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INSOMIS
PO Box 542, Big Bear City, CA, 92314
Employment Resources Bulletin
909-878-0260 Website

HOW SMALL BUSINESSES CAN USE LIFE INSURANCE AS A BUSINESS ASSET

Small business owners who have previously borrowed money can attest that actually being capable of repaying the loan is the core of credit worthiness. They can also attest that the approval process significantly hinges on how risky the applicant appears.

Just because a new business has seemingly valuable potential doesn’t mean things always pan out. New businesses are often notorious for failing to live up to expectations, and the road from concept to profit is frequently long and hard.

During the initial stages a business is trying to identify and reach its target market, a process that takes time and money when profits are at a bare minimum. This is a common reason many business owners find themselves unable to make loan payments.

Lenders look beyond how balance sheets add up when determining a borrower’s credit worthiness. They often evaluate intangible factors such as community ties, reputation, and character to judge whether an owner is likely to meet financial obligations.

A lender may also consider a company’s overall insurance protections, such as Business Legal Expense Insurance, when assessing stability and risk.

One way to demonstrate credit worthiness is owning a life insurance policy, which shows a business owner has a financial commitment to the business and a plan for beneficiaries to follow through with any obligations.

When a life insurance policy is bought through the business, it becomes a business asset and will normally appear on the balance sheet that lenders review. If a portion of the policy’s benefit is assigned to the lending institution, the insurance can be used as loan collateral, and the policy’s cash value can serve as a guarantee against default.

The cash value of a life insurance policy can serve several practical purposes for a business. Borrowing against it is often quick and does not always require separate loan approval, and the cash value typically accumulates on a tax-deferred basis while the policy is in force.

In many cases a withdrawal up to the amount of paid premiums is not taxable, and loans against the policy may be available without immediately triggering a taxable event; however, the details depend on the policy terms and tax rules that apply.

Separately, offering benefits such as Medical and Health Insurance for Businesses can also signal financial responsibility to lenders and help retain employees.

If you are considering using a policy to support a loan or assigning benefits as collateral, talk to an agent.

Frequently Asked Questions

Can a life insurance policy be used as collateral for a business loan?

Yes. Lenders may accept an assignment of policy proceeds or the policy’s cash value as collateral, but acceptance and terms vary by lender and policy.

What is the cash value of a life insurance policy?

The cash value is the policy’s accumulated living value that the owner can often borrow against or withdraw under certain conditions.

Will borrowing from a policy create a tax bill?

Loans against a life insurance policy are typically treated differently than withdrawals and may be tax-deferred while the policy remains in force; tax treatment depends on the type of transaction and policy details.

How do lenders evaluate new businesses compared with established ones?

Lenders commonly view new businesses as higher risk and may weigh the owner’s experience, character, assets, and any available collateral more heavily when making approval decisions.

INSOMIS 909-878-0260 Website
 

DON’T BITE INTO A DENTAL PLAN WITHOUT COMPARING KEY FEATURES

Of the possible group benefits offered by employers, employees often say Dental insurance is one of the most desirable benefits. And, for employers looking into adding to their benefit offerings, the predictable and relatively low premiums associated with Dental insurance make it an excellent option.

For a general comparison of plan types and features, see Dental Benefits Overview.

Employers should comparison shop for a carrier offering a Dental insurance plan that’s applicable to the needs of their workforce and a good value. When evaluating carriers, also compare traditional plans to discount networks such as Dental Health Discount Benefits.

Whether planning to pay a portion of the cost of the coverage for employees or provide the coverage as 100% employee-paid, employers should know the answer to some questions before making a plan decision.

1. What dental service providers will be allowed?

The employer should find out if the plan has a preferred network of dental providers and how the network affects coverage. For example, if the dental care is received outside the preferred network, some plans will pay nothing; some will pay a reduced benefit; and others will pay regardless of the provider but have discounted network providers available.

Plans that have a preferred network should also be scrutinized to make sure they provide the desired amount of provider choice. Employers should know the turnover rate for network dentists, whether specialty services such as pediatric dentistry, orthodontics, periodontistry, and endodontics are included, and whether any network restrictions apply to specialty services.

2. What are the covered and excluded services under the plan?

The employer will want to pay attention to what specific areas of service the plan will cover. For example, some preventive services pay for a teeth cleaning but exclude fluoride treatments or sealants. If orthodontic services are covered, they might exclude coverage for cosmetic procedures or for adult patients.

3. Will the plan provide coverage for pre-existing conditions and extended treatments that began before the effective date of the coverage?

Clarify whether waiting periods or exclusions apply to ongoing treatments started prior to enrollment, and whether any exceptions are made for in-progress procedures.

4. What percentage of the cost of the premium goes toward administrative fees and what percentage goes toward the payment of benefits?

Understanding the carrier's administrative loading and how much of the premium funds actual claims helps evaluate value. Ask for a breakdown or a summary of administrative fees versus claims payouts when comparing proposals.

5. Exactly how will service coverage be paid?

Employers need to know what rate services will be covered at. Take a plan that says it pays 100% on dental cleanings as an example: clarify whether that means 100% of what the serving dentist charges or 100% of the insurer's usual, customary, and reasonable (UCR) allowance. Differences in UCR schedules between companies can affect out-of-pocket costs for employees.

6. Are communication materials, IVR enrollment, online enrollment, and other forms of enrollment support offered by the Dental insurance provider?

Find out what enrollment and ongoing communication support the carrier provides, including employee materials, online tools, and customer service. Good enrollment support can improve participation and reduce administrative work for your HR team.

7. Will the plan require a specific amount or percentage of employees to enroll if the plan is offered as a 100% employee-paid benefit?

Some carriers require a minimum participation rate for group pricing; others will offer a plan regardless of participation. Confirm any minimums before presenting the plan to employees.

With careful consideration, employers can pick a dental plan that meets both employee and company needs. Employers in dental-related industries may also want to review specialized offerings such as Dental Supply Wholesaler Insurance when relevant to their business.

If you want assistance comparing options or getting a price, talk to an agent.

Frequently Asked Questions

Does dental insurance usually cover routine cleanings?

Most dental plans cover routine cleanings, but coverage can vary on frequency limits and whether coverage is based on the dentist's charge or the insurer's allowance.

Are orthodontic services commonly included in employer dental plans?

Some employer dental plans include orthodontic services, often with separate lifetime maximums or age limits, while others exclude orthodontics or limit it to children only.

Can employees use any dentist with a group dental plan?

It depends on the plan type: PPO plans typically allow out-of-network care at reduced benefits, while HMO or network-only plans may restrict coverage to participating providers.

What should employers ask a carrier before selecting a plan?

Ask about provider networks, covered and excluded services, payment rates (UCR vs. billed charges), administrative fees, enrollment support, and minimum participation requirements.

INSOMIS 909-878-0260 Website
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