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When CPAs have individual clients who are business owners, it is important to remember that they have worked very hard to build both their business and their personal estate. Many business owners focus the majority of their time on building the business and do not think about the various risks that could significantly diminish the value of their business and personal estate or net worth. While estate taxes often come to mind when thinking about such risks, other, unknown risks in the business itself could destroy an even larger portion of the estate. A critical element when creating an overall estate plan is a business insurance review to ensure that both known and unknown risks are identified and properly insured against.
Most individuals have similar concerns, such as loss of a job, unexpected medical expenses, and protecting property and vehicles. Business owners, however, also face risks related to business interruption, lawsuits, workers' compensation, cyberliability, professional liability, and group benefits for employees. Ensuring that they have the right insurance coverage for all these and other potential risks is critical to the continued success of the business.
A Comprehensive Approach
Many business owners buy insurance protection as needs arise, such as purchasing commercial building and vehicle insurance when buying such assets or obtaining workers' compensation when employees are hired. While these purchases help protect the owner and the business, this approach may not provide the appropriate total coverage and may in fact cost more than a comprehensive review of what is needed and what the current insurance provides. Buying only what is needed, when it's needed, may put the individual and his personal and business assets at risk, especially if the business has directors, officers, and employees, or if there is an employee benefit plan. This approach can leave gaps in certain coverage and create excess coverage in others. With a coordinated insurance plan, gaps and excesses are reduced (if not eliminated), often at a reduced overall cost.
Personal versus Commercial Insurance
It can be very challenging for individuals facing such a diversity of risks to manage them while running a business. Finding the...