A life insurance policy is a contract between a policyholder and the insurer whereby the policyholder promises to pay a fixed amount as premium at regular interval and against this, the insurer promises to pay a predetermined amount as death benefit to his beneficiary. If you are not aware, the policyholder is the person who buys the policy, the person in whose name it is bought is called the insured, though, in most cases, the policyholder, and the insured is the same person. The beneficiary is the person who gets the death benefit on the death of the insured. The premium is the amount one has to pay to stay covered. It may be paid monthly, quarterly or annually. The premium one has to pay depends on various factors such as total sum assured, age of the insured at the time of policy purchase, kind of policy you are going to purchase etc. There can be temporary term life or permanent universal, whole and variable life insurance. However, if you want cheap life insurance with large benefit you must buy term life insurance. A term life, as its name suggests is valid for a set ‘term’ only. Although it is sold for 1/5/10/15/20/25/30 years, ten to thirty years span is more common. However, decide on it carefully because if you need to buy further coverage at the end of the term, you will have to pay at a higher rate. If comparison is any indication cheap term insurance premium amount is less compared to permanent life insurance. Moreover money is available in the event of the death of the insured. The premium is decided after taking into consideration factors like health past reports and present status, addictions if any, professional risk such as those to water divers, racers etc. At times medical test id made mandatory. The premium which we hand over to the insurance company is split into two parts. The larger portion is safely kept aside for your protection. The smaller chunk goes into the cost incurred by the company in processing your application. The internet is a boon for the insurance companies. The applications processing has become very convenient. There are many websites related to insurance policy work. All sites are user friendly. There are option windows clearly indicating the processing methods. At the click of the mouse you get comparative quotes for instant term life insurance of various companies. You have the facility to view different options or contact the agent for home visit. In case you have no queries you can get instant term life insurance on the spot after filling the required data sheets. In this competitive world do not be surprised if companies offer you discount on premium. An agent is there to help you. Do not be reluctant to meet him. Many things perplexing you before the policy is purchased will get the right perspective once the agent clarifies the situation in a face to face meeting. Do not feel an agent is a nuisance. A computer will give a lot of information on instant term life insurance but not all. You do not have to bear any expense of the agent’s home visit. The carrier bears the cost. A study has conclusively indicated that those clients who forgo the agent end up paying 15% extra compared to those you take the agents service to get wiser. The highlight of the insurance concept is Credit rating can be established through insurance credibility. Medical approval prior to renewal of policy motivates you to keep your healthy through all means. Instant information is available on net even when sitting in the comfort of the home can be accessed and the best decision taken from among all the companies displayed. The money received by the beneficiary is tax free. Many people show preference for extra coverage than required and end up paying more premiums. Assess your needs now and later and customize your needs. Also, remember to let your beneficiary know all about it and that the benefits will come tax-free. Unless your beneficiary knows about the technicalities, receiving the benefits may not be that smooth. Therefore, there is more to buying a policy than writing a cheque.
Insurance is the basic requirement of a single person now days. Insurance is one type of Risk Management, if you are going to buy life insurance you must ensure the coverage given to you that fits your needs and doesn’t cost too much. First, decide how much you need – and for how long – and what you can afford to pay. Next, find out what kinds of policies are available to meet your needs and pick the one that best suits you. These all things could be easier if you found Insurance Brokers who can choose the quality plans for you as per your needs. In this busy world many of the people have no enough time to choose appropriate plans for Insurance. So Insurance Brokers have different Life Insurance Quotes which are suggested by them and suitable for clients. Visit us @ http://www.insurancehelpline.co.nz To hire or appoint Insurance Brokers, clients do not need to deal directly to any insurance companies or insurance agents. When client needed to changes their insurance policy or have questions or concerns, they can contact their Insurance Brokers who in turn will find the information client needed. Insurance Brokers work with insured to find out what kind of risks they regularly encounter, and educate insured about what policies are available for each type of risks. As all know government provides better services for emergency, like car crash, accidents, etc… but for other health related problems, even very serious ones like cancer treatment you can spend months or years also on a waiting list. So if you have Health Insurance, you will not need to wait, you can access high quality treatments very quickly and focus on getting better. More Details: http://www.insurancehelpline.co.nz Health insurance is really the only type of insurance that you will require throughout your whole life – which is exactly the reason why you should get a good major medical plan up and running as early as possible. It’s all about your ‘future insurability’. You need to get cover while you’re healthy, with as little exclusion as possible, and then you’ll have a good level of cover into the future for your health. The healthier you are when you start your insurance plan the better ‘value for money’ that plan will be throughout the rest of your life. For further Information: http://www.insurancehelpline.co.nz Firstly you should get various Life Insurance Quotes from Insurance Brokers related to different companies that will help you to compare insurance benefits and coverage with pricing with each other. So you can find the best of the offers from all companies. The amount of Health Insurance that you need depends largely on your age and income. The general guideline for determining term NZ Life Insurance coverage amount is to multiply your current pre-tax income by a minimum of 5. It is not only important thing to get Health Insurance sooner rather than later, it is also very important that you get top quality plan right from the beginning. Even if you are young and healthy, Life Insurance Quotes from multiple companies by any Insurance Broker is an easy way to take advantage of the competitive nature of the Health Insurance industry and find the insurer who will offer the most affordable policy to you.
Insurance solutions for businesses operating in the Marine Leisure Sector have been slow to evolve compared to other sectors. Until relatively recently, a boatyard owner could find him/herself having to source a suite of insurance products to cover buildings, contents, financial risks, vessels, pontoons and indemnity against a range of legal liabilities. Whilst the first Marine Traders “Combined” policy that provided cover for all these risks appeared in the late 1990s, the market did not rush to embrace the new paradigm. Some significant providers of insurance in this Sector did not release a “Combined” solution until as late as 2007 and others still only offer stand-alone covers.
Advantages of Combined Insurance Policies
There are numerous advantages to business owners of having a single insurance policy that combines cover in respect of the majority of their needs. First and foremost it streamlines administrative processes by reducing documentation considerably, thus saving business owners time and money. It also ensures the owner has a single renewal date to deal with. Probably the main benefit to businesses is the potential premium savings that can be made through this type of system: the more cover that can be placed on a single policy gives the provider more scope to reduce the overall insurance premium.
Marine Trades Insurance Providers
Combined Insurance policies for marine-related businesses are now available from a number of specialist providers. Whilst the majority of these providers will deal direct with the public, some will deal only through insurance brokers. An insurance provider that sells direct to the public will only offer their own product. Dealing directly with insurers not only restricts you in terms of available insurance options, it also means you have to invest valuable time in shopping around providers for competitive quotations. An independent specialist Marine Trades Insurance broker can potentially save you and your business time and money by conducting a full broking exercise across the market on your behalf.
Specialist brokers can also assist in arranging bespoke cover as opposed to a standard “off-the-peg” solution. This can give your business vital benefits where standard policy exclusions are amended or removed, widening the overall scope of protection. You may also benefit in the event of a claim:
Where a business buys direct from an insurer, in the event of a claim the owner is left to negotiate a settlement from the insurer. This can put the business at a disadvantage where there is a dispute over liability or settlement. Using an independent specialist broker to arrange cover provides the business owner with an experienced advocate in the event of suffering a claim. The broker is bound to act in the best interests of the client at all times and a specialist broker can often assist in instances where claims have initially been repudiated.
Structure of Marine Combined Insurance Policies
Before outlining the structure of a policy it is necessary to stress the importance of ensuring that the correct limits of indemnity form the basis of your insurance cover. It is tempting for businesses seeking to reduce their costs to deliberately underinsure their businesses. This can potentially prove catastrophic in the event of a loss, as an insurer will almost certainly invoke the principle of “Average” when underinsurance is discovered.
The Principle of Average: In the event of underinsurance any claim settlement will be based on the ratio of the sum insured to actual value. For example, where a business has insured stock worth £100,000 for only £50,000, the business has underinsured by 50%. In the event of a loss of £25,000, the insurer will apply average and only pay a settlement of £12,500.
The example above underlines the importance for businesses to establish the correct basis of cover with their provider and then negotiate a competitive premium. An independent specialist broker with access to a number of alternative markets will help you obtain the right solution at the best available premium.
Marine Trades Combined Insurance policies generally follow the same model, with the odd exception as to where a particular item may appear. For example, some policies will include pontoons in the Material Damage Section whilst others may bracket them in the Marine Section. Outlined below is a typical policy structure:
Material Damage: This Section will cover all property other than vessels at your business premises. It is split into various sub-sections that vary from provider to provider, but the splitting of property into these sub-sections enables you to benefit from lower premium rates on the lower risk items to be covered. Typically, a Material Damage Section will be divided as follows:
Buildings (with or without subsidence cover)
Marine Installations (pontoons, slipways, wet/dry docks etc)
Computers and Associated Equipment (at the business’ premises)
Machinery and Equipment (at the business’ premises)
General Stock (at the business’ premises)
Valuable & Attractive Stock (at the business’ premises)
All Other Contents (at the business’ premises)
Glass: Some insurers will include Glass within the cover for Buildings. However, most Marine Trade insurers will not cover Glass unless specifically requested and will also levy an additional premium. Cover will be provided for external and internal glass with additional extensions available for items such as glass signage and sanitary ware.
All Risks Cover: Must be obtained for businesses wishing to insure items they remove from the business’ premises such as:
Tools & Machinery
Laptop Computers, Mobile ‘Phones etc
Trailers (thease can also be covered under the Marine Section)
Frozen Food: Covers loss or damage to fuel resulting from change in temperature in fridges or freezers resulting from breakdown or interruption to power supply.
Goods in Transit: Protects against loss of goods whilst in transit or whilst temporarily stored in the course of transit. Business owners need to beware of the variation in scope of cover from policy to policy and of the plethora of exclusions that each insurer applies to cover.
The premium for Goods in Transit insurance is based on a combination of the total sum insured per vehicle, the number of vehicles used and the estimated total annual carryings of the business.
This Section can also be extended to insure postal sendings and carriage by third parties.
Goods in Transit cover for vessels is excluded on many policies unless specifically mentioned. However, it is possible to include insurance for vessels whilst in transit by endorsing the Marine Section of the policy. Organising a policy in this way can save a business money if vessels are the only items to be insured whilst in transit.
Exhibitions: Covers exhibits, stands and other materials at exhibitions.
Whilst insurers include this Section within their policies, a business could reduce costs by having the Marine Section of their policy endorsed to cover vessels at exhibitions rather than pay their insurers an additional premium for the same benefit.
Business Interruption: Covers the loss of Gross Profit and/or the Additional Cost of Working in the event of the trading activities of a business being interrupted by an insured peril, such as fire or flood. Extensions can be purchased to cover losses arising from perils such as:
Breach of Canal
Damage in the vicinity of Premises or to Contract or Exhibition Sites
Denial of Access to the vicinity of Premises
Damage to Moulds, Patterns, Jigs, Dies, Tools, Plans, Designs, etc
Loss or Damage to Property stored in locations other than own premises
Loss or Damage to Property in Transit
Damage to Premises of Suppliers or Customers
Loss of Utilities
Disease & Illness
Just as it is essential to insure property on the correct basis to avoid insurers applying “Average” in the event of a claim, it is vital to ensure the correct level of Gross Profit is used to determine Business Interruption cover.
The definition of Gross Profit in insurance terminology differs from that of accountancy. A business should always check with its provider as to the exact terms of their Business Interruption policy but the procedure below provides a general system that should fit most insurers’ methodology:
Obtain the income statement for the last full operating month and locate the net profit amount.
Employers Liability Tracing Office
Review each individual expense line item on the income statement to identify costs of operation that are not directly related to production, also referred to as “standing charges.” For example, office rent is due whether the business is in operation or not, and the price does not fluctuate based on production, whereas some worker salaries (such as casual, seasonal labour) would cease when trading is interrupted.
Employers Liability Tracing Office
Add each standing expense identified in Step 2 to the net profit obtained in Step 1 to obtain gross profit, or the company’s loss from lack of operations.
Money: Provides insurance for cash, cheques etc whilst on premises, in transit or in bank night safes. Some policies will also provide extensions for money in directors’ homes and at exhibition or contract sites. Policies will usually provide a Personal Accident extension that offers nominal sums in the event of Death or Disability arising from assault during attempted robbery or theft.
Defective Title of Vessels: Reimburses the purchase price of a vessel bought or sold by a business in the event of the true owner of the vessel reclaiming it (or its value). It will also provide indemnity where a business has a valid claim brought against it as a result of being unable to provide good title for the vessel.
Employers Liability: It is a statutory requirement for all businesses to carry Employers Liability Insurance where they employ people be it on a paid or voluntary basis. It indemnifies the business in respect of its liabilities arising from death, injury or illness to its employees
Premium is based on the total annual wages of the business. Each occupation within a business’ workforce will attract its own premium rating based on the perceived hazards associated with that particular occupation. A rigger, for example, will attract a higher premium rating than an employee engaged in light yard work.
You should ensure you accurately declare your annual wageroll to insurers. Deliberately under-declaring could be construed as failing to disclose a material fact and may result in a claim being repudiated.
Labour only sub-contractors should be treated as Employees as far as insurance is concerned. Generally they work under the direction of the Insured and do not provide their own materials or tools (with the exception of small hand tools). Cover would therefore be arranged for such individuals by the hiring business under the Employers Liability Section of their policy.
There is a requirement that businesses must confirm their Employers Reference Number (ERN) or as it is commonly known Employers PAYE Reference to the insurer covering the Employers Liability which is recorded centrally with the Employers Liability Tracing Office (ELTO). This is to ensure that the correct insurer can be identified where claims are submitted by an individual, which can be years after their employment has ceased. It is not unusual, for example, for certain diseases or conditions such as respiratory disease, industrial deafness or repetitive strain injury to take many years to manifest.
The ERN is the unique reference which attaches to a business and does not change which means that it will identify the correct employer and then the insurer for any given time period from 2011 onwards.
Public Liability: Indemnifies your legal liabilities to third parties arising from your business activities that result in death or injury to any person or loss of or damage to property. The insurance only attaches to those activities disclosed to your insurer and noted on your schedule so it is essential that a full description of all your business activities is provided.
Premium is based on the estimated annual turnover of the business. Each activity will attract its own premium rating based on the perceived hazards associated with that particular activity. Paint Spraying, for example, will attract a higher premium rating than Chandlery Sales.
You should ensure you accurately declare your annual turnover. Deliberately under-declaring could be construed as failing to disclose a material fact and may result in a claim being repudiated.
Exclusions and Extensions to Public Liability Insurance vary from insurer to insurer. For example, some policies will automatically provide Yachtyard Liability Insurance as a standard extension to their Public Liability cover. Others will charge an additional premium for Yachtyard Liability.
Liability in respect of hiring-in of cranes is normally excluded on most Marine Trade policies unless specifically requested. The additional premium for this cover is based on your estimated annual hiring-in costs. Standard cover is usually £100,000 which may not be adequate to replace the crane you hire. Find out what your exposures are and get your cover topped-up if necessary.
Yachtyard Liability: Protects your liabilities in respect of moving vessels on water for reasons such as testing, demonstration and deliveries. Like most policy sections, scope of cover will vary from insurer to insurer. For example, policies will restrict your permitted range, but distance you are permitted will vary greatly.
Not all insurers provide this cover under the “Yachtyard Liability” heading. Some insurers will provide “General Liability” that will automatically encompass the Yachtyard Liability element of other policies.
Products Liability: Insures your legal liabilities in respect of the products you manufacture and/or supply.
Whether you are manufacturing or distributing (wholesale or retail), you need to make sure the products you supply are safe. Failing to meet your responsibilities can have serious consequences. You could face legal action with possible fines or even imprisonment. You could also be sued by anyone who has been injured or has suffered damage to personal property as a result of using your product.
Products Efficacy Insurance: Designed to cover the failure of an item to perform its intended function Efficacy Insurance is often excluded from the Public & Products Liability Sections of Marine Trade policies. If your business is involved in the manufacture, supply or installation of performance critical products you need to check with your insurance provider to ensure you and your business have the right scope of Liability Insurance.
Marine Risks: Non-Marine Commercial policies have virtually no insurance provision for vessels. They are specifically excluded, with the odd exception such as rowing boats. The Marine Section of a specialist Trader’s policy is divide into 3 distinct parts:
1. Vessels: This part of the Marine Section will cover all vessels not undergoing construction and includes Stock Vessels, Work Boats, your Private Craft and Charter Vessels. It can also be extended to cover other types of Marine Stock such as engines and parts.
Sums Insured for vessels are usually determined on an “Agreed Value” basis. This can be the price you paid for the vessel plus the cost of any improvements, or it can be a depreciated or written-down value.
The cruising range of your vessels will be clearly defined in this Section of your policy. You should check to ensure that you and your hirers are actually insured to sail or cruise to your intended destinations. For example, an insurer may assume that, if you are based on the Thames, you are only on the non-tidal stretch and will endorse your policy for”Inland Waterways” use only.
The are several extensions that can be purchased for this part of your policy such as:
Social use of vessels by Directors, Employees, Family Members.
Racing Risks (Sails, Masts, Spars & Rigging).
Water Skiing, Towing of Toys.
Angling and/or Diving Parties.
Exclusions in respect of vessels will vary from policy to policy. You should ask your provider to go over any exclusions with you in detail in case you require a special endorsement or extension.
2. Builders Risks: Whilst scope and definitions may differ from one insurer to another, Builders Risks insurance will usually cover your vessel at the yard or dock where it is being constructed, including the yard or premises of a subcontractor. It may also cover the vessel whilst in transit between your yard and your subcontractor’s yard. Extensions can also be obtained to cover:
Movement of the vessel on water around the dock where it is being built.
Delivery voyages under own power
If the vessel in build is being towed on the water a special extension is usually required to insure this activity.
The premium for this Section is based on a combination of the maximum completion value of an in-build vessel and the maximum value of vessels in-build at any one time.
3. Marine Third Party Liability: This insurance is an extension of the Vessels Section and covers your legal liabilities in respect of your interest in or use of your vessels by your skipper and crew. The usual limit of indemnity provided is £3,000,000 but higher levels of cover can be purchased where required.
Policy Conditions, Exclusions and Warranties
As detailed above, policy conditions and exclusions will vary from insurer to insurer. Even if you are purchasing your policy by telephone you should always ask your provider to go through them with you in addition to any warranties that will have been imposed. There are significant differences between each of these:
Conditions: Policy conditions basically set out a code of conduct you’re your business and also outline duties and obligations required for cover to be in effect. If policy conditions are not met, the insurer can deny a claim specific to that condition.
Eg. A theft from a business premises is discovered and not reported to the insurer for a month. If there is a policy condition that all losses must be reported within 7 days, the insurer could refuse to pay the claim.
Exclusions: An exclusion actually removes cover from the insurance policy.
Eg. Boats are excluded from the Goods in Transit Section of a Marine Trades Policy unless an endorsement is put into effect.
Warranties: A policy warranty is an instruction by the insurer that must be carried out by the insured. For example, the business may be warranted to work on vessels worth no more than £500,000. In such a case, if the business worked on a more valuable vessel then it would be in breach of warranty.
The breach of a warranty by a business would enable an insurer to void the whole policy. In the above example, if the business owner suffered a theft of outboard engines, the insurer could void the policy on the grounds that the business had breached a warranty – even though that warranty was totally unrelated to the theft.
As you can see, warranties can potentially have a huge impact on your business. You should ensure your insurance provider goes through each warranty with you and explains what it means. Insurers can impose a warranty for just about anything – some common examples are below (the list is by no means comprehensive):
Compliance with Flammable Liquids & LPG Regulations.
No paint or GRP Spraying.
Automatic fire alarms to be tested weekly.
Fire extinguishers to be professionally inspected annually.
Fireproof doors to remain closed during working hours.
All stock to be kept at least 15cm off floor
Waste & dirty cloths to be kept in metal bins.
Waste bins to be kept outside premises out of working hours.
Intruder alarm to be set whenever premises is unoccupied.
Electrical circuits to be inspected within 30 days of policy inception.
Cash registers to be left empty & open when premises closed.
Vehicles to be fitted with immobilisers and alarms.
Premises to be inspected daily.
No artificial heating to be used on premises.
Machinery only to be running when premises is occupied.
No flammable liquids to be kept on premises.
Moorings to be lifted & inspected at least annually.
Terms of trade to incorporate BMF Terms of Business.
No work carried out on commercial vessels
Trailers to be secured with a wheelclamp whilst unattended.
Vessel not be let out for hire or reward.
Vessel will not tow or be towed
British Marine Federation (BMF) Terms of Business
Most Marine Trade policies warrant that you operate under BMF Terms of Business. You do not have to be a member of the BMF to use their terms. The essential point from an insurance aspect is that you ensure all your customers insure their own boats. This is a crucial factor that defines the mechanics of how your Public Liability insurance works and how it differs from non-Marine commercial insurance policies.
If you have a customer’s boat, outboard etc in your custody or control and it is lost or damaged due to your negligence, your legal liabilities in respect of the property are covered under the Public Liability Section of your Marine Trade policy.
This cover would not be provided on a non-Marine policy as legal liability in respect of goods in custody or control is specifically excluded. To insure these items you would have to procure specific insurance which, as leisurecraft and associated equipment are very expensive, would be financially prohibitive for a business to purchase.
Other Insurances for your Marine Trades Insurance Programme
Directors & Officers Liability Insurance (Management Protection)
Modern legislation now means company directors can now be sued as individuals in respect of their decisions and actions as directors or managers of businesses. The duties of company directors are established in law and include the following areas of responsibility:
Duty of Care: Directors are required to act with ‘the care an ordinary man would take in the same circumstances on his own behalf’ and with the skill expected from someone with his ‘particular knowledge and experience’. Where duties are delegated the Director is responsible for ensuring that the person to whom the duties are delegated is sufficiently experienced, reliable and honest.
Fiduciary Duty: Directors must act honestly, in good faith and in the best interest of the company and must ensure they do not have any conflict of interest.
Statutory Duty: Company directors are legally bound by legislation such as the Companies Act 1985, Insolvency Act 1986, Financial Services Act 1986, Environmental Protection Act 1990, Health and Safety at Work Act 1974.
How Can Claims Arise?
Whilst public bodies such as the Health & Safety Executive can prosecute directors if they are perceived to have failed to comply with their statutory duties, claims could also arise from numerous third parties such as employees, creditors, customers or suppliers.
With the number of employees injured at work increasing by over 100,000 in 2010 and lawyers able to act on a “No-Win, No-Fee” basis, directors appear to be more exposed than ever.
What Are The Financial Implications of a Claim? Directors will be personally liable for meeting the cost of legal expenses as well as any damages awards, fines or penalties. This means assets such as their cars, houses, stocks and money could be lost. Companies are prohibited from indemnifying their directors in the event of their insolvency.
How Can Directors & Officers Liability Insurance Help?
Whilst a D&O policy will not cover any fines against directors it will cover the cost of defending a prosecution until the point when guilt is established. This could potentially save tens, if not hundreds, of thousands of pounds of an individual’s assets in legal expenses. A D&O policy can also cover awards for damages and legal expenses made against directors in civil cases.
Professional Indemnity Insurance
If you give advice, conduct surveys or inspections for a fee, your legal liabilities in respect of these activities are excluded on your Marine Trade policy. A stand-alone Professional Indemnity policy will fill the gap in your insurance cover.
Tractor & “Special Types” Insurance
Tractors and other special type vehicles which are road-registered are excluded from standard public liability policies, as are many unregistered vehicles, if travelling on, or crossing, public highways. This may also apply to areas where the public have access such as ports, harbours and boatyards. Types of vehicles that fit into this class are: Tractors, Cranes, Fork Lifts, Cherrypickers, Boat Lifts and other self-propelled mobile plant.
Third Party insurance is compulsory and a failure to have this basic cover is considered one of the most serious offences. A substantial fine and disqualification are amongst the recommended penalties.
Driving uninsured (or allowing your employees to do so) is an absolute offence which means there is no discretionary defence available, ie the vehicle is either insured or it is not. If, for any reason it is not insured, the offence is committed.
Without insurance your business and your personal assets are at risk from potentially huge compensation claims being made against you
Comprehensive Road Risks insurance in for tractors and “Special Types” is available at very competitive rates from your specialist broker.
Modern businesses need modern insurance programmes. Cutting cover to cut costs is not the solution. Your 9-point step to getting the right cover for your business at the best available premium is:
1. Choose an independent specialist broker.
2. Ask them what they can offer you in terms of support in the event of a claim.
3. Ask them to visit you to look over your business.
4. Ensure you fully disclose all relevant information about your business
5. Accurately assess the value of your premises & property and the levels of your turnover, payroll and gross profit.
6. Request 3 quotations.
7. Ensure you have all conditions, exclusions, warranties explained to you verbally – a written summary is not sufficient.
8. If you think some of the exclusions or warranties are unreasonable then ask your broker to negotiate their removal.
9. Finally, negotiate the best premium you can get from your appointed broker.
Disclaimer: This article does not constitute specific advice or recommendation to any individual or business. Individuals and businesses should seek the advice of an appropriately authorised and regulated insurance broker or intermediary.
Over the past 20 years, many small businesses have begun to insure their own risks through a product called “Captive Insurance.” Small captives (also known as single-parent captives) are insurance companies established by the owners of closely held businesses looking to insure risks that are either too costly or too difficult to insure through the traditional insurance marketplace. Brad Barros, an expert in the field of captive insurance, explains how “all captives are treated as corporations and must be managed in a method consistent with rules established with both the IRS and the appropriate insurance regulator.”
According to Barros, often single parent captives are owned by a trust, partnership or other structure established by the premium payer or his family. When properly designed and administered, a business can make tax-deductible premium payments to their related-party insurance company. Depending on circumstances, underwriting profits, if any, can be paid out to the owners as dividends, and profits from liquidation of the company may be taxed at capital gains.
Premium payers and their captives may garner tax benefits only when the captive operates as a real insurance company. Alternatively, advisers and business owners who use captives as estate planning tools, asset protection vehicles, tax deferral or other benefits not related to the true business purpose of an insurance company may face grave regulatory and tax consequences.
Many captive insurance companies are often formed by US businesses in jurisdictions outside of the United States. The reason for this is that foreign jurisdictions offer lower costs and greater flexibility than their US counterparts. As a rule, US businesses can use foreign-based insurance companies so long as the jurisdiction meets the insurance regulatory standards required by the Internal Revenue Service (IRS).
There are several notable foreign jurisdictions whose insurance regulations are recognized as safe and effective. These include Bermuda and St. Lucia. Bermuda, while more expensive than other jurisdictions, is home to many of the largest insurance companies in the world. St. Lucia, a more reasonably priced location for smaller captives, is noteworthy for statutes that are both progressive and compliant. St. Lucia is also acclaimed for recently passing “Incorporated Cell” legislation, modeled after similar statutes in Washington, DC.
Common Captive Insurance Abuses; While captives remain highly beneficial to many businesses, some industry professionals have begun to improperly market and misuse these structures for purposes other than those intended by Congress. The abuses include the following:
1. Improper risk shifting and risk distribution, aka “Bogus Risk Pools”
2. High deductibles in captive-pooled arrangements; Re insuring captives through private placement variable life insurance schemes
3. Improper marketing
4. Inappropriate life insurance integration
Meeting the high standards imposed by the IRS and local insurance regulators can be a complex and expensive proposition and should only be done with the assistance of competent and experienced counsel. The ramifications of failing to be an insurance company can be devastating and may include the following penalties:
1. Loss of all deductions on premiums received by the insurance company
2. Loss of all deductions from the premium payer
3. Forced distribution or liquidation of all assets from the insurance company effectuating additional taxes for capital gains or dividends
4. Potential adverse tax treatment as a Controlled Foreign Corporation
5. Potential adverse tax treatment as a Personal Foreign Holding Company (PFHC)
6. Potential regulatory penalties imposed by the insuring jurisdiction
7. Potential penalties and interest imposed by the IRS.
All in all, the tax consequences may be greater than 100% of the premiums paid to the captive. In addition, attorneys, CPA’s wealth advisors and their clients may be treated as tax shelter promoters by the IRS, causing fines as great as $100,000 or more per transaction.
Clearly, establishing a captive insurance company is not something that should be taken lightly. It is critical that businesses seeking to establish a captive work with competent attorneys and accountants who have the requisite knowledge and experience necessary to avoid the pitfalls associated with abusive or poorly designed insurance structures. A general rule of thumb is that a captive insurance product should have a legal opinion covering the essential elements of the program. It is well recognized that the opinion should be provided by an independent, regional or national law firm.
Risk Shifting and Risk Distribution Abuses; Two key elements of insurance are those of shifting risk from the insured party to others (risk shifting) and subsequently allocating risk amongst a large pool of insured’s (risk distribution). After many years of litigation, in 2005 the IRS released a Revenue Ruling (2005-40) describing the essential elements required in order to meet risk shifting and distribution requirements.
For those who are self-insured, the use of the captive structure approved in Rev. Ruling 2005-40 has two advantages. First, the parent does not have to share risks with any other parties. In Ruling 2005-40, the IRS announced that the risks can be shared within the same economic family as long as the separate subsidiary companies ( a minimum of 7 are required) are formed for non-tax business reasons, and that the separateness of these subsidiaries also has a business reason. Furthermore, “risk distribution” is afforded so long as no insured subsidiary has provided more than 15% or less than 5% of the premiums held by the captive. Second, the special provisions of insurance law allowing captives to take a current deduction for an estimate of future losses, and in some circumstances shelter the income earned on the investment of the reserves, reduces the cash flow needed to fund future claims from about 25% to nearly 50%. In other words, a well-designed captive that meets the requirements of 2005-40 can bring about a cost savings of 25% or more.
While some businesses can meet the requirements of 2005-40 within their own pool of related entities, most privately held companies cannot. Therefore, it is common for captives to purchase “third party risk” from other insurance companies, often spending 4% to 8% per year on the amount of coverage necessary to meet the IRS requirements.
One of the essential elements of the purchased risk is that there is a reasonable likelihood of loss. Because of this exposure, some promoters have attempted to circumvent the intention of Revenue Ruling 2005-40 by directing their clients into “bogus risk pools.” In this somewhat common scenario, an attorney or other promoter will have 10 or more of their clients’ captives enter into a collective risk-sharing agreement. Included in the agreement is a written or unwritten agreement not to make claims on the pool. The clients like this arrangement because they get all of the tax benefits of owning a captive insurance company without the risk associated with insurance. Unfortunately for these businesses, the IRS views these types of arrangements as something other than insurance.
Risk sharing agreements such as these are considered without merit and should be avoided at all costs. They amount to nothing more than a glorified pretax savings account. If it can be shown that a risk pool is bogus, the protective tax status of the captive can be denied and the severe tax ramifications described above will be enforced.
It is well known that the IRS looks at arrangements between owners of captives with great suspicion. The gold standard in the industry is to purchase third party risk from an insurance company. Anything less opens the door to potentially catastrophic consequences.
Abusively High Deductibles; Some promoters sell captives, and then have their captives participate in a large risk pool with a high deductible. Most losses fall within the deductible and are paid by the captive, not the risk pool.
These promoters may advise their clients that since the deductible is so high, there is no real likelihood of third party claims. The problem with this type of arrangement is that the deductible is so high that the captive fails to meet the standards set forth by the IRS. The captive looks more like a sophisticated pre tax savings account: not an insurance company.
A separate concern is that the clients may be advised that they can deduct all their premiums paid into the risk pool. In the case where the risk pool has few or no claims (compared to the losses retained by the participating captives using a high deductible), the premiums allocated to the risk pool are simply too high. If claims don’t occur, then premiums should be reduced. In this scenario, if challenged, the IRS will disallow the deduction made by the captive for unnecessary premiums ceded to the risk pool. The IRS may also treat the captive as something other than an insurance company because it did not meet the standards set forth in 2005-40 and previous related rulings.
Private Placement Variable Life Reinsurance Schemes; Over the years promoters have attempted to create captive solutions designed to provide abusive tax free benefits or “exit strategies” from captives. One of the more popular schemes is where a business establishes or works with a captive insurance company, and then remits to a Reinsurance Company that portion of the premium commensurate with the portion of the risk re-insured.
Typically, the Reinsurance Company is wholly-owned by a foreign life insurance company. The legal owner of the reinsurance cell is a foreign property and casualty insurance company that is not subject to U.S. income taxation. Practically, ownership of the Reinsurance Company can be traced to the cash value of a life insurance policy a foreign life insurance company issued to the principal owner of the Business, or a related party, and which insures the principle owner or a related party.
1. The IRS may apply the sham-transaction doctrine.
2. The IRS may challenge the use of a reinsurance agreement as an improper attempt to divert income from a taxable entity to a tax-exempt entity and will reallocate income.
3. The life insurance policy issued to the Company may not qualify as life insurance for U.S. Federal income tax purposes because it violates the investor control restrictions.
Investor Control; The IRS has reiterated in its published revenue rulings, its private letter rulings, and its other administrative pronouncements, that the owner of a life insurance policy will be considered the income tax owner of the assets legally owned by the life insurance policy if the policy owner possesses “incidents of ownership” in those assets. Generally, in order for the life insurance company to be considered the owner of the assets in a separate account, control over individual investment decisions must not be in the hands of the policy owner.
The IRS prohibits the policy owner, or a party related to the policy holder, from having any right, either directly or indirectly, to require the insurance company, or the separate account, to acquire any particular asset with the funds in the separate account. In effect, the policy owner cannot tell the life insurance company what particular assets to invest in. And, the IRS has announced that there cannot be any prearranged plan or oral understanding as to what specific assets can be invested in by the separate account (commonly referred to as “indirect investor control”). And, in a continuing series of private letter rulings, the IRS consistently applies a look-through approach with respect to investments made by separate accounts of life insurance policies to find indirect investor control. Recently, the IRS issued published guidelines on when the investor control restriction is violated. This guidance discusses reasonable and unreasonable levels of policy owner participation, thereby establishing safe harbors and impermissible levels of investor control.
The ultimate factual determination is straight-forward. Any court will ask whether there was an understanding, be it orally communicated or tacitly understood, that the separate account of the life insurance policy will invest its funds in a reinsurance company that issued reinsurance for a property and casualty policy that insured the risks of a business where the life insurance policy owner and the person insured under the life insurance policy are related to or are the same person as the owner of the business deducting the payment of the property and casualty insurance premiums?
If this can be answered in the affirmative, then the IRS should be able to successfully convince the Tax Court that the investor control restriction is violated. It then follows that the income earned by the life insurance policy is taxable to the life insurance policy owner as it is earned.
The investor control restriction is violated in the structure described above as these schemes generally provide that the Reinsurance Company will be owned by the segregated account of a life insurance policy insuring the life of the owner of the Business of a person related to the owner of the Business. If one draws a circle, all of the monies paid as premiums by the Business cannot become available for unrelated, third-parties. Therefore, any court looking at this structure could easily conclude that each step in the structure was prearranged, and that the investor control restriction is violated.
Suffice it to say that the IRS announced in Notice 2002-70, 2002-2 C.B. 765, that it would apply both the sham transaction doctrine and §§ 482 or 845 to reallocate income from a non-taxable entity to a taxable entity to situations involving property and casualty reinsurance arrangements similar to the described reinsurance structure.
Even if the property and casualty premiums are reasonable and satisfy the risk sharing and risk distribution requirements so that the payment of these premiums is deductible in full for U.S. income tax purposes, the ability of the Business to currently deduct its premium payments on its U.S. income tax returns is entirely separate from the question of whether the life insurance policy qualifies as life insurance for U.S. income tax purposes.
Inappropriate Marketing; One of the ways in which captives are sold is through aggressive marketing designed to highlight benefits other than real business purpose. Captives are corporations. As such, they can offer valuable planning opportunities to shareholders. However, any potential benefits, including asset protection, estate planning, tax advantaged investing, etc., must be secondary to the real business purpose of the insurance company.
Recently, a large regional bank began offering “business and estate planning captives” to customers of their trust department. Again, a rule of thumb with captives is that they must operate as real insurance companies. Real insurance companies sell insurance, not “estate planning” benefits. The IRS may use abusive sales promotion materials from a promoter to deny the compliance and subsequent deductions related to a captive. Given the substantial risks associated with improper promotion, a safe bet is to only work with captive promoters whose sales materials focus on captive insurance company ownership; not estate, asset protection and investment planning benefits. Better still would be for a promoter to have a large and independent regional or national law firm review their materials for compliance and confirm in writing that the materials meet the standards set forth by the IRS.
The IRS can look back several years to abusive materials, and then suspecting that a promoter is marketing an abusive tax shelter, begin a costly and potentially devastating examination of the insured’s and marketers.
Abusive Life Insurance Arrangements; A recent concern is the integration of small captives with life insurance policies. Small captives treated under section 831(b) have no statutory authority to deduct life premiums. Also, if a small captive uses life insurance as an investment, the cash value of the life policy can be taxable to the captive, and then be taxable again when distributed to the ultimate beneficial owner. The consequence of this double taxation is to devastate the efficacy of the life insurance and, it extends serious levels of liability to any accountant recommends the plan or even signs the tax return of the business that pays premiums to the captive.
The IRS is aware that several large insurance companies are promoting their life insurance policies as investments with small captives. The outcome looks eerily like that of the thousands of 419 and 412(I) plans that are currently under audit.
All in all Captive insurance arrangements can be tremendously beneficial. Unlike in the past, there are now clear rules and case histories defining what constitutes a properly designed, marketed and managed insurance company. Unfortunately, some promoters abuse, bend and twist the rules in order to sell more captives. Often, the business owner who is purchasing a captive is unaware of the enormous risk he or she faces because the promoter acted improperly. Sadly, it is the insured and the beneficial owner of the captive who face painful consequences when their insurance company is deemed to be abusive or non-compliant. The captive industry has skilled professionals providing compliant services. Better to use an expert supported by a major law firm than a slick promoter who sells something that sounds too good to be true.
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Insurance Agents are furthermore called Insurance Sales Agents or Insurance Brokers. Such persons obtain up advertising of Insurance policies as a profession. Their occupation portfolio consists of serving potential insurance buyer to select a suitable policy diagram base on their economic requirements. The kind of insurance customers comprise persons, families or businesses.
Insurance Agents might also work separately as an Independent Insurance Agent or be working wholly by an Insurance supplier as a confined Agent. They could concentrate in the sales of an exacting financial product or an extensive variety of products. Captive Agents are allowable to sell insurance harvest of their company only.
The type of strategy plan and life Insurance Agent UK sells could comprise insurance for possessions, victim, Life, Health, Disability and lasting care. Numerous Insurance Agents also sell communal Funds, variable annuity and other securities.
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The law, known as the citizens of ObamaCare, still causes heated discussions. Although it is aimed at ensuring access to health care for all Americans and allows the poor to use credit program for the purchase of insurance, if you get individual health insurance now becomes mandatory in the United States – and it’s like it is not everything. The number of poor Americans in recent years does not decrease, reported to the US Census Bureau.
How To Get Individual Health Insurance In The US 2016?
In the first stage, according to the reform plan, in 36 states of the country will be launched special websites. They have since 1 October of this year (the program will enter into force only in 2014), residents of 36 states will be able to purchase health insurance. In these states, 95% of Americans will be able to choose from at least two insurers. On average, Americans for the insurance will pay $ 328, according to the Department of Health and Human Services.
Under Obama’s plan, those who earn up to $ 94,000 per year for a family of four will be able to take advantage of federal subsidies that will reduce the cost of insurance.
Lower prices for insurance, according to HHS, will be ensured by the fact that many insurers are finding themselves in a competitive market, reduced rates in order to attract more customers. The Washington administration has said that 7 million uninsured Americans will soon use the opportunity to purchase a policy for the program that starts next week.
What does it mean ObamaCare and how to get individual health insurance now?
“In many states, previously dominated by one or two insurance companies is said Kathleen Sebelius of the HHS. – Now the Americans will be able to choose from about 53 companies.”
How To Get Individual Health Insurance In The US 2016?
Uninsured Americans will be able to choose one of four programs – “bronze”, “silver”, “gold” or “platinum”. “Approximately one out of four insurance companies offering individual programs, which means healthy competition, – says the situation Gary Cohen, director of consumer information and supervision. – The prices are quite affordable. Lowest for the “bronze” products – it’s $ 93.”
The report analyzes the projected cost of the insurance buyers, depending on age, family size and state to state. For example, 27-year-old American who in Dallas earns $ 25,000 a year, before he could buy a “silver” insurance for $ 223 per month, but now, with the new lending programs – for $ 145. “Bronze” to get individual health insurance product and it all can be purchased for $ 74 a month.
However, according to Cohen, the tariffs for the residents of some states can grow, for example, where they are generally higher than the national average. So, to get rid of kidney stones, even under the new program in New York, in any case, more than to do the same in Indianapolis.
It is essential that each automobile manager have some form of automobile insurance. Having the right insurance policy can be a obstacle. It’s important to research your options, so that you can get the very best quality car insurance although still maintaining the fee reasonably priced. When looking for auto insurance, you should do some detailed investigation and comprehend what it really is basically that you need to have. Some advice about auto insurance can be obtained from this post.
To minimize in your monthly insurance coverage expenses, try out cutting back on the amount of miles you drive every year. Your premiums may go down if you report your low mileage for your insurance provider.
When looking for motor vehicle insurance policy for your teenage, request your agent to provide a quote, the two as being a separate coverage and in addition as being an addition to your existing coverage. In some instances, it may be less expensive to obtain them by themselves coverage.
What sort of automobile you buy and push decides a lot about the size of your premiums. When the insurance fees issue to you personally, then it could be wise to bear that in mind when creating your choice. To economize on insurance plan, invest in a vehicle that is certainly harmless and small.
Insurance coverage insurance coverage is totally for your motorist to whom the plan is published. Typical insurance coverage are improbable to cover out if a person aside from the plan-holder was driving a car at the time of a car accident. Automobile insurance insurance policies are available at a higher superior, that come with letting other accredited motorists to work your car.
Insurance rates fluctuate according to in which you dwell if you are thinking about a transfer, look into insurance rates. The accident and burglary level of any region generally decide the insurance prices. Generally suburbs and outlying areas will have decrease charges the important metropolitan areas.
When signing up for your automobile insurance, remember that only you will be covered if you do not particularly add more other folks in your coverage. Typically people will enable a friend to make use of their motor vehicle, but if the mate is concerned in a vehicle crash, the insurer can reject payment for any claims. Vehicle insurance insurance policies can be acquired in a higher top quality, which include enabling other licensed motorists to use your car or truck.
Be sure to research the insurance rates in your area. Some places have greater insurance premiums because of burglary.
Look at subscribing to pack insurance, as this can often save some costs. You need to speak with your agent about guaranteeing your own home and automobile collectively. Despite the fact that two independent insurance plans can be quite a better option, you still want to make certain the sale you’re getting is good, and has a lot of coverage.
Residence problems responsibility is definitely a important thing to include in your automobile insurance plan. This can make up other car owner for virtually any house injury you cause throughout a crash. Virtually all suggests call for drivers to hold this insurance. Although you need to invest funds, it will be worth the charge should you get in an incident.
When you push up to 7500 kilometers in a year, you may most likely obtain a large low cost on your own insurance coverage. Reducing your automobile insurance for driving a vehicle much less miles is a great means of saving money.
Think about paying out your whole top quality in advance. Certain companies forces you to spend a charge if you want to make monthly payments. Save cash monthly to ensure when you want to spend your plan, it is possible to make 1 repayment.
It is recommended to pay back any visitors tickets prior to change insurance plan. There is no approach to conceal a bad report from insurance agencies. Ensure you pay off any seat tickets. Taking good care of these minimal infractions is not just your duty, it may also make your insurance costs straight down.
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The vast majority of huge insurance firms offer household special discounts when each and every relative is covered through the identical organization. You could conserve hundreds, even 1000s of dollars a year in month-to-month monthly premiums by protecting all of your current cars collectively.
When you travel under a a number of miles a year, such as 7500 kilometers, you might get a deduction from the insurance company. Provided you can reduce your overall mileage then you could help save a lot of money your insurance.
If you would like the lowest insurance coverage amount, opt for the top deductible. An increased insurance deductible for your personal automobile insurance costs far more for those who have a car accident and definitely will nevertheless supply insurance coverage for fixes once you reach the threshold volume. For those who have a one thousands of buck insurance deductible, by way of example, you will need to spend the money for very first thousands of dollars’ amount of fixes before you may be qualified to receive insurance plan. Should your auto will not be worth greatly, a high insurance deductible could be a good choice.
Auto insurance which is cost-effective is not only a misconception. Use the guidance over these ideas to lower your costs and also manage better coverage.
Auto insurance phrases have lots of wording which can be puzzling. Often, it may look very puzzling. This article will enable you to maintain the complicated terminology your insurance professional employs. Together with the suggestions that you will find listed below, you will end up moving the realm of car insurance such as a pro right away.
Most states have laws and regulations that expect you to have correct automobile insurance whenever you generate. Keep in mind that the obligation for transporting the officially-essential amount of insurance coverage is placed together with you, not your insurance firm. If you happen to engage in a crash not insured, you might be in infringement of your law plus encounter serious monetary loss.
Lapses inside your coverage can make it difficult to keep your rates low. If you keep changing insurance policy suppliers, your insurance coverage will lapse, and prices increases. An insurance firm will raise the level if they notice these spaces.
If you are searching for automobile insurance to get a adolescent car owner in the household, shop around for adding these people to your existing policy, together with them obtaining their very own. You will want to check if it is actually less expensive to guarantee your cars on various insurance policies.
Many people hold the fake idea that insurance rates magically fall at 25. The reality is that right after the car owner has attained age of 18, the velocity starts progressively dropping.
Be sure of what protection you require in relation to buying car insurance. Not every coverage choices make sense for anyone. However, if you’ve traditionally got modest accidents, it is most likely in your best interest to cover the extra to make certain accidents are protected.
You will be just insuring the car’s motorist when getting an automobile insurance policy. Many people will let close friends drive their vehicle and when the friend receives in a vehicle crash, the insurance plan will not pay out. You might have to have an accessory for your insurance to permit for this particular.
Take a low-sporty automobile. Insurance for any sports vehicle is commonly pricey. Use a vehicle that isn’t so substantial-user profile. For those who have a motor that may be large, it will cost more for insurance policy. Sports automobiles can also be more likely to be taken, therefore they are more expensive to make sure.
If you are intending to move, remember that your car insurance premiums my change. Some areas have higher insurance rates as a consequence of robbery.
Understand that the yearly value of an auto insurance policies is just one factor of countless that really must be regarded as. Inspect the details in numerous plans so that you are familiar with gain constraints, program specifics of deductibles, protection minutiae, and many others.
You can also reduce your automobile insurance superior by using out other insurance coverage from the same organization. Which means you should try and purchase your entire different types of insurance together. However, you must make sure to make sure that you will get the correct protection at the very best selling price. Occasionally, keeping two individual insurance coverages is the perfect alternative.
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When purchasing automobile components, assess the quantity that insurance includes in thievery or problems. Many times, insurance will never include these elements, only the amount that they can enhance the whole worth of the auto – which will not be much.
Should you be planning on buying aftermarket components to your automobile, speak to your insurance company to determine precisely what and how much they pay in case your automobile is at a car accident or taken. Insurance carriers normally don’t protect the whole expense of these components, only the worth of the auto with one of these enhancements, which generally isn’t a great deal.
Check out insurance premiums for many different automobile types prior to going car shopping. Your insurance agent can let you know which autos benefit from the lowest prices. This can assist you when picking a vehicle, regardless of whether it’s new or a little utilized. Your insurance costs may possibly drop significantly when you select an auto with excellent protection reviews.
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When you increase your deductibles, you can save funds. This really is a high-risk relocate, but if you wish to cut costs each month and also have the willpower to place cash away to spend a deductible in case you are within an incident, it is actually a terrific way to save money Increasing your insurance deductible will reduced the total amount you have to pay for your personal premium.
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This is a frequent perception that insurance premiums decline the moment a young vehicle driver reaches the miracle age of 25. Insurance policy commences heading down at around 18, according to their history.
They form of car you acquire will have a crucial role in the cost you pay for your insurance policy. When your choices guide you to a deluxe vehicle, the amounts on the insurance coverage bill will rise appropriately. To economize on insurance coverage, get a automobile that is certainly risk-free and small.
There are insurance strategies above what exactly is legitimately necessary that provide greater protection. Procuring additional coverage are often more high-priced, even though performing this may be beneficial. For example, if you achieve uninsured driver insurance policy, you might be shielded even when the other celebration included is illegally driving a car not insured.
You ought to overview all following-market gear you would like to set up on the car with the insurance agent, to help you be sure it becomes taken care of effectively. You might spend in regards to a grand on newer and more effective rims for your automobile, but if an appraiser principles them reduced the main difference involving the sums is going to be lost if the auto is robbed.
In several suggests, auto insurance doesn’t ensure just the car, however the person driving a car that car, also. At times, individuals allow a buddy to use their motor vehicle, but when this close friend wrecks, your insurance carrier will not buy damages. You are able to choose insurance that will allow other individuals to get your car, although you will need to shell out a little more for your.
You are just protecting the car’s car owner when receiving an automobile insurance policy. Lots of people will permit buddies push their vehicle and if the good friend receives in a car automobile accident, the insurance coverage will not likely shell out. You might have to get an addition to your insurance coverage to enable just for this.
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