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Prevent Identity Theft: Be Aware, Be Proactive, Be Assertive
An incorrect billing statement could be a simple error, or someone might be trying to impersonate you. Forged credit cards remain the bane of credit card users everywhere. But oddly enough, credit card fraud is not the biggest problem with identity theft. Chris Wright offers some practical tips to prevent identity theft and to begin the process of restoring your good name. Identity theft involves acquiring key pieces of a person's identifying information in order to impersonate them, usually for financial gain. Such theft might include a person's name, address, date of birth, social security number, driver's license number, mother's maiden name, license plate number, or other identifying personal data. Once the thief has acquired this information, they can use it to commit numerous forms of fraud, including but not limited to: Taking over the victim's financial accounts; Opening up new bank accounts; Purchasing an automobile; Applying for loans or credit cards; Renting apartments; Obtaining social security benefits; and Establishing public services with phone companies and utilities BE AWARE The biggest problem is that you might never know you're a victim until you notice something is amiss — you receive an invoice for something you didn't buy or a statement from a credit account you never opened. Perhaps you're denied credit based on negative information on your credit report. When you investigate, you discover charges and late payments that you didn't authorize and knew nothing about. It pays to keep your eyes open. If you think you might be a victim, tackle the problem immediately. Any delay will only hurt you and your credit further. BE PROACTIVE While you can't prevent identity theft entirely, you can minimize your risk by managing personal information wisely, cautiously, and with awareness of the potential for identity theft. Effective guidelines for information management include, but are not limited, to: Don't reveal any personal identifying information until you know how it will be used and whether the information will be shared with others. Ask if you have a choice about the use of your information and whether it can be kept confidential. Pay attention to your credit card billing cycles. Follow up with creditors if your bills don't arrive on time. A missing credit card bill could mean that a thief has changed your billing address to cover their tracks. Guard your mail. Deposit outgoing mail in post office collection boxes or at your local post office. Remove mail from your mailbox promptly after it has been delivered. If you're planning to be away from home, request a vacation hold on your mail. Put passwords on your credit card, bank, and phone accounts. Don't carry more identification information and credit cards than you actually need. Don't give out personal information on the phone, through the mail, or over the Internet unless you initiated the contact or know with whom you're dealing. Legitimate organizations with which you do business have the information they need and won't ask you for it. Shred charge receipts, copies of pre-approved or actual credit applications, insurance forms, physician statements, checks, bank statements and other financial information. Do not simply discard them in the trash. Be cautious about where you leave personal information in your home. This is especially true if you have roommates, employ outside help, or are having service work done to your home. Verify that your personal information at work is kept in a secure location. Finally, give your Social Security Number (SSN) only when absolutely necessary. Your employer and financial institution will likely need the number for wage and tax purposes. Some businesses might ask for your SSN to do a credit check. However, you do not have to give a business the number just because they ask for it. Before providing your SSN, ask these questions: Why do you need my SSN? How will it be used? What law requires me to give you my SSN? What will happen if I don't give you my SSN? BE ASSERTIVE If you suspect that your personal information has been stolen to commit fraud or theft, take action immediately and keep a record of your conversations and correspondence. You should almost always take these three steps: First, contact the fraud departments of each of the three major credit bureaus. Tell them that you believe you're an identity-theft victim. Request that a 'fraud alert' be placed in your file, as well as a 'victim's statement' asking that creditors call you before opening any new accounts or changing your existing accounts. At the same time, request a copy of your credit report from each of the credit bureaus. They must give you a free copy if your report is inaccurate because of fraud or if you have been denied credit. Otherwise, you can obtain a copy for a small fee. The three major credit bureaus are: CREDIT BUREAU TO ORDER A REPORT TO REPORT FRAUD Equifax www.equifax.com (800) 685-1111 P.O. Box 740241 Atlanta, GA 30374-0241 (800) 525-6285 P.O. Box 740241 Atlanta, GA 30374-0241 Experian www.experian.com (888) EXPERIAN (888) 397-3742 P.O. Box 2104 Allen, TX 75013 (888) EXPERIAN (888) 397-3742 P.O. Box 9532 Allen, TX 75103 Trans Union www.tuc.com (800) 916-8800 P.O. Box 1000 Chester, PA 19022 (800) 680-7289 P.O. Box 6790 Fullerton, CA 92634 Fraud Victim Assistance Second, contact your creditors for any accounts that have been tampered with or opened fraudulently. Such creditors might include credit card companies, phone companies and other utilities, and banks and other lenders. Ask to speak with someone in the creditor's security or fraud department and follow your conversation with a letter. Credit card companies must be notified in writing as part of the statutory consumer protection procedure for resolving errors on credit card billing statements. Third, file a report with your local police or the police in the community where the theft occurred. Get a copy of the police report in case you need proof of the crime when dealing with creditors. It's also a good idea to contact the U.S. Secret Service. Although the Secret Service generally investigates cases in which the dollar loss is substantial, your information might provide evidence of a larger pattern of fraud requiring their involvement. You can find a local office in the telephone directory, or go to www.treas.gov/usss. OTHER STEPS Stolen mail. If an identity thief has stolen your mail to get a new credit card, bank, and credit card statements, pre-screened credit offers, or tax information, or has falsified change-of-address forms, report the theft to your local postal inspector. Contact the local post office for the phone number or use the Postal Service Web site (www.usps.gov/websites/depart/inspect). Change of address on credit card accounts. If you discover that an identity thief has changed the billing address on an existing credit card account, close the account. When you open a new account, ask that a password be required before any inquiries or changes can be made on the account. Bank accounts. If you have reason to believe that an identity thief has tampered with your bank accounts, checks, or ATM card, close the accounts immediately. Again, when opening new accounts, insist on password-only access to the accounts. Stolen or misused checks. Place stop payments on them and request the major check verification companies to notify retailers using their databases not to accept these checks. The major check verification companies are: National Check Fraud Service: (800) 571-2143; SCAN: (800) 262-7771; TeleCheck: (800) 710-9898 or (800) 927-0188; CrossCheck: (707) 586-0551; Equifax Check System: (800) 437-5120; and International Check Services: (800) 526-5380. Investments. If you believe that an identity thief has tampered with your security investments or a brokerage account, immediately report the problem to your broker or account manager and to the Securities and Exchange Commission (http://www.sec.gov/). Phone service. If an identity thief has set up new phone service in your name or is misusing your existing regular or cellular phone service, contact your service provider immediately and cancel the account. If you're having trouble settling the issue with the local phone company, contact the local Public Utility Commission for local service providers or the Federal Communications Commission for long-distance and cellular providers at (888) CALL-FCC or go to http://www.fcc.gov/complaints. Employment. If you believe that someone is using your SSN to apply for a job, call the Social Security Administration's Fraud Hotline at (800) 269-0271. Also call the SSA at (800) 772-1213 to verify the accuracy of the earnings reported on your SSN and to request a copy of your Social Security Statement. Follow up your calls in writing. Driver's license. If you suspect that an identity thief is using your name or SSN to get a driver's license or a non-driver's ID card, contact the Department of Motor Vehicles. If your state uses your SSN as a driver's license number, ask to substitute another number. Bankruptcy. If you believe that someone has filed bankruptcy using your name, write to the U.S. Trustee in the Region where the bankruptcy was filed. For a listing of the U.S. Trustee Program's Regions, go to www.usdoj.gov/ust. You should also file a complaint with the U.S. Attorney or the FBI in the city where the bankruptcy was filed.

Even If It's Not Raining You Need an Umbrella
You own your home, have your own business, and drive a new car. Though you are not rich, you are comfortable. It will be a shame to lose it all if someone sustains injuries by your car or at your home or place of business. You have insurance you say; you have standard auto liability insurance. The limits are $100,000 for a single person and a total of $300,000 for multiple people. Suppose you are responsible for any accident involving a shuttle taking ten people to the airport. Three hundred thousand dollars allows on average $10,000 per person. That is hardly enough to cover the emergency room fees let alone any surgery, rehabilitation, lost wages and other medical expenses. If there is a fatality, you may consider bankruptcy. Your business has a small storefront on a busy street. A middle-aged executive comes into your place of business following a rainstorm. Your floor is wet and slippery, and the executive slips and falls. He strikes his head, loses consciousness, and goes into a coma. Your general business liability insurance has the same limit as your auto insurance - $100,000. It may cover part of the hospital bill, but the official says he is permanently disabled and sues you for future wages for $1 million. Since your business is a sole proprietorship, bankruptcy beckons. Your son invites a friend over for a swim in your pool. He dives into the shallow end strikes his head and suffers traumatic brain injury. Sadly, the damage is permanent -- with standard liability limits of $100,000 -- well, you know, bankruptcy stares you in the face. The inexpensive, elegant solution to the problem is umbrella insurance. When a claim exceeds your standard liability insurance limits, your umbrella insurance policy takes over and pays up to your umbrella liability limits. Most people who buy umbrella insurance extend their liability limits to $5 million. Though you hope never to use it, for a few hundred dollars per year, you can protect your assets, and avoid financial disaster. Umbrella insurance pays when you are responsible for an injury that exceeds your standard liability limits.

...t six years. In fact, personal bankruptcies reached a record high of 1.35 mill...

Ownership Of A Producer's Book: A Better Way
 OWNERSHIP OF A PRODUCER'S BOOK: A BETTER WAY by Larry Morrison and Gary Jacobson Some agencies choose to offer key producers an 'ownership' interest in the producer's book of business as part of that producer's overall compensation package. Other agencies would like to, but consider the cost too high. A simple way to reduce the cost is to improve the way it is taxed. If the agreement specifies actual 'ownership' which must be bought back when the producer leaves the agency, then the repurchase of the book will take the agency 15 years to deduct. If the agreement has the exact same financial value to the producer but the agreement is in terms of deferred compensation, the agency will be able to deduct the payments at the time they are paid to the producer. In other words, a minor change in the agreement can enable the agency to reduce taxes now, rather than spread the benefit over 15 years. KEY OPTIONS/BENEFITS Deferred compensation is much more flexible than typical retirement plans such as a 401k or profit-sharing plan. Amount: The benefit amount is extremely flexible, with no pre-determined upper limit. Vesting/Forfeiture: Vesting and forfeiture have no predetermined rules. For instance, you can design a 'golden handcuff' plan that the producer forfeits if he or she goes to work for a competitor. Non-Compete: A non-compete agreement with a producer who has already been hired is generally not enforceable unless the producer receives adequate consideration in exchange for signing. The deferred compensation plan can be that consideration. Death/Disability: The plan can include special benefits for death or disability. COST SHARING If the producer wants a higher benefit (or you wish to offset part of the cost), you can reduce current commissions in exchange for the future benefit. To estimate the value of a reduction in a producer's commissions for a property/casualty insurance agency, let's assume the producer's commissions are reduced by 5% per year, and that the time value of money is 10% per year. The following table shows you how much that reduction in commissions is worth in terms of a multiple of 'book': Retirement is in: 5 Years 10 Years 15 Years 20 Years Multiple of 'Book': 0.3 0.8 1.59 2.86 In other words, a reduction in commissions from 30% to 25% for 15 years is worth a multiple of 1.59 times the 'book.' Put another way, a $5-per-year reduction in commissions for 15 years is worth $159 in deferred compensation after 15 years, assuming a 10%-per-year interest rate. Since a producer's book usually grows over time, a lot of that book is likely to have been deferred for only a few years. This is a crucial factor in evaluating the costs and benefits of a deferred compensation plan. TAXATION Since one of the benefits of deferred compensation is reduced taxes, let's review the tax effects. Taxation of deferred compensation comes at two times: First, when the producer is fully vested and the money is non-forfeitable (generally at retirement); and second, when the money is actually paid (generally over a five- to seven-year period). At Retirement: The entire deferred compensation amount becomes subject to social security and medicare taxes at retirement. Since social security taxes cut off at certain levels, you may end up owing very little social security tax. This is especially valuable if you retire at the year's end and have already paid the maximum social security tax for that year. Both the company and the employee benefit. The Medicare tax does not have an upper limit, but the tax is small (1.45% for the employee and for the employer). When paid: The amount paid is taxable income to the employee and deductible compensation expense to the employer at the time it is paid. The income does not reduce the employee's Social Security benefit when it is received. SPECIAL RULES As everyone knows, Congress never makes things simple when complicated will do just as well. Fortunately, Congress hasn't spent much time with deferred compensation, so it is much simpler. This is because it is 'Non-Qualified.' NON-QUALIFIED 'Non-Qualified' means that it does not fit the definition of a 'Qualified' plan. Typical examples of a Qualified plan include a 401K, profit-sharing plan, etc. Qualified plans are subject to many rules and restrictions, such as those found in ERISA. One of these rules is that they must be nondiscriminatory, which usually means you must offer the same package to basically all your employees. Many other rules also apply, such as how much can be contributed. A Non-Qualified plan is much simpler, with far fewer rules to follow. But to be non-qualified it MUST be discriminatory. You must limit it to a group of management or highly compensated employees. UNFUNDED To avoid a number of unpleasant issues, such as immediate taxation to the employee and possible inadvertent classification as a 'qualified' plan, the plan must be technically 'unfunded.' 'Unfunded' does not mean that the company cannot set aside money to pay for the future obligation. But it does mean that if the company chooses to do so, any money set aside must remain available to the general creditors of the company in the event of bankruptcy. A 'Rabbi Trust' is sometimes used to restrict further the way set-aside money can be used. Basically, a Rabbi Trust ensures that the set-aside money can only be used to pay for the deferred compensation obligation, unless, of course, the company goes bankrupt. In the event of bankruptcy, the money in the Rabbi Trust becomes available to the general creditors of the company. Remember, the company does not get a tax deduction for deferred compensation until the money is actually paid to the producer. Any money set aside must be done with after-tax dollars. 'CONSTRUCTIVE RECEIPT,' 'ECONOMIC BENEFIT' The producer must not receive 'Constructive Receipt' or 'Economic Benefit.' Constructive Receipt means that there must be some chance that the money might not get paid. This is usually met by specifying certain conditions under which it could be forfeited. Economic Benefit means that the future recipient cannot somehow get that future economic benefit today. For instance, you cannot use the expectation of the future benefit as collateral for a loan today. 'REASONABLE' COMPENSATION The money actually paid in a given year, plus the amount deferred for that year, must represent a 'reasonable' total. 'Reasonable' can be hard to define, but this is not likely to be an issue for a producer who is not also an owner. OWNERS Deferred compensation for the owners is a great tool for improving the future sale of a company, especially if you have a 'C' corporation.