcare or long-term care for their parents.

Many employees don’t take advantage of this benefit and may be unaware of the significant tax savings. Employees may hold back as much as $5,000 annually of their pre-tax salary for dependent care expenses.

Qualified dependent care expenses include, but are not limited to:

  • The care of a child under the age of 13,
  • Long-term care for parents,
  • Care for a disabled spouse or a dependent incapable of caring for her- or himself, and
  • Summer day camps.


What you get out of it

Every dollar that goes through a cafeteria plan reduces your payroll by the same amount. That means you don’t have to pay FICA or workers’ comp premiums on that part of your workers’ salaries.


The savings can add up to as much as 20% of every dollar being passed through the plan.

It’s also a great recruitment tool and an essential part of a larger employee benefits package.

The Limits and Gaps in a Business Owner’s Policy

One option available to small businesses seeking an all-encompassing policy that packages property and liability coverage into one is the business owner’s policy ― also known as the BOP.

These policies are designed to simplify risk management for small to mid-sized businesses and are generally a good bet for providing the greatest amount of coverage and the least amount of work. Over the years since they were first introduced in 1976, BOPs have evolved by including coverage extensions depending on the needs and nature of the policyholder’s business.

Despite this evolution, however, and the general assumption that BOPs provide truly comprehensive coverage, there are some gaps that could catch you by surprise. There are ways to mitigate some of these gaps by purchasing additional insurance, but if you are aware of a BOP’s limitations at least you won’t be caught off-guard.

Typical BOP coverage

This article focuses on the typical Insurance Services Office BOP form, and some carriers have created their own with different coverages and limits. First, let’s look at what the typical BOP covers:

  1. Property insurance (covering buildings, equipment and inventory).
  2. Business interruption insurance (covering losses that cause you to shut operations or reduce production for a time). Business interruption insurance can provide funds to offset lost profits or to pay continuing expenses (typically for up to a year for insured losses).
  3. Casualty or liability protection (covering harm done by employees or products to other people or their property).
  4. Crime insurance (covering loss of money or securities resulting from burglaries or robberies or destruction), as well as losses from employee theft or embezzlement.
  5. Liability insurance covering lawsuits arising from accidents (as when someone trips and falls on your business’s property), or when you sell a product that damages the customer’s property or you are accused of offenses such as slander, copyright or invasion of privacy.
  6. Vehicle coverage for rented or borrowed vehicles.


The main BOP gaps

Business income protection in a BOP is reasonably extensive for loss of income after an event such as a fire, as the policyholder is fully covered for the period it is closed during restoration, for up to 12 months. However, there are five main gaps in a BOP:

Payroll protection вЂ• A BOP policy will only cover payroll of “ordinary” employees for 60 days, unlike a standard business income policy. Ordinary employees are all of your staff excluding officers, executives, department managers and contract employees, among others.

If you want to extend payroll coverage for your ordinary employees beyond that, you have to purchase an endorsement for the additional period you want. Payroll for non-ordinary employees, as listed above, is covered for the entire period of your business’s restoration up to the 12-month maximum.

Restoration period вЂ• The period of restoration, during which the policy will cover your business income, is limited to 12 months, and that time can pass quickly when you consider everything that may need to be done to return your firm to “operational capability.” It’s at that point that business income loss coverage ceases.

Consider that if your business burns to the ground, you will need to draw up new building plans, obtain building permits and make sure your new building is up to code. You also have to factor in the time it will take to rebuild the structure. If all of this takes longer than 12 months, business income loss coverage ceases. The policy will not extend protection beyond this period.

By the way, “operational capability” for the purposes of business income means that the company is operating at or near pre-loss production or sales capacity. It does not mean bringing the business income back to pre-loss levels.

Extended business income вЂ• The BOP will pay for lost income for an additional 30 days after the firm has reopened for business. In many cases, this amount of time will not be enough to bring your business income back to the same level as before the incident. You can purchase a policy extension for this coverage.

Seasonal increase limitations вЂ• One of the benefits of a BOP is that it will cover loss of business income in periods of seasonal increases. The standard increase limit is 25% for business personal property. The typical limit most small business purchase is $100,000, but that does not automatically mean that the policy will cover up to $125,000 during the business’s peak months.

That’s because BOPs state that the business personal property limit must equal 100% of the average monthly values on hand for the 12 months preceding the loss. In other words, it takes into account the seasonal increases from the year before.

Here’s an example of how the seasonal increase limit may yield the claims payment short of expectations: Randy’s Raft Rental, which carries $100,000 in coverage, experiences an uptick in business in June, July and August. While it enjoys revenues of $100,000 a month in the nine other months, during the peak period revenue jumps to $125,000 per month.

To qualify for receiving the seasonal increase to ensure it is covered for the full $125,000 during the peak season, policy limits would have to be increased to $106,250 (the sum of 9 months x $100,000 + 3 months x $125,000, divided by 12). If you are confused, we can explain.

Electrical damage/system breakdown

Typical BOP policies specifically exclude losses caused by systems breakdowns, or damage from electrical or steam boiler problems. If you want this coverage, you can pick up the “Equipment Breakdown Protection Coverage” endorsement.

Will Your Policy Cover Neighbor’s Lawsuit?

Not all of your neighbors are neighborly and sometimes disagreements can arise, from your barking dog to perhaps painting your home a color that’s not pleasing to some others living on your block.

And while you may be able to settle most of these issues through discussions and action, sometimes those complaints can escalate to lawsuits. Before this happens, it is important to know what types of provisions a homeowner’s policy offers for legal issues.

Homeowner’s insurance is really a package of protections. It covers damage to your own property, and it covers your liability, meaning legal responsibility, for injuries to others and damage to the property of others for which you become legally responsible. To an extent and under specified circumstances, the insurance provides coverage that applies to civil lawsuits.

Most individuals think that a homeowner’s policy will cover most lawsuits that are filed against them. But that’s not true.

Say for example, you tear down the fence and replace it with one with higher boards and colors not approved under the subdivision’s code. If the subdivision has rules about the permissible colors and acceptable maximum height of fences, it will try to get the new homeowner to comply.

Homeowners who refuse might find themselves facing a lawsuit for violating the code. The courts will likely favor the subdivision’s rules, and a homeowner’s policy will not provide coverage for defending against the lawsuit. Therefore, it is important to understand exactly what legal issues are covered under the policy.

That’s why if neighbors sue you for erecting eyesores in your front yard or making excessive noise, you will typically not be covered as the alleged issues do not physically harm other people or physically damage their property.


So what’s covered?

Under the personal liability portion of the standard homeowner’s policy, the insurance company will typically cover you and your family members against lawsuits in cases when you are sued for causing some physical damage, such as if your dog bites a neighbor or a guest falls on your porch steps due to faulty railing.

Personal Liability Insurance (Coverage E) is the section of a standard home insurance policy that protects you or covered family members against lawsuits. This type of insurance coverage would protect you in various situations where a suit is presented.

Standard home insurance policies will typically include a minimum of $100,000 for each liability claim occurrence. Some common exclusions of this policy include lawsuits involving the transmission of a communicable disease; mental, physical or sexual abuse; or anything involving the sale, manufacture or distribution of a controlled substance.

Some homeowners choose to take out an extension of this liability coverage if they feel they need to further protect themselves against liability lawsuits. One common reason for taking out such an extension would be if your home includes a swimming pool.

Another type of liability coverage is personal injury liability or an umbrella liability policy which protects the insured against lawsuits involving:

  • libel,
  • slander,
  • defamation of character,
  • false arrest,
  • detention,
  • imprisonment or malicious prosecution,
  • invasion of privacy
  • wrongful eviction, or
  • wrongful entry.


This policy can also cover liability protection for auto accidents with the minimum underlying auto limits. (Be sure to talk to your agent about this.)


Injuries covered too

The standard policy also includes another liability, portion medical payment coverage, which is also known as MedPay. This section will cover medical costs in the event that someone is injured on your property and does not want to sue you.

MedPay would cover injuries sustained on your property when a lawsuit is not present, such as the following examples:

  • A neighbor falls on your steps, hurts her back and does not want to sue.
  • A neighborhood child falls on your driveway, sprains his ankle and his family does not want to sue.
  • Your dog bites a friend, who does not want to sue.


Typical MedPay coverage will be $1,000 per injured person. Some homeowners choose to take out an extension of this coverage if they feel they need extra protection.

MedPay does not cover injuries sustained:

  • Due to the transmission of a communicable disease.
  • Because of physical/mental/sexual abuse.
  • Resulting from the sale, manufacture or distribution of a controlled substance.

FSAs, HSAs Can Now Be Used for Non-Prescription Medications

The recently enacted $2 trillion stimulus law aimed at providing financial assistance during the coronavirus outbreak also includes a key change on how health savings accounts and flexible spending accounts can be used.

The Coronavirus Aid, Recover and Economic Stabilization Act, or CARES Act for short, reverses an Affordable Care Act rule that barred policyholders from using funds in HSAs and FSAs to pay for over-the-counter medications.

HSAs and FSAs allow people to set aside pre-tax funds for medical costs, medical out-of-pocket and copays, as well as for the cost of pharmaceuticals. The moneys in these funds are usually deposited from the employee’s paycheck before taxes, thereby reducing their tax burden.



HSAs are usually attached to high-deductible health plans, while FSAs can be used in conjunction with any employer-sponsored health plan.

For 2020, contribution limits to HSAs are $3,550 for individual coverage and $7,100 for family coverage.

Unlike FSAs, HSA owners can allow their funds to carry over from one year to the next, so their contributions and the interest accrues tax-free.

You can withdraw money from an HSA tax-free if it’s used for qualified medical expenses. You can find a list of these expenses on the IRS’s website (your HSA provider should also be able to provide you with a list).



For the 2020 calendar year, an individual can contribute up to $2,750 to a health care FSA.

If employers provide health care FSA contributions, this amount is in addition to the amount that employees can elect. Employees can elect up to the IRS limit and still receive the employer contribution on top of what they contribute themselves.

If employers have adopted a $500 rollover for the health care FSA, any amount that rolls over into the new plan year does not affect the maximum limit that employees can contribute.


The takeaway

The ACA rule was relaxed by the CARES Act due to the coronavirus outbreak, so that people can use their FSA funds to pay for OTC medications like pain relievers, anti-inflammatories and other medicines that don’t require a prescription.

While the coronavirus led Congress to permanently overturn the Obamacare restriction on OTC medications, other parts of the CARES Act reforms could vanish once the pandemic ends. For example, it only temporarily allows insurers and employers to cover telemedicine if employees haven’t met their deductibles.

Why You Need ‘Key Man’ Insurance

If you are operating a small business, you are likely relying on a small crew to get the job done.

Many employees in small firms have to wear several hats and, if one of them or an owner should die, the business could suffer greatly from that sudden loss of talent or one of the owners who is integral to the operations.

If you don’t have “key man” insurance, that setback could be devastating to the viability of your operations, whereas coverage would provide you with extra funding that you would need while recovering from the loss.

Key man insurance is simply life insurance on the key person in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business ― the ones whose absence would sink the company. You need key man insurance on those people.

Key man insurance basics

Before purchasing coverage, give some thought to the effects on your company of possibly losing certain partners or employees.

In opting for this type of coverage, your company would take out life insurance on the key individuals, pay the premiums and designate itself as the beneficiary of the policy. If that person unexpectedly dies, the company receives the claim payout.

This payout would essentially allow your business to stay afloat as you recover from the sudden loss of that employee or partner, without whom it would be difficult to keep the business operating in the short term.

Your company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner.

In other words, in the aftermath of this tragedy, the insurance would give you more options than immediate bankruptcy.


Determining whom to cover

Ask yourself: Who is irreplaceable in the short term?

In many small businesses, it is the founder who holds the company together ― he or she may keep the books, manage the employees, handle the key customers, and so on. If that person is gone, the business pretty much stops.


Determining the amount of coverage

  • The amount of coverage depends on your business and revenue.
  • Think of how much money your business would need to survive until it could replace the key person, come up to speed and get the business back on its feet.
  • Buy a policy that fits into your budget and will address your short-term cash needs in case of tragedy.
  • Ask us to get some quotes from different insurers.
  • Check rates for different levels of coverage ($100,000, $500,000, etc.)