An Insider's Look at Business Insurance

Participants were navigated through the state of the business insurance industry, baseline coverages and what companies can do to get the best pricing for their business insurance needs in this informative webinar tailored to small business owners. Scroll down to the bottom of this article to listen to the full presentation and view the slides.

During a recent COSE’s WebEd Series webinar, presenters Rob Strachan of Strachan Novak Insurance and Tessa Forby of Grange Insurance took a deep dive into the business insurance industry to help small businesses like yours understand their needs and achieve desirable outcomes when it comes to protecting their business.

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    State of the industry

    According to the presenters, Ohio is one of the cheapest states to buy insurance and is considered a buyer’s market, with agencies activing aggressively to acquire new businesses. As with any industry, the business insurance industry is constantly changing due to the release of new technology. In this case, things like Uber and driverless cars will have an impact on the future of business insurance. Amazon is starting to get into the business insurance market place. All of these things will drastically change the landscape of the market moving forward.

    What is the role of the buyer?

    There are two ways to purchase insurance. Buyers can go directly to an insurance company, or they can get an independent broker or agent who can shop the market. If choosing the latter, buyers should have a face-to-face with their broker to explain important information such as their niche and core capabilities.

    What is the agent’s role?

    An insurance agent is a bridge between the buyer and the insurance company. A good agent should listen carefully to the client’s needs and then proceed to shop out to each insurance company. Agents usually have somewhere between five to 15 different insurance companies that they have relationships with and frequently connect with on behalf of their clients.

    What you need to know before seeking coverage

    When evaluating a business for coverage, there are several things an insurance company wants to see, such as:

    • Pride of ownership, including housekeeping of the space and maintenance of the equipment;
    • protective devices such as sprinklers, central station burglar and/or fire alarm, cameras on property and other safeguards;
    • good record keeping of things like job files, vehicle maintenance, etc;
    • financial stability that proves the company is making money and has capital to put back into the business;
    • experience in the field so that the insurance provider is confident the business knows what they’re doing; and
    • appropriate hiring practices. Do they drug test employees or determine what kind of a driving record they have? How frequently is there turnover within the company?

    And on the other hand, there are of course things an insurance company does not want to see from a potential customer, such as:

    • Inaccurate marketing materials or information that exaggerates the company’s capabilities;
    • lack of prior insurance, which could be an indicator that the company doesn’t truly recognize the need for insurance;
    • late reporting of claims, which could be an indicator that the company was careless in preventing a claim from getting too large;
    • frequently changing carriers or agents, showing a lack of loyalty or that they are trying to avoid something;
    • poor payment history, which might show the company isn’t financially stable or that they don’t acknowledge insurance as being an important part of the business; and
    • Difficult clients who seem like they are not receptive to working with insurance carriers.

    When it comes to insurance, there is always “the fine print,” right? The webinar presenters encourage business owners to understand the small print when it comes to the different types of insurance. Here’s a list of important questions to make sure you’re asking:

    Important question No. 1: If someone else’s equipment is in your care inside your building, does your policy cover their stuff?

    Important question No. 2: Is flood included? What about things like pollution, product recall and professional liability?

    Important question No. 3: What happens if equipment breaks down?

    Important question No. 4: Does it exclude things like pollution, product recall and professional liability?

    Important question No. 5: What is the coverage territory?

    Important question No. 6: Does it include non-owned or hired automobiles? What about towing and rental expenses?

    Important question No. 7: What is the coverage timeframe? How far back will the insurance cover you and will it extend into the future?

    Important question No. 8: Are you covered from a cyber perspective: Viruses, phishing emails, privacy breaches?

    Important question No. 9: In the event that you have to cease business for a period, does it cover business income, extra expenses and the effort you need to get your business going again?

    And a few parting words: Do not look at your insurance as an expense. Instead, view it as an asset. You have someone to do your taxes, a financial advisor and a lawyer, among other professionals on your “team.” Do you have an insurance advisor? A hole is left in your business if you don’t have the proper planning needed when it comes to business insurance. Make sure you find someone who is involved and responsive, and who is not trying to sell you something.

    The full recap of this webinar can be viewed below. Also, be sure to head over to COSE’s Events Page to view other upcoming events that can help your business grow.

    Next up: Becoming Successful Takes Hard Work—Staying Successful Takes Planning
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  • Becoming Successful Takes Hard Work—Staying Successful Takes Planning

    It used to be if you had a good product and provided solid customer service, you could count on success. While product and service are still critical, other variables—such as increased competition for key employees—can make maintaining and building on that success difficult.

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    Consider your own business. Your success didn’t happen overnight. It took careful planning, attention to detail and a lot of hard work. And if your business is like most, the contributions of a few key employees is responsible for your business’s success. That’s part of the reason why more business owners are looking for creative ways to reward and retain their key people. Unfortunately, government regulations can make it difficult for businesses to reward one select group of people without doing the same for everyone.

    So, how do you build on your success and reward the people who’ve worked hard, year after year, to make that success happen? One answer might be the use of a welfare benefit plan designed to help small business owners provide themselves and select key employees with substantial life insurance protection, medical benefits, or other optional benefits.

    Why life insurance? It’s one of the most remarkable financial tools ever developed. Life insurance proceeds can be used to:

    • Help families maintain their lifestyle and pursue their objectives following the loss of a major breadwinner.

    • Fund the purchase of a co-owner’s share of the business following her or his pre-mature death.

    • Pay estate taxes and other expenses, allowing personal and business assets to pass to an individual’s named beneficiary intact.

    How can a 419 plan help business owners?

    Generally referred to as a “Section 419 Plan” after section 419 of the Internal Revenue Code, the plan is available to owners of C corporations, sub-chapter S corporations, and limited liability corporations, but not sole proprietors. It allows for the purchase of life insurance on owners and selected key employees using company dollars.

    The benefits to business owners include:

    • Plan contributions (policy premiums) for participants are considered a tax-deductible business expense.

    • Policy cash values grow free from current income taxes.

    • You can provide yourself and key employees with substantial life insurance benefits that, with proper planning, can pass to named beneficiaries income tax free and possibly estate tax free.

    • You can limit participation in the plan to just owners of the business and/or select employees.

    • You can accommodate your company’s cash flow needs by choosing from a variety of flexible funding alternatives. Typically, universal life policies are used because of their premium flexibility.

    • All plan assets are sheltered from the claims of creditors, whether business or personal.

    • Your plan can be integrated into any existing business continuation and estate plans, buy/sell agreements, and/or personal estate plans you or your employees may already have established. 

    • The only “cost” to plan participants is the income tax due on a small portion of plan contributions equal to the “economic benefit” of the life insurance protection. Some employers choose to provide employees with a “bonus” equal to this amount of the tax.

    The bottom line

    You and your key employees are likely the backbone of your past, and current, success. By protecting them, yourself and your business with life insurance, you can help ensure your company’s future success as well.

    This information is provided for educational purposes only and should not be construed as tax advice applicable to each individual. Please consult a qualified tax advisor regarding your individual circumstances. All guarantees are based on the claims paying ability of the issuer.

    Joseph Pilla is VP – Advanced Strategies at 21st Century Financial. Contact him via email at or via phone at 216-545-1781.

    Next up: COSE Member Capital Advisors, Ltd. Awarded 2016 Best Practices Award by InvestmentNews
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  • COSE Member Capital Advisors, Ltd. Awarded 2016 Best Practices Award by InvestmentNews

    InvestmentNews named COSE member Capital Advisors, Ltd.  as one of 12 winners of the 2016 Best Practices Awards, an important initiative that recognizes the top-performing and most innovative firms in the financial advice industry.  The 12 winners of the InvestmentNews Best Practices Awards were identified through their participation in the 2016 Financial Performance Study of Advisory Firms, and recognized at The Best Practices Award and Workshop at the New York Athletic Club in New York City, on October 18th. 

    InvestmentNews named COSE member Capital Advisors, Ltd.  as one of 12 winners of the 2016 Best Practices Awards, an important initiative that recognizes the top-performing and most innovative firms in the financial advice industry.  The 12 winners of the InvestmentNews Best Practices Awards were identified through their participation in the 2016 Financial Performance Study of Advisory Firms, and recognized at The Best Practices Award and Workshop at the New York Athletic Club in New York City, on October 18th.

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    To identify the 2016 Best Practices Award winners, InvestmentNews Research created composite scores that examined the rate of growth, profitability and productivity levels for all the participants in the 2016 InvestmentNews Financial Performance Study. The firms classified as having “Best Practices” were those who ranked among the top-quartile of all participants; however, a number were selected for extensive qualitative interviews conducted by the InvestmentNews Best Practices Committee, in order to select the 12 winners.

    “We are honored to be considered amongst some of the finest wealth management firms in the country,” says Neil Waxman, Managing Director, Capital Advisors, Ltd.  “To my mind, recognition of best practice is some of the highest praise we can attain because it confirms what our team works so diligently to achieve: commitment to excellence, prudence, and consistency in bringing to bear a superior level of service to our clients.”

    This is the fourth consecutive year that InvestmentNews has recognized the industry’s top-performing firms as part of the Best Practices program. All of the firms honored have participated in InvestmentNews’ primary benchmarking studies: The Advisers Compensation & Staffing Study, The Financial Performance Study of Advisory Firms and The Adviser Technology Study.

    “The firms that have seen the most growth are those that have been the most strategically managed,” says Mark Bruno, Associate Publisher of InvestmentNews. “Capital Advisors is one of those firms, and its leaders executed on their strategic plans more effectively than most firms in the industry. They are an excellent example of how—and why—professionally run wealth management firms are out-performing and well-positioned for long-term success.”

    InvestmentNews honors Capital Advisors, Ltd. with a 2016 Best Practices Award. 

    Next up: How to Build Your Business's Financial Gameplan
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  • How to Build Your Business's Financial Gameplan

    With all of the day-to-day business operations entrepreneurs are faced with—product development, human resources issues, and business development to name just a few—it might be easy to lose track of a business’s balance sheet strategy.

    With all of the day-to-day business operations entrepreneurs are faced with—product development, human resources issues, and business development to name just a few—it might be easy to lose track of a business’s balance sheet strategy.

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    “A lot of small business owners don’t understand their business’s costs,” says Brian Alquist, president of business consultancy 1Direction, Inc., in Brecksville. “Consequently, they’re really just focused in on the cash they have at the end of the month.”

    But operating a business requires a much more comprehensive plan than just focusing on what’s left over when the month comes to a close, experts say. It requires detailed thought around the best way to think about setting financial goals and KPIs, access to capital, accounting best practices and more.

    ‘Build backwards’

    One of the first things an owner needs to do is settle on what the organization’s goals are, says Michael Foss of Foss Business Solutions in Lyndhurst.

    “Build backwards,” he advises. “What are our current expenses? How do I want to grow? What do I need to do to achieve that?” Once those questions are answered, the business owner will begin to be able to form a clear picture of the sales (and gross profit margin) the business needs to obtain to achieve those goals.

    This is where understanding your cash flow comes in, says Rion Safier of Rion Safier Accounting LLC in Beachwood. For a small business, cash flow is king and the company’s budget and cash flow forecast

    “There are companies that don’t have an accounting infrastructure and the business owner is just flying by the seat of their pants and using their bank balance as one of their key drivers,” he says. “That’s not a good way of looking at it. What if your receivables are delayed? Your cash might be depleted. Only looking at the cash balance is not an indicator of the health of a company.”

    Measure effectively

    What businesses should be paying attention to is working capital, or the capital a business uses in its day-to-day operations and calculated as current assets minus current liabilities, Alquist says.

    “That tells me how well they’re really managing the financial aspect of their business on a day-to-day basis,” he says. “If the company has some level of capital invested in the business, I would also look at the ratio of depreciation to expenses. That tells me if they are investing or reinvesting in the business.”

    Next up: Is it time to look for a CFO for your business?
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    Next up: Low-Rate Lending Options for Small Businesses
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  • Low-Rate Lending Options for Small Businesses

    Microloans and the Community Advantage Program are two ways you can potentially save on interest payments.

    You got through the holidays and made it back to your business.  Congratulations!  Now it’s time to give your business a gift by lowering your interest rates. The coldest months are a good time to hunker down and analyze how to squeeze more profitability out of your income statement. Reducing interest expense is probably the least painful way to do so.

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    According to a study by the U.S. Small Business Administration Office of Advocacy, only 12% of businesses use a business loan for capital when they are starting out. Business and personal credit cards account for almost twice as much of entrepreneurs’ starting capital.  That’s a little surprising because most savvy business owners are aware that carrying balances on credit cards results in interest rates well over 16% these days, according to Some “fintech” solutions may have effective interest rates that are even higher. The fintech industry includes names like OnDeck and Kabbage.

    Credit cards and fintech loans are easy and fast, and entrepreneurs love that combination. For many entrepreneurs, ease and speed are worth the extra expense, until they start adding up the cost. 

    Here are some options that might work for you.


    The SBA offers microloans to borrowers who, for whatever reason, cannot qualify for regular bank financing. When an entrepreneur gets started by running up credit card balances, it may adversely affect the personal credit score of the owner, a double hit because it locks out the entrepreneur from many typical routes of refinancing.  Enter the microloan.

    “Taking out too many credit cards will reduce personal credit scores and make it even more difficult for a traditional lender to offer a loan,” says Patty Ajdukiewicz, relationship manager for the Economic and Community Development Institute.

    The Economic and Community Development Institute (ECDI) provides SBA microloans to qualified individuals who can meet certain basic eligibility requirements and show repayment ability. Microloan rates range from 9% to 12%. That is more expensive than a traditional bank loan, but a fraction of the costs of credit cards and fintech.

    Ajdukiewicz notes entrepreneurs should anticipate having to pledge all available collateral when they refinance a credit card loan. While a credit card may leave fixed assets unencumbered, the lender is compensated for that lack of collateral with a high rate. An ECDI Microloan could cut the interest rate in half, but you should anticipate a lien against your business assets, and perhaps personal assets as well.

    Community advantage

    For slightly larger transactions, Growth Capital Corporation’s Community Advantage program is also available.

    “I’ve got one now that we’re approving today. They’re 13 years old and have revenues of $1.3 million.  They have over $100,000 in credit card debt. Thirteen years and they have never gotten good advice,” says Kate Kerr, program director.  She adds that most of the clients she works with have one or two credit cards, perhaps to take advantage of refund points or free travel. But some companies might end up with dozens of cards, and the debt load quickly becomes unmanageable. 

    A key difference between responsible term loans and credit card debt is the ease with which the transaction is completed. Credit cards are the easy path, but you pay for the convenience. Expect a much higher degree of due diligence from a lender like Kerr. The rate is much lower, but you must have your financial statements in order. 

    For example, businesses need to have their tax returns filed so that the loan can be underwritten, Kerr says. Your accountant may have the ability to get you an extension on your taxes, but if you’re in the process of applying for a loan, that is actually not at all helpful.  SBA-backed loans such as Community Advantage or microloan typically need financial statements current within 120 days of application.

    You can also refinance high-rate loans through most traditional banks. SBA’s loan guarantee programs are available to assist any participating lender, if there is not sufficient capital or time in business to justify a conventional loan. 

    If you must use fast credit, use the business name

    When the outstanding debt is in the name of the business, it is easier for a bank to refinance the higher rate debt. SBA only asks that the bank obtain the applicant’s certification that the debt incurred was exclusively for business purposes.  If the balance includes personal expenses as well, these amounts must be excluded.

    When the outstanding debt is in the name of the individual owner, it is much more difficult. Lenders must document the specific business purpose of the credit card debt and the applicant must certify that the loan proceeds are being used only to refinance business expenses. Documentation required will include a copy of the credit card statements and individual receipts of any expenses in excess of $250.

    If you must start your business on a credit card, at least try to get a card that is in the business name.  That will make a future refinance request much easier for the lender to process.

    Ray Graves works in lender relations in the SBA’s Cleveland office.

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