Have You Insured Your Cash Register? Don't let illness or injury blindside your lifestyle.
Shop owners are the living cash registers within their businesses. When so much of their personal net worth is embedded in the sweat-equity and the journey of growing their business, when so much of an owner's lifestyle for self and family is at stake, one serious question needs asking: What if the shop owner broke?
Is preventive maintenance a one-sided coin?
There's a parallel between the customers that a shop courts and the professionals an owner contracts with to cover business risks that could affect current and future lifestyles. On one side of the cash register, consumers often see auto service and repair as an expensive puzzle to make sense of. Shop owners try to gain the opportunity to be the whole car solution from the first estimate onward. Building customer relationships and loyalty is about nurturing and cultivating their trust over time. Concepts such as business referrals, sound CSI scores and becoming a customer's crash repair automotive advisor flow from trust, time and the quality of service provided.
On the other side of the cash register, shop owners need sound counsel to protect their assets, livelihoods and their abilities to maintain both. They need advice to manage the risks that can strike their businesses and cause serious financial woes. The world of financial planning — investment, retirement accounts, insurance, tax planning and estate planning — can be a maze for many shop owners. Finding the level and competence of advice that one can trust needs to be more than a random walk through the Yellow Pages. Even when that sound counsel is secured, there are dynamic shifts over the course of an owner's life and the business's operation that require plans to be retuned to meet changing events and circumstances.
Of the many risks a shop owner faces, proactive planning to minimize three of them — critical illness (CI), long-term disability (LTD) and long-term care — are often postponed, if not overlooked altogether. Yet shop owners have a higher degree of risk to these three possibilitites than many may be aware of. In short, it isn't about whether one dies; rather, it's about whether one breaks and is unable to work for an extended period of time or perhaps the rest of their living days.
It's what we don't see coming
Businesses have divergent needs, and it's human nature for its owner to be prudent when spending the company's money. One often buys just what one knows or perceives is needed: life insurance because one cares about surviving family, property and casualty, as well as automobile, because business financing mandates it. It's common sense, right?
But like estimating vehicle damage, there is more to protecting your business than what meets the eye. Many customers readily acknowledge when obvious vehicle servicing is needed, although sometimes rather late. It's often what prompts them to show up at a shop in the first place. In providing professional expertise to them, the shop owner can often identify other risks needing attention. When the identified risks are more serious than the original work done and are more likely to require more immediate attention, it can be frustrating when consumers balk at the added work. As an expert trying to break through prejudices or ignorance, it is a constant part of educating clients and doing business.
So, too, a shop owner will readily insure against the likely perceived risks. Yet, like a customer, there are other serious risks, which can be identified by an insurance expert, that are present and more likely to impact a shop owner than the obvious ones. However, even if a shop owner is made aware of them, the response often mirrors that of his or her customer. Unlike a car that can be damaged in a collision and repaired later at more expense, however, a shop owner's health can't be fixed as readily.
Dollars and sense
Contracting a serious illness, suffering a debilitating injury while at or away from the business, and incurring the need for expensive assisted healthcare down the road can prevent an owner from effectively earning a living and maintaining a comfortable lifestyle. Yet despite their likelihood of occurring, consideration and protection from these risks are often lacking.According to the Society of Actuaries (SOA), Americans underestimate the risk of suffering a disability — be it from an illness or accident at work or at home, or while driving or playing a sport, etc. The chances of becoming disabled, says the SOA, are greater than the risk of premature death, something shop owners are more predisposed to insuring. Yet incurring a disability can halt income, create additional costs and even prevent the building of a retirement nest egg. For shop owners, it can also place strains on business operations and even survival.
In a report, "Disability Insurance: A Missing Piece in the Financial Security Puzzle," co-authored by the SOA, the study concluded that for those in their working years, the risk of disability is greater than the risk of death, for both genders. Furthermore, while females have a lower risk of mortality compared to men of comparable age, they also have a higher risk of disability.
In addition, while a disability is defined as being a loss of ability to work for 90 days or more, many disabling events last much longer. The costs of dealing with a short-term disability are significant in themselves and those associated with a long-term or permanent disability can be financially devastating.
The Congressional Budget Office reports that the most frequently cited reason for bankruptcy is illness or injury. According to the U.S. Housing and Home Finance Agency, nearly half (48 percent) of mortgage foreclosures are due to a disability — a rate 16 times higher than those attributed to death. Given the higher risk of being disabled, it is clear that shop owners need to take the time to consider their own personal situations.
According to the Insurance Information Institute, some people find themselves in need of help with eating, bathing, dressing, toileting or continence, and/or transferring (e.g., getting out of a chair or out of bed) because of old age, mental or physical illness, or injury. These six actions are called "Activities of Daily Living." In general, if a person can't do two or more of these activities — or if a person has a cognitive impairment, such as Alzheimer's or Parkinson's disease — that person is said to need long-term care.
According to the Federal Long-Term Care Insurance Program, more than 40 percent of people who are receiving long-term care are between the ages of 18 and 64. This can be a result of a serious disabling accident, a stroke, a brain tumor, diseases and a host of other causes. In addition, those with health plans may find on inspection that long-term care is not part of the coverage provided. A shop owner might not be able to prevent the need for long-term care, but he or she can protect assets, preserve the choice of care and reduce the burden on family by buying long-term care insurance early enough while still qualifying for coverage.
With people living longer these days, the presumption that a person will be able to qualify for long-term care coverage when older is mistaken. The Insurance Information Institute has noted that actuarial studies demonstrate that the older a person gets, the more difficult it will be for him or her to purchase this type of insurance. For instance, Wakely Consulting Group studied applicants for long-term care insurance in 2003 and 2004, and found that 11 percent of those in their 50s were rejected, 19 percent in their 60s were rejected, and 43 percent in their 70s were rejected.
The risks are clear. In all three cases, a shop owner is less likely to die than he is to become critically ill, disabled or need long-term care. Surprisingly though, the cost for a shop owner to cover him or herself in regards to these risks is often less than insuring their teenager's first car.If risks are a fact, managing them is a choice
There are a number of paths a collision shop owners can take to ensure protection from the risks they face. Solutions can be provided through banks, insurers (direct or independent agents) or brokerage firms. While there is some overlap, each offers benefits and drawbacks and careful consideration by shop owners of which option provides the best fit needed. But making those choices before their cash register breaks is essential.
Universal Underwriters Group (UUG) is one example of an insurance firm able to provide insurance solutions to business owners:
The company offers insurance targeted specifically to the automotive industry.
David Willett, Eastern Division vice president and general manager for UUG's Automotive Specialty Markets, says conducting a needs analysis is one of the first steps. He explains that this analysis helps uncover needs a shop owner isn't aware of and then can allow discussion while designing a customized plan that considers not only the risks to be addressed, but also how to do so affordably and over time.
Bob Tschippert, senior vice president for UUG's Automotive Specialty Markets, adds that shop owners' needs are dynamic. They can change because of life events, emerging trends within the industry and shifting business circumstances. Therefore, once a plan is developed, he emphasizes that the insurance advisor should maintain a close relationship with the client through a number of contacts, including an annual review of the shop owner's needs and solutions. Tschippert summarizes the relationship cycle by saying that, "When we treat our clients personally, we create a strong bond."
Expanding your options
Merrill Lynch spokesperson Dan O'Gorman, a Phoenix-based broker and insurance agent for the brokerage firm, agrees that building a meaningful and ongoing relationship with clients that meets their current and future needs is key. When looking at a brokerage-based solution, O'Gorman stresses that the broker/agent must meet a higher level of licensing than other types of advisors. When combined with day-to-day experience with insurance, investments, tax and estate planning, these brokers/agents can consider a shop owner's entire portfolio when addressing needs and finding alternative solutions to them.
Sometimes a client believes he or she can't afford certain insurance just yet, O'Gorman says. "By reviewing the entire portfolio, there are instances where unnecessary fees are being paid to other institutions. Cash that is already being spent could be freed up to help meet an insurable need."
In addition, he noted there are some insurance policies that contain investment options (known as subaccounts) for the client, for which a broker is qualified and licensed to provide counsel, whereas many other types of advisors are not.
O'Gorman adds that when considering what type of advisor to hire, a shop owner might pose the question, "What if insurance isn't the best solution?" Solutions aren't necessarily limited to one area — be it insurance or investments — and the customer must determine his or her level of comfort when seeking a more diverse and broad-based range of alternative solutions. In addition, O'Gorman notes, the increased education and licensing requirements of brokers/agents provide greater fiduciary responsibility to clients, as they are governed by more state and federal regulators.
Careful consideration
Hal Lumley, a principal with Financial Matrix Inc., a company that provides consulting and integrated needs analysis tools to the insurance and financial planning industries, says there are several important points for a shop owner to consider when investigating insurance options.
Lumley acknowledges that in general, investment brokers have more training, required continuing education and mandatory licensing than insurance agents. However, he notes there is a difference between being qualified to sell, and actively working with CI, LTD or long-term care insurance solutions. Shop owners need to be cognizant of this distinction when screening and choosing a representative.
A broker who is concentrated on investments or an insurance agent who is focused on life insurance might not be the best choice for these needs. In short, active and daily experience in working with CI, LTD and long-term care insurance solutions is critical.Business owners need to be diligent and prudent — after all, it is their money and lifestyles at stake. Asking questions and looking for evidence of competency are two ways for shop owners to qualify a representative. For instance, national organizations such as the American Health Insurance Plans (AHIP) and the National Association of Health Underwriters (NAHU) both provide DI and long-term care education and certification to insurance agents.
Lumley also notes that insurance is one of those products that can be manufactured and repackaged in many different ways. For shop owners with limited resources to cover many needs, some firms — both insurance and brokerage — may be able to bundle solutions into a more affordable hybrid package that can provide coverage for multiple risks at a cost lower than separate policies.
Clearing the fog
Rather than submit to the winds of fate, it's worth the time to investigate your options and make an informed decision. It's about becoming aware and knowledgeable, selecting the best representative, prioritizing risks and then managing them.
There's no doubt that being a shop owner today is considerably more difficult than it used to be. The daily crush of repairing automobiles, dealing with insurers and growing a valued customer base requires constant attention. Vehicle technology continues to accelerate exponentially, restrictive regulatory impacts abound and growing attention to consumer satisfaction remains a constant. The retention of market share, growth of profits and nurturing both employee and client relationships demand more of a shop owner's time every day.The daily grind and stress can make it easy to push some matters to the back burner. Sometimes those issues are minor in the overall scope of things. At other times they can be like the untended dog that can jump up and bite you.
Shop owners know their businesses in which they work every day. Those who help shop owners understand and manage the living health risks they face — even the not so perceptible ones — know their businesses, too. To them, you and your lifestyle are that important.
