Buy-Sell Agreements: Life Insurance for Your Business

What happens to your business in the event that you or your business partner were to pass away? Buy-sell agreements cover what happens to the business in the event of the death of one of the business owners. A lot of business owners in Johnson City, Tennessee have asked me about buy-sell agreements, so I wanted to take some time to explain exactly what they are.

Buy-Sell Agreements

A buy-sell agreement is a life insurance policy for the continuation of your business. It is an agreement you have with other shareholders or your business partner where you either set a time where they will buy your business, or you agree that they will buy it upon your death. In general, most spouses do not want to own your business. Further, most shareholders and partners do not want the spouse to be their new partner. The spouse would rather have the cash, and your business partner or shareholder would rather have the business.

How Do They Work?

To understand buy-sell agreements better, let’s look at a few scenarios.

In the first scenario, we have business owner A, business owner B, and the business where each owner owns half the business. Each business owner has a life policy on the other. It is important to note that you must pay this life policy with after-tax dollars. The business owners would pay, for example, one thousand dollars per year extra (resulting in some small tax consequences). The owner would write a check out of his own checking account so that the proceeds are tax free back to him. This means that you should never write this off as a business expense on your taxes, but rather view it as a personal expense.

Let’s say Owner A passes away. Owner B receives money from the life insurance policy he or she purchased on the life of Owner A. Owner B will pay Owner A’s family for the ownership. If it is a $500,000 policy, Owner B will pay $500,000 to Owner A’s family. The family will face some tax consequences, which they should talk to their CPA about, but Owner B is getting the whole $500,000 tax free. Now Owner B owns 100% of the business. If Owner B were to sell the business, he would sell it with a step-up basis. This means that he pays $0 in taxes on the increase in cost he now has in the business (again, check with your CPA on this).

The situation is a little different when you have 3 owners (Owners A, B, and C). Each owner owns a third of the business and a third of the stock. The business also has treasury stock. Each business owner would have a life insurance policy on them which the business would pay. This is not tax deductible. Let’s say Owner C passes away. The business would get the life insurance proceeds tax free because the policy was paid for with after-tax dollars. The business then pays Owner C’s family the money they received from the policy. Owner C’s stock is then “sold” back to the business by his or her family so that each owner has 50% of the outstanding issued stock, and thereby owns 50% of the business. Keep in mind, the remaining owners do not receive step-up value from the agreement.

In summary, you should always pay the premium with after-tax dollars – never write it off on your taxes. That way, you can receive the proceeds tax free. Also, you should carefully consider the benefits of step-up value when setting up these policies.

Learn More

If you have any more questions amount buy-sell agreements, or other questions regarding your business or personal/family insurance, contact our Tri-Cities office today at (423) 292-4142, or email us at help@veritasrm.com. We will be glad to help you make sure you have the coverage you need.

Staying Safe at Work

When was the last time you collided with somebody going through a door, or bumped or tripped over something at work? Quite recently, I imagine. It happens all the time. It’s just one of the hazards those of us who go out to work every day face. Usually, these bumps and scrapes are not serious. However, well over 3.5 million people end up in hospital emergency departments each year as a result of occupational injuries.

In an ideal world, your workplace should be a source of fulfillment and even, dare I say it, fun. But at the very least, it should be the place from which you arrive home safely every day. You ought to take necessary precautions to protect yourself and your fellow coworkers.

Company Safety Rules

Mostly, we count on employers to provide us with safe workplaces, to conform to health and safety legislation, and to provide facilities for emergency treatment – from first aid kits to resuscitators. But, there’s also a lot that we as individuals can do to protect ourselves from on-the-job hazards or to help others in the case of an emergency.

I’m not just talking about exercising caution when opening and shutting doors or keeping your eyes peeled for obstacles, though these are important. Employees should be more broadly aware of company safety rules and know how to respond to emergencies.

Your employer might provide written safety guidelines, which you should always make time to read. There could also be qualified first-aiders nearby that you should get to know. Further, you should know where first aid supplies and fire extinguishers are stored, and the layout of emergency escape routes.

6 Guidelines to Follow

Here are a few more guidelines for you to consider:

Wear appropriate clothing for the job. For instance: no loose items near machinery. Use eye protection, hard-hats, safety masks, and reinforced shoes when appropriate. Never cut corners or think you can make do with anything less than regulations or common sense stipulate.

Monitor your workplace temperature and environment. If it’s too hot or too cold, too stuffy, or there are unfamiliar odors, alert your supervisor or senior worker.

Use the right tools for the job. And by that I mean everything from a letter opener and staple remover to electrical appliances. If you don’t know how to use a tool properly, then ask. Additionally, always store sharp items, like scissors, when not in use.

Mitigate potential hazards. Don’t leave objects where other people (or you!) might collide with them. If you spot an obvious hazard, move it if permissible and appropriate, or try to make others aware of it (perhaps by using a warning cone or a simple sign).

If you have allergies (e.g. latex) or phobias (e.g. confined spaces), ensure that your employer and colleagues know.

Finally, if you are injured or feel unwell, especially if you are dizzy or suffering severe head or chest pains, tell someone immediately. Time is of the essence if something serious, like a stroke or heart attack, threatens. There are no points for keeping your mouth shut and being a hero.

Protect Yourself

You will find more useful information on workplace safety at the Centers for Disease Control and Prevention website. You can also think about becoming a first aider yourself – your local Red Cross chapter can tell you how.

If you are a business owner or employer in the Tri-Cities or elsewhere, be sure your business carries workers compensation insurance. This provides the coverage you need to protect your Tennessee business in the event of a work-related injury.

If you have any questions about workplace safety or workers compensation insurance, please contact our Johnson City office at (423) 292-4142, or send an email to help@veritasrm.com. We would be happy to give you more information and help you with any of your questions.

Who is Responsible for a Fallen Tree?

Determining whether all your insurance needs are covered can be confusing at times. One thing we get asked about a lot is liability for fallen tree damage. Every year, homeowners have trees that fall in storms. Unfortunately, this often results in damaged property. In the event of a treefall, who is responsible for the damage and removal, and what can insurance do to cover the costs?

Who is Liable?

No matter whose yard the tree was in, if it falls into your yard and damages any property, it is your homeowner policy’s responsibility to cover the loss. Because of the liability clause in any home policy, unless the owner of the property where the tree was knew that the tree was about to fall or that it needed to be taken down, they are not liable for any damage it might have caused your property. Thus, if one of your trees falls into your neighbor’s yard without you having any previous knowledge that it was going to fall, you are not liable for your neighbor’s damages (and vice versa). Think about it this way: the homeowner where the tree was had no control over the damage that the tree caused, so their insurance cannot be responsible either.

The Coverage You Need

Let’s say your neighbor’s tree fell in a windstorm into your yard. You are liable for the damage, but what can you do to fix the problem? Most insurance policies only cover up to $500, $1000, or $1500 dollars for tree removal if the tree did not damage any property. However, if the tree hit your fence, house, or car, these damages will be covered under your home or auto insurance policies.

If you have any further questions about this or anything else, please contact our Johnson City office at (423) 292-4142, or email us at help@veritasrm.com. We will be glad to answer any questions you have and help you make sure you have the coverage you need.

Rental Car Insurance: Good or Bad?

You may have been tricked into buying unnecessary insurance before, but one type of insurance that certainly isn’t just a clever marketing ploy is insurance from rental car companies. For most people who ask whether they need to buy coverage through the rental car company when they rent a car, the answer is almost always “yes”.

In the event of damage to their vehicle, many rental car companies hold you responsible for a lot more than your traditional auto insurance policy is going to cover. Depreciation is just one example. Unless you have insurance through a company that has an agreement with certain rental agencies, such as Erie with Enterprise, you should read the fine print of both your auto insurance policy and your rental car contract carefully before you refuse rental car insurance.

If you have any questions about this or any of your other insurance needs, please contact our Johnson City office today at (423) 292-4142, or send an email to help@veritasrm.com. We would be happy to give you more information and help answer any of your questions.

What is Full Coverage?

Click here to listen as Andrew Darlington sits down to explain the basics of full coverage.

Let’s talk about auto insurance. Everybody calls in and says, “I need full coverage on my vehicle.” The question is, what exactly is full coverage? There are a lot of different coverages out there—comprehensive, collision, towing, labor, rental car coverage, new car replacement, OEM parts repair. What exactly is full coverage? We will break that down for you.

Comprehensive and Collision

What most people mean when they say full coverage is comprehensive and collision coverage. Collision covers when you hit something—when you drive your car into something, that is a collision claim. It can’t involve blood, so if you hit a person or animal, that is actually a comprehensive claim. So a collision claim is when you hit something inanimate with your car, and the insurance company pays to fix your car.

Think of comprehensive coverage as something happening to your car like a tree limb falling on it, lightning hits it, someone keys it in the parking lot, or you hit a deer or a person. Those are comprehensive claims. Comprehensive and collision pay to fix your car if something happens to it when it was not someone else’s fault.

Roadside Assistance

Roadside assistance is a great coverage to have as well. It is not very expensive, and it will give you gas if you are broken down on the side of the road, it will pay for towing, and will generally cover some quick repairs by the side of the road like jumpstarting or getting your car unlocked. You don’t want to have a lot of those claims because the insurance company might not be happy with you and might adjust your rates, but it is always good to have in the event you need it.

Better Car Replacement

Better car replacement is where they upgrade your vehicle in the event you have a claim. If you have a claim, most insurance companies are going to a good job giving you the value of your car. But this is the problem—no one ever thinks that their car is worth the same as what someone else thinks it is worth. If I am selling a car, I am going to want to sell it for a lot more than you are willing to pay for it. And if I wreck my car, I would think there is no way I am going to get a car exactly like it. What the better car or newer car replacement coverage does is to upgrade your car so that you get what you think your car is worth, not what it is actually worth.

Contact Us!

Those are some of the coverages you need to consider so that if you are adding full coverage to your policy, you know exactly what to ask about to make sure you are getting the auto coverage you need.

If you need car insurance in Johnson City or the Tri-Cities, or if you just want to see if we could save you money on your auto insurance, give us a call at (423) 292-4142. Tammy in our office will give you a quick and free quote over the phone. We will work with you to make sure you, your family, and your car are properly protected.

What You Need to Know About Homeowners Insurance

Click here for the audio of Andrew explaining what you need to know about home insurance!

You’re about to buy a new house and you need to get homeowners’ insurance in Johnson City. What do you do? What are you looking for? Everybody and their brother wants to sell you home insurance right now. The mortgage brokers are sending you to folks, the realtors are sending you to folks… There are some things you need to know about home insurance in Tennessee, because if you just look at a quote from the homeowners insurance company, a lot of times it doesn’t tell you much of anything. Most people just make sure there is enough coverage on their house, and make sure there’s enough on their contents coverage, and they might also look at a deductible.

Replacement Cost or Actual Cash Value

Here are some of the things you need to look at beyond those basics. How will the insurance company replace a house? Is it on an Actual Cash Value (ACV) basis where they take into account depreciation? Or is it on a replacement cost basis where you get a brand-new house? Is there a limit to the coverage? Some companies only pay up to whatever the limit of coverage is. Some companies pay another 25% on top of that. The problem with that is that the insurance agent might lower the amount of coverage and tell you that you will get another 25%. That is true, but if there is a tropical storm coming or some sort of natural disaster, the price of building in Johnson City can go up quite a bit during that period of time, so it will cost you a lot more than that amount to rebuild your house. That is why the insurance companies give you that cushion—it is not so that you can insure it for less, but it is in the case of a bad situation. A lot of insurance agents will just give you the lowest price possible to get you in the door, but they are not going to sell you a good policy that will protect you when you need it most—at the time of the claim.

A lot of companies are not giving full replacement coverage on the roof, which means they will take into account depreciation in the value of the roof. If your roof is 10 years old and it is a 20-year roof, you will only get half the value of the roof.

Additional Coverages

Another aspect of homeowners insurance coverage you should consider is sinkhole collapse. In the Kingsport, Bristol, Johnson City, and Jonesborough, there are sinkholes everywhere because we have a lot of limestone that creates those sinkholes. Many companies have stopped adding that coverage automatically, so you have to buy it separately. You don’t want to have a sinkhole claim and your house isn’t covered because you saved $20 a year.

Earthquake coverage is another coverage you should consider. We had an earthquake not too long ago in the Tri-Cities! Some folks felt their dishes rattling close to our office in the Boones Creek and Johnson City area! If water backs up through your drain and comes into your house, a lot of policies do not automatically cover that. Make sure you consider adding coverage for sewer and drain backup.

You need to know these things and you need to sit down with someone who knows what they are doing who can give you options on the coverages you need. In the event of a claim, you should be confident that you are going to be protected, your house is going to be rebuilt or repaired the way that you need it done. You don’t want to be out thousands or tens of thousands of dollars at the time of a claim. The time of the claim is a lot more important than the time of the purchase. Usually at the time of purchase you are talking about maybe $10-$15 a month difference, but at the time of the claim you may be talking about tens of thousands of dollars difference.

Liability

You should also be aware of liability. A lot of companies limit your liability for animals, such as horses and cows that get out of the fence and injure someone, or your dog biting someone or your cat scratching someone. All those things can be excluded in policies, and if you are simply looking at a quote, you may not know about these issues and it can be a problem.

Contact Us!

Contact our office in Johnson City today at (423) 292-4142 to have one of our knowledgeable and local agents sit down with you and show you your options and the different coverages you might want to consider. Our job is to educate you so that you can make the proper decision for your family.

Why You Need Life Insurance - Andrew's Personal Story

For audio of Andrew telling his story, click here.

I’m going to tell you a very personal story about why you need life insurance. When I was going into 7^th grade, my Dad died. Obviously, it was very tragic for a 13-year-old boy to have his Dad pass away, but even more tragic is that we had almost no life insurance—when my Dad passed away, we had $50,000 in life insurance. My Mom had not worked for over 7 years, my Dad was an engineer making a decent amount of money, and we were a good, middle-class family. When he died, all we had was $50,000 of life insurance. We honestly did not know what was going to happen. My Dad had worked hard, and I went to a private school. How were we going to pay that, how were we going to pay the mortgage, college—and all we had was $50,000.

How Much Coverage You Need

I know firsthand the toil and the mess it brings to your family when you don’t have the life insurance you need to protect them in the event that the unexpected and unthinkable happens. Protect your family. You need to make sure you have life insurance. Most of the experts will tell you that you will need 10-15 times your annual income in life insurance so that your spouse can take the investment income off of that and live on it for the rest of their life. Had that happened in our situation, we wouldn’t have had to worry about where our next meal was coming from. We would’ve known there was life insurance there to take care of it. My Mom wouldn’t have had to scramble to find a job. Again, she hadn’t worked in almost 8 years and had been a stay at home Mom, and all of a sudden she needs to go find a job so that we can eat, pay the mortgage, the car payments, the school payments, pay for college—all that was slapped on her at one time unexpectedly. Don’t let that happen to your family!

It's Affordable

For as little as $10 a month, if you are in good health, you can get $100,000 or maybe $200,000 of ten year term life insurance to protect your family. A $500,000 or $1,000,000 policy is not that expense. As you get higher up in the amount of coverage at $500,000 and $1,000,000, most insurance companies have a rate reduction, so you will pay less for a million dollars than you would for two half million-dollar policies. Contact us or call us today at (423) 292-4142 to make sure your family is properly protected, so that if the unexpected and unthinkable happens, they will be able to grieve the way they need to grieve, and to be able to move on and keep the same lifestyle they have now.

If you have been declined for life insurance in the past, we can still help you! Find out more here.

Life Insurance

What You Need to Know About Life Insurance – With Andrew Darlington

Click here for the audio of Andrew explaining what you need to know about life insurance!

Life insurance is one of those things you don’t like sitting and talking about, especially with your family. It means you are going to die. No one likes to talk about that. But if you are gone, who is going to provide the income to your family that you’re providing right now? Let’s say you’re making $40,000 a year, can your wife live the way she’s living right now with your family if there’s not another $40,000 coming in? That’s the question you need to ask yourself. Life insurance is cheap. It is not very expensive at all. If you’re in good health, you can get life insurance for next to nothing, and we even have programs right now where you don’t have to give blood, step on a scale, fast, or pee in a cup—none of that. And in twenty minutes you can get preferred rates. So here’s what you need to think about: if you are gone, whatever you’re making right now, you need 10 to 15 times that in life insurance. Why? If you make 10,000 dollars a year, and you have 15 times your income in life insurance, that’s a $150,000 dollars in life insurance. Your wife can invest that money with a good financial advisor, and they will tell her to take 4 to 6% of that per year, and live on it for the rest of her life. If you have 6% of $150,000 a year, you are going to end up with right about $9,000 a year. If you were making $10,000 a year, this is going to give your wife $9,000 dollars a year, and for the most part, if we look at historical results, she should be able to take that $9,000 a year, keep up with inflation, and not have to use any of that principal. She can keep on doing what she is doing, either working or staying at home with the kids–but either way able to replace your income. That’s what life insurance is about: being able to replace lost income if someone dies. The opposite is true for your wife. If she dies, you need 15 times her annual income in life insurance. If your wife is a stay at home mom, she is worth a lot of money. She’s cooking, she’s clean, she’s driving the kids everywhere. If something happens to her, even if she is not bringing home an income, it’s going to cost you a lot of money to have someone do all those things for your family, because she’s not there. So you need to sit down to talk to your wife and find out exactly how much life insurance you need to replace your income, and how much you need on her that would replace either her income or the work she does in the house. If you are 25 years old and in good health, you can have a $100,000 ten-year term for less than $10 a month. Sit down and make sure you have enough life insurance. Most people do not have nearly enough life insurance. Statistics say about 20% of the people in America actually have the life insurance that they need to protect their family. Make sure that you’re not one of them by getting the life insurance you need. Call us today and we can help! Megan Jackson in our office does a phenomenal job helping folks with life insurance. Call her today at (423) 292-4142 and let us help you get your family protected with the life insurance you need. Also, if you have been declined for life insurance in the past, learn how we can help you get coverage!

5 Tips to Remember When Building a New Home

If you are building a new home, there is probably much on your mind. Out of all the details, plans, dreams, and projects, take some time to investigate how you can protect yourself from future insurance claims. Here are some effective ways you can reduce the number and severity of your claims later by putting in a little extra research and effort right now. Even if your house is already built, you may come away with some helpful tips.

The first thing you should be mindful of when building a new house is the potential for future water damage.

The most important thing you can do is to install a device to shut off your water automatically. As an example, this is a whole-house flow detector that is web-based – https://waterheroinc.com/guide-to-automatic-water-shut-off-valves/ – It tracks your normal water usage and will shut your water off not if it detects a leak but if it detects odd usage. So, if in the middle of the night you have an abnormal water flow, it will shut off the water to your house. Moen has a similar detector available – https://www.techhive.com/article/3321177/flo-review.html

Other sensors monitor for leaks, but they are generally not whole-house. You simply place a sensor in each spot you want to monitor. Here is a link to the LeakSmart Shut-off Valve – https://leaksmart.com/products/protect-by-leaksmart-shut-off-valve/ – and here is a review site to the top 7 automatic shutoff valves of 2019 – https://www.keepthewaterflowing.net/best-automatic-shutoff-valve-reviews/

If you have a traditional water heater, make sure it is up on something that can have a pan underneath. If you are using a tankless water heater, make sure you have sensors below it. If you use a tankless water heater you won’t need to worry so much about water claims because the chances of a bad leak are small.

Make sure you have water sensors around the leak pans on your HVAC units, especially if they are in the attic. This is a common cause of loss.

If you have a water claim with spray foam insulation, you won’t have as much damage because it does not absorb so much water. This costs more on the front-end, but for a new house you will save enough over time to offset the additional costs.

Slab basements are horrible for water claims because the water does not stop until it gets outside. If you have a basement that is unfinished and water can run down into it, you can really limit water claims.

A nice steel roof will go a long way in reducing wind claims and hail claims. Dents to steel roofs are not covered because it is not considered “damage” unless there is a hole in it. That can be an issue for people who might not like dents in their roof, but that doesn’t generally happen unless you have very large hailstones. Most steel roofs will take a good beating and not see any damage. The price is approximately 30% more expensive, but you will get 50 years out of it. You would usually not have a claim. If you get a nice one, the paint will stay true for most of the life and it gives better insulation than a traditional shingle roof due to the way they install the sheets with the insulation on the back.

By putting a little extra effort when planning or building your new house, you can save yourself from future hassle, claims, premium increases, and disaster.

If you have any questions, please call us today at (423) 292-4142 or visit our website at VeritasRM.com! Veritas Risk Management is a local, independent insurance agency serving the region of East Tennessee and Southwest Virginia. Our friendly and professional team would love to assist you with any of your home insurance needs!

How can liability insurance protect you?

Andrew Darlington Veritas Risk Management and Insurance Services (423) 292-4142 Do you have enough liability insurance? Your front steps recently started to crumble a little bit — what would happen if your neighbor slipped and hurt their wrist while bringing you some mail? When things go wrong, many people are happy to resolve problems privately or forgive the responsible party. But sometimes an injury or a property loss is so expensive that outside help is the only way to pay for the damage. Here's what to know about how to protect yourself from potentially costly accidents. FIND OUT MORE >> Refer a Friend Request a Quote Policy Review Write a Review No one really wants to think about life insurance. But, if someone depends on you financially, it's a topic you can't avoid. In the event of a tragedy, life insurance can help protect your loved ones from financial hardship. Even stay at home parents need life insurance!  Remember, life insurance is not for you, it is for them! Call us today, (423) 292-4142. We can provide a quick and easy, no obligation quote.  Call us today to help with Business, Home, Life, Auto, Work Comp, Disability, Medicare Supplements or Employee Benefits. Remember, if it ends in INSURANCE, we can help! - Andrew Darlington  Are you turning 65 or do you know someone turning 65? If so, call us today (423) 292-4142 about your Medicare options!  Andrew Darlington | Veritas Risk Management and Insurance Services Andrew@VeritasRM.com PO Box 4539 Johnson City , TN 37602 Phone: (423) 292-4142 Veritas Risk Management, Inc.