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What to Know When Dealing with the Death of a Business Partner

Posted on July 27, 2021 | by | Posted in Uncategorized

Death alone is a difficult subject to broach. But it is essential to have this discussion, especially at times when necessary. Moreover, trying to figure out what will happen if you or your business partner dies is a genuine concern to all business owners. While nothing really prepares you for the loss of a person, you can alleviate most of the difficult matters by arming yourself with adequate knowledge.

Death of a business partner 

When handling the risk management strategies for your business, you should not only include physical injuries or illnesses. Rather, you should also take into account the possibility of unforeseen tragedies happening to a partner, such as death.

When safeguarding your company from the consequences of such an occurrence, you should not leave it all up to your attorneys to settle the matters after the incident. With that, here are the options available to you should you encounter death of a partner:

• Liquidation and distribution of remaining assets:  

If forming a new partnership is not in your plans, this is the alternative to pick. However, you should not opt for liquidation if you are not willing to invest a lot of time and effort. It is possible that the remaining owners may realize that liquidation is sufficient to satisfy the estate of the late partner. If this is the case, you may be required to sell the remaining assets based on their market values and distribute the profit to the remaining partners. 

• Dissolve the company completely: 

Ultimately, the remaining partners lose their ability to bind the partnership once a partner’s death triggers dissolution and winding up. Moreover, your agreement or state law may compel or allow you to terminate your partnership. Before doing so, the majority of the remaining partners must agree with the decision. In the event that the majority has opted for termination, the company will then proceed to wind up its operations. This will include completing or closing projects and settling existing debt.   

• Buy your late partner’s assets:

The main issue that comes with this option is determining the right price of the assets. Moreover, this can be especially challenging for new companies who have valued their inventory based on future revenue. Therefore, the most advisable step to take is to seek help from professionals. 

• Sell out to the heirs:

You may also want to consider selling your company to the surviving spouse of your partner or other remaining heirs. However, only choose this option if you are confident that the heirs of the late partner are willing, qualified, and competent enough to take part in the company. Just like the previous choice, the most challenging step of this option is establishing the right values for all the assets.

Business Partners’ Life Insurance

A life insurance payment might help a firm get through a difficult period by providing operational funds. Moreover, it can also assist remaining partners if they plan on purchasing the shares of the deceased partners from his or her heirs. With that in mind, you can come up with an insurance policy that clearly identifies the beneficiaries of a partner. 

Do you have a buy-sell agreement? 

Before you take any action, you must first determine whether a buy-sell agreement with the late partner has been established. This is a legally enforceable contract that specifies how a partner’s shares will be transferred if that partner dies. Moreover, the contract is often entered into by the partners and their spouses. In most cases, a buy-sell agreement is established along with the initial partnership arrangement. If there has been an agreement in place, the stated steps your company will take if a partner passes away will be followed. 

Furthermore, the contract may state that the business share must be sold to the company or the remaining partners based on a respected formula or percentage. Also, partners may be prohibited from selling their shares to other investors unless they receive the approval of the remaining partners. 

If you have failed to make a buy-sell agreement with the late partner, you can turn to the Partnership Act of your state. 

Why should you have insurance protection for your business? 

Just like you, your business partnership needs life insurance. This is a necessary component of your operation, as your company might incur serious penalties if you fail to secure one. 

Moreover, there is no harm in planning ahead and preparing your business for unforeseen and unfortunate events. The main reason you should acquire life insurance is to safeguard yourself in the instance where one of the partners passes away. Insurance plans for businesses can be designed such that the earnings are returned back to the firm to help with cash flow and cover extra expenditures. Specifically, it will help you deal with loans, expenses, funds, and assets easier.

How can I acquire business insurance? 

Business life insurance works in the same way as ordinary life insurance. Furthermore, it is just as essential to find the proper insurance provider as it is to acquire adequate policy coverage. You will need the guidance of an expert who can help you create a strategy to deal with such a situation. 

Each company has its own set of requirements. Therefore, you need to consider your sales, number of employees, assets, location, etc. The insurance representative will guide you in determining your needed coverage and most applicable policy. After you’ve learned about the various insurance coverages available, you should look into which ones are ideal for your company.

HANDLING AN UNDERINSURED HERITAGE BUILDING

Posted on July 01, 2021 | by | Posted in Uncategorized

Every property owner, company owner, or homeowner should be aware of the requirements to attain proper building insurance. In the case of heritage structures, there are several conditions that should be met. As we always recommend, it is worthwhile speaking to a leading insurance broker in Perth if you require any additional information.

Replacement Value 

Getting insurance for heritage-listed properties is one of the most prevalent worries of owners. For one, these infrastructures need to be insured for their total replacement value. This figure is essential as it determines the amount it would cost to entirely replace the property. Furthermore, to arrive at the replacement cost, you will need to compute for the following: 

1. Cost of labor: total cost for all workers in terms of salaries, benefits, and payroll taxes
2. Cost of materials: cost of materials used in the construction of the property
3. Architect fees: most of the time, this number is a percentage of the project’s total construction cost
4. Engineer fees: this is somewhere between 1% and 20% of the project’s total construction cost

Typically, the replacement value of properties is not inclusive of premiums on materials, overtime fees, and bonuses. Furthermore, the appraiser will also take into account foundation and footings, exterior walls, interior walls, finishings, framing materials, etc.  

Rebuilding Cost 

Moreover, most insurers require a valuation for the costs of rebuilding such premises. As the name suggests, this is the total cost you would incur to rebuild your property should it be damaged beyond repair. 

In addition to labor cost, material costs, architect fees, and engineer fees, you should get in touch with a professional to help you compute for the following: 

1. Development of property: includes but is not limited to the construction cost, government fees, permitting cost, inspecting fees, etc.  
2. Debris removal fees: in computing this amount, you will need to establish the area covered by the debris, the amount of waste, etc. 
3. Demolition fees: similarly, this is computed by square footage 

Other factors that contribute to the reconstruction or rebuilding cost involve the removal of mold and other hazardous materials. Unlike the replacement value, reconstruction costs may consider premiums and other added payments. 

Essentially, the main difference between the two is that replacement costs pertain to the amount required to reconstruct the building entirely. On the other hand, reconstruction cost is the amount needed to replicate the infrastructure.

Average Clause 

An average clause is found in almost all insurance policies. This is basically an insurance policy provision that calls for you to bear a part of any loss if your property is insured for less than its total replacement value. So, if you have underinsured your property, your insurer will only pay a percentage of your claim. 

For instance, Kara’s building was only insured for $200,000, when in fact, the building actually cost $800,000. Following an electrical fault, Kara went on to claim her insurance. Accordingly, the damages brought by the incident are worth $50,000. However, since her building was only 25% insured, she only received a $12,500 payout. 

Another way to compute the amount to be claimed is by multiplying the actual loss and insured amount. The product will then be divided by the actual value of the property during the incident. 

In the example above, we derive at: 

Claim amount= ($50,000 x $200,000) / $800,000 

Claim amount= $12,500

This was the case for Kara because she was only able to cover a certain percentage of her property. As a result, her claims will also cover the same rate. 

This is only one of the many reasons why you should ensure that your property is adequately insured. 

Heritage Building Valuation 

There seem to be no definitive criteria for valuing historic structures. While there have been established concepts applicable to more modern buildings, they do not always apply to historic structures. 

Designs, locations, conditions, local and national legislation are all factors to consider. 

Materials and maintenance 

Another factor examined by valuers is the general condition of the structure. This is inclusive of the building’s electrics, plumbing, and how well it has been constructed and maintained over the years. A failure to comprehend the proper materials and skills required for heritage building restoration could result in underinsurance.

Historic building preservation and repair calls for specialized knowledge and abilities. Specifically, there is a need for a thorough understanding of locating and using traditional materials and techniques.

Furthermore, if you are seeking insurance for your heritage building, ascertain that the property is in good condition or repair. 

Condition and improvement 

It is ideal to seek advice from site inspectors as they offer independent and accurate evaluations of your property. In addition to that, you should also conduct surveys and analyses. 

Specifically, you will need to assess and document the notable features and updates on the area. 

For these improvements, it is strongly encouraged to keep receipts of them for more additional records. 

Possible risks 

Insurance is primarily concerned with risk underwriting, which involves estimating the possibility of loss and its frequency and severity.  Furthermore, calculating a rate or premium that is proportionate with that risk is also necessary. 

Loss of heritage value 

Suppose the heritage value of your property has been lost due to damage or deterioration. In that case, the Queensland Heritage Act 1992 states that there is no more need to conduct any replication of the building. If it is partially damaged, any reconstruction work must be done in a way that respects the building’s heritage values.

In line with this, it is also imperative that you understand the true significance of your structure along with its essential characteristics. 

You should also take into consideration the demand of the property or who is willing to purchase it.

How Insurance Brokers Save You More Money

Posted on July 01, 2021 | by | Posted in Uncategorized

Insurance 

An insurance policy is primarily a form of financial protection against some loss or damage. You pay a monthly or annual premium to insure your life, health, car, property, and other assets over a certain period of time. 

In exchange, the insurer compensates for any financial losses covered and insurance policy.

Why is getting insurance important? 

We cannot prevent the unexpected. Moreover, the least we can do is prepare for it. Although there is no way you can mentally prepare for the death of a loved one, having insurance to cover the hefty funeral costs will lift significant weight off your shoulders.

Injuries and diseases are the same way. When faced with high medical costs, having health insurance is tremendously beneficial. 

Furthermore, insurance can considerably reduce or even eliminate your expenses.

Who are insurance brokers, and what do they do?

Helping individuals protect their homes, properties, businesses, and families, insurance brokers are skilled professionals who guide their clients in finding the most suited insurance plan. They will select a policy that best matches your demands at a fair price using both your history and their insurance expertise.

Insurance brokers work by representing their clients instead of insurance companies. Ultimately, this implies that dealing with insurance brokers entails working with them directly.

Insurance brokers vs. insurance brokers 

Off the bat, the main difference is that insurance agents work on behalf of the insurance company. While both are obliged to help you find the right insurance plan, insurance agents are known to be representatives who insurers appoint to work with clients. 

Why get an insurance broker? 

With all that being said, here are only some reasons why working with an insurance broker is worth it: 

Save money and time 

Having an insurance broker by your side will save you not just time but also money. In addition, these seasoned professionals are qualified to alleviate your concerns as they have years of education, training, and experience in their arsenal. 

Everyone can hire an insurance broker, especially those with complicated concerns. For example, if you have multiple cars or homes, properties with various policies, and more. It will be such a hassle to deal with those problems independently, which is why you should seek help from insurance brokers. 

They will spare you the time by finding the right plan for you. Moreover, brokers assist clients in navigating regulations and relaying policies before they purchase since they are already knowledgeable of the investing industry. On top of that, brokers will take the responsibility of settling your claims for you. 

Also, because firms know brokers help their clients get the right policy with the right coverage, they give lower prices to brokers. So, the chances of you being insured at a fair cost are higher. 

Plus, working with an insurance broker will allow you to negotiate with the policy premiums as there are no middlemen in that particular circumstances. 

In the end, you get to save your money by not investing in the wrong insurance and paying unnecessary fees.

In-depth understanding 

Insurance brokers have studied the Product Disclosure Statement (PDS). Essentially, this is a document that contains the key features of a product, along with its benefits and risks. Moreover, they will walk you through and help you understand the contents of your policy. Insurance brokers will aid you in comparing several insurance policies to select one that best matches you and your needs.

Since you will be working closely with them, they will answer any questions you have regarding the terms of your insurance throughout the route. 

Risk assessments 

Similarly, you will also be aware of the possible risks other insurance plans can bring you. Insurance brokers are keen on weighing the risks and rewards of each policy. Therefore, they know the right coverage that will suit your condition, budget, and goals. 

Direct business 

As mentioned earlier, insurance brokers are not representatives of insurance companies. Which means, they have your best interest. Insurance brokers do not have a whole company to back them up should there be any mishaps, so you are more certain that you will receive the best service and advice. On top of that, working directly with them will mean more speedy service as they do not need to coordinate with a company. 

More policy options

Since you will be communicating closely with insurance brokers, you will be receiving more alternatives than you would get through an insurance representative. As you explore all of your alternatives, you will have better chances of finding the best option at the most reasonable price. 

In addition, a broker can give access to specialty markets where going directly to an insurance provider isn’t always possible.

Regular policy reviewing 

Insurance plans are highly susceptible to change over time. If you have an insurance broker, they will be communicating the possible renewals for the plan. In addition to that, they can also introduce better alternatives should your current plan not be serving you anymore.   

Final thoughts 

Insurance brokers are industry specialists with a knack for getting the greatest coverage at the best deals. Not only will your broker help you find the finest offers on the market, but any claims will be handled by your broker, saving you the time and effort of dealing with what can be a complex and unpleasant process.

The Hidden Dangers of Average and Co-insurance Clauses

Posted on May 20, 2021 | by | Posted in Uncategorized

Most business insurance policies have hidden clauses that claim to protect the insurers from underinsurance by their policyholders. This is one example of a clause in a business policy:

Underinsurance

In case of damage to the property insured, our liability will only cover a greater portion of the Damage than the Sum Insured bears to 80% of:

a). where the Basis of Settlement is Reinstatement or Replacement, the reinstatement or replacement cost of the Property Insured;

b). where the Basis of Settlement is Indemnity, the value of the property Insured, taking into account wear, tear and depreciation; on the day of commencement of the Period of Insurance.

Underinsurance does not apply if the amount of damage is less than 5% of the sum insured.

 Every Situation insured is separately subject to this clause.

The numbers are roughly 85% within an industrial risks policy,  while some property owner policies can reach up to 90%. Many will apply this clause if a claim exceeds 5% of the sum insured with some waiting until it reaches 10%.

The question is, why do such clauses exist? Simple. It discourages insured clients from under-insuring. The thought is that if the client is aware of this clause, they are likely to update their sums insured regularly instead of relying on shortfall in case of a total loss.

In reality, if you’re paying a premium that’s based on a $700,000 sum insured but should have been paying it based on a $100,000 sum, then you’ve been only paying 70% of the risk. It makes no sense 100% of any minor claim up to $700,000 when in a total loss you would have only gotten 75%.

There is another way which is a Stop loss sum insured and some insurers use this to avoid problems with underinsurance. This acts like a sub-limit on policies where the policy will pay up to the sum insured limit. We find this process more commonly in Householder policies. The trouble with this is there is no incentive to make sure you are insuring for the full value of your risk even though you will be fully covered for any minor loss up to the sum insured. In theory would expect you would be paying more in premium to be covered fully for minor losses.

The thing is that if you have a total loss with both covers, you are still underinsured if you haven’t insured for the full value. Our recommendation is to insure your property’s full replacement value as much as you can. If you are under-insured by less than 15% of the full value, the Average Clause should not be applied to your claim.

 The Insurance Contracts Act 1984 details how an average is applied to a claim:

44 Average provisions

(1) An insurer may not rely on an average provision included in a contract of general insurance unless, before the contract was entered into, the insurer clearly informed the insured in writing of the nature and effect of the provision including whether the provision is based on indemnity or on the replacement value of the property that is the subject-matter of the contract.

 (2) Where the sum insured in respect of property that is the subject-matter of a contract of general insurance that provides insurance cover in respect of loss of or damage to a building used primarily and principally as a residence for the insured, for persons with whom the insured has a family or personal relationship, or for both the insured and such persons, or loss of or damage to the contents of such a building, or both, is not less than 80% of the value of the property, the liability of the insurer in respect of loss of or damage to the property is not reduced by reason only of the operation of an average provision included in the contract.

 (3) Where:

(a) the sum insured in respect of property that is the subject-matter of such a contract is less than 80% of the value of the property; and

(b) but for this subsection, an average provision included in the contract would have the effect of reducing the liability of the insurer in respect of loss of or damage to the property to an amount that is less than the amount ascertained in accordance with the formula

 AS/P

where:

A is the number of dollars equal to the amount of the loss or damage.

S is the amount of the sum insured under the contract in respect of the property; and

P is 80% of the number of dollars equal to the value of the property. the average provision has the effect of reducing the liability of the insurer to the amount so ascertained.

(4) In this section: value, in relation to property, means:

(a) if the relevant contract provides for indemnifying the insured in respect of loss of or damage to the property, the indemnity value of the property; or

(b) if the relevant contract provides for reinstatement or replacement of the property, the reinstatement or replacement value of the property; at the time when the relevant contract was entered into.
As the leading insurance broker in Perth, our professional advice is for you to be insured for all your property covers. It makes sense from an insurer’s perspective because it protects you from underinsurance.

How to Manage Bushfire Risks

Posted on May 20, 2021 | by | Posted in Uncategorized

As bushfires continue to engulf Western Australia and parts of the Northern Territory, the need to establish a national bushfire policy has never been more crucial. Proactive land management such as forest thinning and hazard-reduction burning play an important role in keeping bushfires at bay.

When executed properly, controlled burning helps limit a bushfire’s spread and makes it easier to suppress. Reducing the amount of flammable material is the main goal and thinning vegetation on roadsides can help in maintaining fuel breaks, thus enabling firefighters access to forests in case of an emergency.

Here’s what you need to know about managing bushfire risks to ensure the safety of you and your family.

Preparing for a bushfire

• Local fire agencies suggest writing a bushfire survival plan that you can discuss with your family to help them become familiar with managing bushfire risks
  
• Learn about the Fire Danger Ratings. Use them to determine whether or not an area is at high risk of bushfires
  
• Children, elderly people, animals, and those with mobility issues should be moved away from danger as early as possible

• If you live or are planning to travel in a high-risk bushfire area, pinpoint the nearest evacuation centre and meeting point. Plan the safest and most efficient route to get there
  
• Stay up to date with the latest fire danger ratings by tuning in to your local radio station.
  
• Don’t wait before taking action. It’s extremely risky to wait for signs of a bushfire before leaving the area. Always follow the instructions of the local authorities on when to leave your home, where you should go, and how you will get to the nearest evacuation point.
  
• Alert your friends and family about your plans and whether you intend to stay or leave
  
• Prepare a bushfire survival kit. The kit should consist of a battery-powered radio, waterproof torch, first-aid kit, medicines, wool blankets, toiletries, and overnight bags.

Driving during a bushfire

You should never drive through a bushfire until it’s your last resort. The road conditions are just too dangerous and it will take you longer than expected to arrive at your destination.

It’s also very dangerous to get stuck inside the car in the middle of a bushfire because they offer minimal protection against radiant heat. If you are forced to drive during a bushfire, keep these safety tips in mind:

• Park your car behind a building or other solid structure. This helps to block as much radiant heat as possible. If you can’t find a solid structure, then pull over to the side of the road and away from any debris that may catch on fire.
  
• Close the vents, wind up your windows, turn on your hazard lights, leave the engine running, and allow the air conditioner to circulate air inside the vehicle.
  
• Get down as low as you can
  
• Stay hydrated. Bring plenty of water along with you
  
• If you’re parked in a relatively safe spot, wait for the fire to pass before proceeding to drive
  

Protecting your home during a bushfire

• If you plan on staying home and protect your property against the bushfire, make sure everyone is wearing fire-retardant clothing
• Move gas cylinders and other flammable materials away from your home
• Pot plants, outdoor furniture, and doormats should also be moved to a safe distance
• Check the main gas supply and turn it off. Check the gas cylinders and make sure they’re positioned upright with their relief valve pointing away from your property. Do the same with your A/C units.
• Keep plenty of wet rags and towels nearby
• Close the doors and windows. Fill in the gaps using wet towels
• Take shelter until the fire passes. Be on the lookout for embers and extinguish them when they land.
• If your house catches on fire, run to the nearest exit. Wrap a towel around you and take cover from a nearby building or other structure.

After a bushfire

• Stay tuned to your local radio station for updates on where the evacuation points are

• If you’ve evacuated, do not return to your home unless the authorities have deemed it safe to do so.

• For those who’ve stayed home, continue to wear protective clothing and extinguish embers that land onsite
  
• Call your loved ones and inform them of your status,

• If you’re worried about where your friends and family are, you can contact the National Registration and Inquiry System on 1300-993-191. They will help you get in touch with your loved ones quickly.

• If your home is unsafe to occupy after a bushfire, alert local police authorities about the situation. Check with your insurance company to see if you can claim temporary housing expenses or acquire an advance on your eventual settlement.  

• It is the owner’s responsibility to secure their home after a bushfire. Ensure the outside doors can still be locked and that the entry points are covered and protected.

• Contact a general contractor if you require professional assistance in boarding up the premises.