BIF Bites Flashcards
Mini Bite: Homeowners Insurance Coinsurance Clause
What is the formula for and describe Coinsurance clause?
https://www.youtube.com/watch?v=3XC6OHI7oMk
In this 5-minute video, Mike explains a key aspect of homeowner’s insurance, the coinsurance clause. Understanding the coinsurance clause enables the planner to assist clients with decisions regarding adequate levels of homeowner’s insurance dwelling coverage.
Coinsurance clause – dwelling coverage be maintained at a certain minimum percentage of the home’s replacement cost in order for a partial loss on the dwelling to be covered in full
Coinsurance application = ( Insurance Limit / Required % x Replacement Cost ) x Loss - Deductible
- Insurance Limit / Required % x Replacement Cost = ( DID HAVE / SHOULD HAVE)
- Health insurance: deductible comes off the top.
- In HO policy, deductible comes out the back end.
- What advice would you give client?
- At a minimum, recommend client to carry 80% of $500k
- Insurance is never going to pay more than the policy limit
- So best advice is to maintain coverage limit of the full replacement value.
- That way in the event of a total loss, it would have $500k of coverage. If only had $400k required coinsurance application, wouldn’t have full coverage.
Mini Bite: Buy-Sell Purchase Agreements: Entity Purchase
https://www.youtube.com/watch?v=B-Aw0Sy1Ob8
* In this 5-minute video, Mike explains key aspects of Entity Purchase Buy-Sell Agreements. Understanding this estate planning tool enables planners to assist clients with business succession plans. These agreements can help ensure a smooth transition in the event of a business owner’s death.
* Sometimes referred to a stock redemption plan, when used in a corporate setting
* Purpose is to be able to transfer the business to the remaining owners at the death of one of the shareholders/owners at a fair price for the deceased family
* Surviving owners own 100% of stock after
* At the death of this owner, there is a contract for the stock to be sold back to the company, the company to redeem the stock at the negotiated price
* Business will purchase a life insurance policy on the owner
* Business pays the premium to the insurance company
* At death, the insurance company pays the business the proceeds the amount needed to buy out the deceased owner’s estate
* The other owners own 100% stock
* **Efficient way to transfer business interest that is fair to the owner’s state and business itself **
* For the remaining shareholders, basis does not increase
* Contrast with cross purchase business – where there is an increase in basis
* In this 5-minute video, Mike explains key aspects of Entity Purchase Buy-Sell Agreements. Understanding this estate planning tool enables planners to assist clients with business succession plans. These agreements can help ensure a smooth transition in the event of a business owner’s death.
