Category Archives: Insurance

Top 5 Benefits of Buy/Sell Agreements

An often overlooked but important aspect of Executive Planning is the Buy/Sell Agreement. No one wants to think about the death of one of their business partners, it’s painful on both a personal and financial level. But it’s important to plan for the worst so that if that day comes, both their family members and your business remain protected and secure.

What is a Buy/Sell Agreement?

A Buy/Sell Agreement is basically a business prenup: it’s a legally binding contract that stipulates how a partner’s share of a business may be reassigned if that partner dies, divorces, or faces bankruptcy. Often the agreement stipulates that, in the event of a business partner’s death, their shares be sold to the remaining partners or to the partnership. As part of the agreement, business partners can buy life insurance policies on each of the owners. This way, if one of the owners dies, the remaining owners can use the payout from the life insurance policy to buy the deceased owner’s share of the business and make sure the deceased’s families are taken care of.

Top 5 Benefits of Setting up a Buy/Sell Agreement:

1. Peace of Mind

A Buy/Sell Agreement is great because it’s a simple way to secure the future of your business. It protects all partners in a business, whether they decide to leave the business or can no longer partake in the business.

2. An Easier Transition

In addition to offering business owners and partners peace of mind, a Buy/Sell Agreement also assures continuity for customers, creditors, and employees. Loosing a partner can be difficult enough, the last thing you want is to lose customers or assets in the transition process.

3. Promotes Equitable and Orderly Transfer of Wealth and Ownership

Having an effective Buy/Sell Agreement will help your company avoid messy inheritance issues or having an unexpected family member become a partner. It also guarantees the family a buyer for the assets which really help ensure the family is taken care in paying estate debts, expenses, and taxes.

4. Inexpensive Way to Protect your Company

Setting up a Buy-Sell Agreement is affordable and simple. Even if everything goes great and there are no unexpected deaths, you’re not losing money by setting one up and it can even offer tax advantages. However, if the worst does happens, having one can save everyone involved a great deal of time, money, and emotional heartache. To us, it’s a no-brainer to set one up.

5. Easy to Do When All Partners Are Healthy

Since a Buy/Sell Agreement involves taking out life insurance plans, the younger and healthier every partner is, the easier it will be to get an affordable life insurance policy. If you try to procure a plan after one of your partners is diagnosed with a terminal illness, you may not be able to get a plan at all.

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Need help setting up a Buy/Sell Agreement? We can help you with that. Contact us at marketing@corpstrat.com today!

Importance of Insurance Premiums During COVID-19

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During these unprecedented times, business owners and professionals are becoming increasingly concerned about cash flow. No entity or individual is immune to the economic disruption caused by the COVID-19 crisis. Today we bring you some of our thoughts on what’s happening on the insurance side of this pandemic.

Current State of Health Insurance

To date, we haven’t seen much from insurance companies in terms of extending payments and/or granting relief. Some carriers like Kaiser have announced their offering of extended grace periods for employer groups. Then there are some life insurers who have issued no-lapse statements while Blue Shield has agreed to grant employers some relief on their April premiums. There are also many carriers who haven’t released any statements to address this issue.

Insurance companies depend on premium revenues to support their actuarial assumptions and reserves. They don’t have systems in place to accommodate a mass change in premiums – even if such programs existed, they aren’t anticipated to abate any premiums, but rather simply extend them.

With this in mind, it is now more critical than ever to have some level of coverage in place for your health insurance, life insurance, and/or disability insurance.

We realize this is easier said than done for many. Employers are currently looking at their April billing and wondering to themselves, “Where is the relief for this payment? What do I do?”

From our experience, insurance companies are not likely to forgive any payments. Deferring only adds a larger amount to any subsequent obligation to pay future premiums.

While auto and equipment leasing are extending payments, some landlords providing flexibility on rent, and some utility companies are granting relief on tenants’ payments, insurance companies generally lag when it comes to consumer-centric thinking.

What Business Owners Should Do

CorpStrat believes in taking a pragmatic approach, in that the essence of insurance is that it must be in good standing in times like this when one’s coverage is needed the most.

If you are a business owner, make sure to explore the SBA loan resources and apply for opportunities that will best help you preserve your benefits packages.

Some other tips from CorpStrat:

Try your best to keep all insurance payments as current as possible
Work with your broker to ask if your carrier has any “unpublished” considerations and contact us for guidance on any issue

We hope you found this helpful during these challenging, uncertain times. Contact the CorpStrat team if you need guidance on organizing your insurance premiums.

The Secret Behind Disneyland

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Life Insurance Policy

Want to know the secret of how Walt Disney started Disneyland? After being turned down by his bank for a basic business loan, Disney turned to life insurance to finance his dream of opening a theme park. The proceeds from his life insurance policy were used to open Disneyland, “The Happiest Place on Earth.”

But how did this work? His life insurance policy basically accumulated cash value and he was able to withdraw this money as a policy loan. This accumulated value was tax-free and was used by Disney to create a tax-free income.

So, what exactly was this asset Disney used?

In today’s term, this asset is called the Indexed Universal Life Insurance (IUL). An IUL is a type of cash value life insurance policy that has both death benefits and an accumulation element. Rather than placing investments in the market where it could be lost, investments in an IUL are put into a strategy that mirrors an index like the S&P 500, allowing the participant to realize most of the gains in the market. These gains are then locked in to protect against potential losses.

Basically, this allows for people to invest in the market without taking losses, which makes IULs appealing to professionals and business owners. Another benefit is that it allows cash value within the policy to grow tax-free. Since IULs are funded with post-tax dollars, clients can withdraw money tax-free and, essentially, have a tax-free income at a future date.

Compared to IRA or a 401(k), IULs are more flexible. There is no limit on how much money can be added annually, as long as the added cash doesn’t create a Modified Endowment Contract (MEC), which is taxable. There are also no restrictions on when the money can be taken out, unlike the IRA.

As a life insurance policy, IULs provide financial security to the family in the event of death of disability. In an event of the policyholder’s death, the death benefits are received tax-free in a lump sum by the beneficiary.

IULs are perfect for those who want to experience the gains of the market without facing the losses. They are perfect comprehensive and flexible wealth building options that can be tailored to each person’s financial plan.

Want to know more about IULs and other life insurance policies? Contact CorpStrat to learn more about how our 21^st Century strategies can revolutionize your life and business.

Open Enrollment: 3 Things to Know About Individual Health Coverage for 2020

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Open Enrollment 2020

It’s that time of year again. Open Enrollment period is here and as employers, you must engage your employees and get them ready.

The Affordable Care Act is still the health coverage standard and with 2020 comes a couple changes. To help you better navigate open enrollment season for health coverage in 2020, here are three things to keep in mind as you prepare your employees.

Open enrollment is from October 15, 2019 to January 31, 2020.

California residents must be enrolled in a health insurance policy by January 31, 2020 to receive coverage for the rest of the year. Employer-based health plans have their own enrollment periods, but it is important to keep this deadline in mind as a benchmark.

What You Should Do Next

Encourage your employees to sign up for health coverage and make sure they pay the first month’s premium by the end of 2019. This way in the new year, employees will have coverage for 2020 and always be protected in case something unexpected happens.

Health insurance providers may have changed.

Annual changes from the Affordable Care Act and low premium increase rates may have changed the health insurance providers and their offerings. For example, Anthem Blue Cross will be expanding its offerings in California but won’t be available in certain areas anymore.

What You Should Do Next

In light of these changes, make sure to review any new offerings with your broker and understand any new details in case your employees need clarification.

Make any changes clear and simple for your employees so they can easily understand and know what to expect for the upcoming year.

Premiums rates will be lower in 2020 but at a cost.

In order to keep the annual premium increase rates low, California is passing two state-wide initiatives:

Middle-class enrollees will be offered a state-funded tax credit.
Those who don’t enroll will get hit with a new state tax penalty.

The new penalty will be similar to the one under the Affordable Care Act: $695 per adult and $347.50 per child under 18, or 2.5% of annual household income, whichever is greater.

What You Should Do Next

As employers, you should encourage your employees to enroll in health coverage to help them avoid these penalties—and perhaps even be eligible to receive tax credit.

2020 is coming soon so make sure to get your employees enrolled in health insurance. Contact the experts at CorpStrat for a consultation and information about employer-based health plans for the upcoming year.

Everyone in California MUST have Health Insurance for 2020

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Everyone in California MUST have Health Insurance for 2020

In the upcoming year, California will be the first state in the country to offer state-funded tax credits to middle-class enrollees. And Californians who don’t enroll in health insurance will be faced with a new tax penalty.

These two statewide initiatives are set to be implemented in order to keep California’s health insurance premiums low in 2020. The tax penalty will partly fund the state-funded tax credits which is why premiums are expected to rise by an average of 0.8% next year, the lowest increase in the past few years compared to this year’s average increase of 9%.

Covered California, California’s official health insurance agency under the Affordable Care Act, estimates that these two initiatives—the state-based tax credits and the new state tax penalty—will bring in 229,000 newly insured Californians.

Eleven of the health insurers participating in Covered California will return next year, with Anthem Blue Cross expanding its offerings within the state. They are set to expand into Central Coast, parts of the Central Valley, Los Angeles County, and the Inland Empire.

However, depending on the region, not all eleven will be offered. California is divided into 19 pricing regions and each region will provide differing options. Rate increases will also vary, with some regions receiving higher rates than the statewide average and the others receiving lower. Nonetheless, nearly all Californians will have a choice of at least two insurers. And the final price will depend on the person’s area of residence, their income, the desired level of coverage, and their choice of insurer.

Covered California’s open enrollment for 2020 began on October 15, 2019 and is set to continue until January 31,2020, with these individual mandates going into effect at the start of 2020.

The penalty for not having insurance will be the same as the one under the Affordable Care Act, which was $695 per adult and $347.50 per child under 18 or 2.5% of annual household income, whichever is greater.

These penalties can amount to thousands of dollars a year. So, in order to avoid them and be eligible to receive tax credits, everyone in California must have health insurance for 2020.

To learn how you and your employees can enroll to avoid these penalties, contact CorpStrat for more information on the upcoming year.