Can u Keep it?
   
 
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THE BUILDING BLOCKS
Unfavorable Trusts
Favorable Trusts
Insurance
Divorce Protection
Exempt Assets
Equity Separation
Strategies
Qualified Plans
 
 

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  Insurance

In addition to creating the correct business structure and using basic and wealth protection trusts, proper insurance coverage is instrumental in risk management. This seems obvious: Carry the right insurance at all times to protect your business.
But this is not always the case. In today’s insurance environment, widespread exclusions provide little in the way of actual coverage.
I recently consulted with a “mass grader” required by the city to carry a $5,000,000 general liability policy. After being declined by more than a few insurers, the mass grader was finally able to purchase a policy with a price tag of $3,400,000 in annual premiums. The policy, delivered eight months into the contract term, listed “subsidence, soils, and any soil-related complaints” as the first in a long list of exclusions. Trouble was, a mass grader’s job consists of moving large plots of soil, so this exclusion made the policy useless as any claim that would ever be levied against the mass grader would exclude soil-related claims.
 
Would it be so easy to buy insurance and worry not! Unfortunately, the U.S.’s insurance standards are filled with holes. Let’s take a look at some of them:

 

 
 “We do not insure any coverage for a loss consisting of one or more of the following items below:
conduct, act, failure to act, or decision of any person, governmental organization or governmental body whether intentional, wrongful, negligent, or without fault;
defect, weakness, inadequacy, fault, or unsoundness in
planning, zoning, development, surveying, siting; 
design, specifications, workmanship, construction, grading, compaction;
materials used in construction or repair; or
maintenance; of any property (including land, structures, or improvements of any kind) whether on or off the premises.”
Does this strike you as strange language to appear in a homeowner’s insurance policy? Does it strike you as shocking that defects in design are not covered? The moral of the story is this: You must read every word of your contracts to see what they cover (and more importantly what they do not cover).
Covered Only in Right Condition—Spouses and children are often covered by policies only if they live at home. Your son just went off to college in another state—with your car. Are you covered?
Loss of Control in Legal Defense
—One lawyer who worked in securities law was appalled to see clients settle what he considered spurious lawsuits by groups of pseudo-shareholders. But the clients’ insurance company provided the legal team, who counseled the insurance company to settle such claims to save in legal fees. This might have been in the best interests of the insurance company, but it was not in the policyholders’ best interests. Unfortunately, most insurance companies are leery of breaking with a lawyer's advice when they have a business to run and are unfamiliar with the law.
Financially Unfit Companies
—Some insurance companies go out of business. And no law protects the insured from paying judgments if the insurer goes bankrupt. Pick a stable insurer or, in some cases, self-insure using a captive insurance company.
Other Uncovered Events—Although not likely, many policies do not cover damages due to wars, “civil commotions,” some “acts of God” (nature), and even terrorism.
 
Unfortunately, insurance alone is not enough, and it must be buttressed by other legal asset protection platforms, as we discuss herein. That said, be sure to understand the following policies:
 
Homeowners insurance protects your home and the objects kept inside your home. Importantly, it also protects you and your family against liability that might otherwise place your home at risk of being used to satisfy a judgment against you.
 
Automobile insurance covers you from liability arising out of your or your business’s use of vehicles.
 
Directors and Officers (D&O) liability insurance provides financial protection for directors and officers in the event they are sued in concert with the performance of their duties.  D&O liability insurance can usually include employment practices liability—which includes harassment and discrimination suits, the majority of a business owner’s exposure to risk—and sometimes fiduciary liability.
 
D&O insurance is often mistakenly confused with Errors and Omissions (E&O) insurance. While E&O insurance covers performance failures and negligence with respect to products and services, it does not cover the performance and duties of management. E&O insurance protects you if you make a mistake or neglect to do something that causes a customer or client some harm. E&O insurance protects your company from claims if your client holds you responsible for errors, or if you fail to perform in accordance with your contract. Coverage includes legal defense costs and court costs, no matter how baseless the allegations, up to the coverage limits on your policy.
Business owners are wise to carry both D&O and E&O insurance.
Professional Liability
insurance covers damage to property or injuries suffered by someone else for which you are held responsible. 
Umbrella Insurance
policies plug holes in your other insurance coverages. Umbrella liability insurance is so named because it acts like an umbrella, sitting on top of your auto and homeowners liability policies to provide extra protection.
Business Owner Policies (BOP):
Policies designed to cover many of the losses businesses face. BOPs are designed as modules so business owners can add coverage they feel is necessary. Some of the common policy modules are property insurance (covers the building and the contents), business interruption (covers the loss in business due to some catastrophic event), liability protection (for the damage to others caused by you or your employees) 
Property insurance
provides coverage for damage to property. This could include fire, theft, weather damage, and the like. Many specialized forms of insurance are availible, such as fire insurance, flood insurance, eaurthquake insurance, homeowners insurance, and product liability insurance. 
Captive Insurance Company
: Originally, insurance was designed to protect companies against risk, but in today’s culture, insurance is often a token policy fraught with exclusions and provide little but lip-service to the insured. 
Instead of paying for traditional insurance, many of which come with a large price tag and limited coverage, many successful business owners can create their own insurance company, called a “captive” insurance company. A captive protects against risk, may allow for tax-deductible premiums, controls claims, and retains profits for its owners. In essence, risks are transferred from the business owner to the captive. Owners of the captives determine the type and degree of risk and reap the benefits and keep the profits of premiums.

 

The Fine Print and Gaps—Part of a responsible asset protection plan is reading and understanding your insurance coverage. Given the hundreds, sometimes even thousands of pages an insurer sends an insured, this can be hard, to say the least. At a minimum, understand the exclusions on each type of insurance used in a comprehensive risk management plan.
The following language can be found in the fine print of a sample homeowner’s insurance policy:
 
     
 
 
 
     
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