Insurance
March 19th, 2008
By The XBanker
Is insurance enough to protect your assets?
Only if you believe in the Easter Bunny, the Tooth Fairy and commission earning insurance salesmen.
Insurance is the first line of defense in protecting your business and real estate assets. You should always have a reasonable amount of insurance coverage to protect against standard claims.
But you should never forget that insurance companies do not want to cover certain claims. They are certainly not willing to cover every imaginable claim. As well, they are quite clear about excluding these claims from your policy. While it may not be detailed in bold capital letters, and more often than not is in eye numbing miniscule print, the exclusions will be laid out somewhere in your policy.
As such, you will always need a second line of defense, which is the proper use of LLCs, LPs and corporations to protect your assets. The use of a second line of defense may be at odds with your insurance agent, who may stridently assert that your policy completely covers you. Such agents may further assert that with such a bulletproof policy you do not need to implement asset protection strategies.
First and foremost, you need to know that many commissioned insurance agents are less concerned with your asset protection needs than their need to sell lucrative, commission laden policy. Secondly, you need to know that they are not licensed to give legal advice. So feel free to questions their motives when they practice law without a license by saying you don’t need asset protection because insurance is enough.
Insurance policies may cover most situations, but there is no absolute 100% guarantee that you will be covered in every imaginable situation.
Which is why you need to use the proper mix of entities to supplement your asset protection planning. And, why you need to steer clear of insurance ‘professionals’ who would tell you that insurance is all you need.
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Very well mr. Garrett , after several pinpoint accurate articles I had read from you , the time I will ask for your services is coming pretty fast .
Keep up the great work
Tomas
Tomas: Thanks for the kind words. Regards, Garrett
Great Advise.
I’m still a small business with 7-10 employees at any given time. At what point should I start to think aobut getting insurance for the biz? Am I still too small?
One thought for all readers from me . There is no such a thing like a too small , or too big in the business world . In this “jungle” you always have to be prepared to defend yours ground , so my advice to you is to start preparing NOW !!!
Proper maintenance of documentation is also very important once you get incorporated. You must be disciplined to hold certain meetings and have big decisions done by your company be voted on. It can seem rather redundant to have you and your wife ( secretary) voting on stuff, but these simple practices will make your case in the event someone claims that your corporation is just an extension of yourself.