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By Bill Harris – Buy key-person insurance. Stat. It’s the best investment you’ll make this year.
My company has a $1 million life insurance policy out on me. It was a condition of landing our VC funding when we launched Personal Capital. That’s standard operating procedure in Silicon Valley. Investors aren’t going to dig into their pockets without knowing there’s a financial backstop that would help the business weather the sudden death of a key employee.
Step outside the Valley, however, and you’ll have a tough time finding an entrepreneur carrying this insurance. According to a National Association of Insurance Commissioners survey, seven in 10 small businesses reported being “very dependent” on a few key employees, yet only 22 percent of the companies had insurance policies that would deliver money in the event that a key employee died or was disabled. That data is from 2007 (the most recent available), but given the rough economy since then, it’s unlikely to have changed.
To be blunt, you are nuts if your business doesn’t carry key-person insurance on you or on any other integral member of your team. Not going after VC funding? Fine, but if you’re interested in a loan backed by the Small Business Administration, it’s typically required.
More important, do you really want to leave your company high and dry if something happens to you or another crucial employee? With a life insurance policy in place, you give your business the ability to regroup after a loss.
Key-person insurance can be ridiculously affordable. There are two broad types of insurance: term and permanent. Term, which pays out for a specific period of time–hence the name–is cheap. Permanent, which includes a side investment component, is way more expensive. Stick with term. It’s all you really need, and it won’t put a dent into your cash flow.
You’ll also need to choose the actual term. Ten years should be plenty if your business is just getting started and still building up cash reserves. If the business is more established, pick a term that will get you well beyond major financial milestones, such as the date by which the business plans to pay back any loans or launch an expansion.
How large a death benefit should you be willing to pay for? If you’re a solo act and your death would effectively end the business, think about a benefit that would pay off your debts and close your books with dignity for your survivors. For larger businesses that will continue on, focus on providing an adequate cushion during the transition. Maybe that means a multiple of your salary. Or it might make more sense to think in terms of monthly operating expenses, including the time and cost of recruiting, while the company looks for a replacement and struggles to get its bearings. Another consideration: If you’re one of a small band of equity investors, you may want to give the company the ability to buy out your share from your heirs.
Every company is different. But if you’re healthy, it’s probably worth going right to $1 million, because that will require you to go through the burden of a complete health screening, which is a good thing for you and your investors anyway. You can also add in disability coverage. Stick with a guaranteed term policy; the premium doesn’t change from year to year.
Your insurance broker can work up a few quotes for you. Or you can do some ballparking at term4sale.com. I’m a 56-year-old healthy male, and my $1 million policy costs about $3,000 annually. A $1 million, 10-year guaranteed term policy for a healthy 40-year-old male can cost as little as $500 or so a year. For a 40-year-old woman, it might be $50 or so cheaper. Are you really going to tell yourself you can’t afford $40 or so a month to buy that much peace of mind?
Ice Dams and Roof Snow Removal Tips
An ice dam has the potential to cause serious damage to both your roof and the inside of your home. It is important to take the right steps to protect your home from the risks associated with heavy snow and ice.
What is an ice dam?
An ice dam can form when water from melting snow re-freezes at the edge of your roof line. Without roof snow removal, the ice dam may grow large enough to prevent water from draining off the roof. The water can then back up underneath the roof shingles and make its way inside your home
Immediate steps you can take:
- Clear downspouts. An easy way to help snow and ice drain off your roof is to make sure the area around your downspouts is clear. This will make it possible for your gutters to drain when snow does melt. It will also help prevent flooding when the snow and ice melts.
- Remove snow from your roof after every storm. Use a roof rake to clear the first three to four feet of snow from your roof immediately after each winter storm to prevent ice dams from forming. While the amount of snow and ice that your roof can handle may vary depending on a number of factors such as the roof type, age and condition of the structure, a good rule of thumb is if there is more than a foot of heavy, wet snow and ice on your roof, you should try to have it removed.
Ultimately, the best prevention for ice dams is to eliminate the conditions that make it possible for them to form in the first place.
- Insulate your attic. Make sure your attic is well insulated to help prevent the melting-and-freezing cycle that causes ice dams to form. Check and seal places where warm air could leak from your house to the attic, including vent pipes, exhaust fans, chimneys, attic hatches and light fixtures.
- Install a water-repellent membrane. When replacing a roof, make sure to install a water membrane underneath the shingles. This acts as an extra barrier that helps prevent water from seeping inside the building.
Removing snow from your roof:
Clearing the first three to four feet of snow from your roof immediately after each winter storm can help prevent ice dams from forming.
- If you have a flat roof that is easily reached from an interior stairway, you may want to shovel the roof. When de-icing, remember to put safety first any time you are on a roof, especially one that is covered in snow and ice. If you have any doubt, leave it to the professionals.
- If you have a sloped roof, it may be possible to remove the snow and ice using a roof rake, a long-handled tool designed specifically for this purpose. Stand on the ground and pull as much of the snow off the eaves as you can safely reach. It is not necessary to remove all the snow; removing the first three to four feet of snow closest to the gutters will help alleviate these issues.
- If you cannot reach the roof, many home builders, landscaping and roofing contractors, and property maintenance companies will remove snow and ice from roofs. Before hiring a contractor, Travelers encourages you to check references. Always be sure your contractor is insured and bonded.
We do not recommend using a ladder in snowy and icy conditions. This can be extremely dangerous and is best left to professionals.
Removing ice dams
Just because an ice dam is present does not necessarily mean water has penetrated the roof membrane. However, it is always best to remove ice dams before they have the opportunity to cause damage. To determine if you have damage, look for water stains or moisture in the attic or around the tops of exterior walls on the top floor.
- If you can reach the roof safely, try to knock the ice dam off with a roof rake, or cut a channel through the ice to allow standing water to drain.
- If you cannot reach the roof safely, consider hiring a contractor to remove it.
- Another method is to fill a nylon stocking with calcium chloride ice melt and place it vertically across the ice dam so that it melts a channel through the dam. If you try this method, make sure you can safely position the ice melt on your roof, and make sure to use calcium chloride, not rock salt. Rock salt will damage your roof. Also be aware that shrubbery and plantings near the gutter or downspout may be damaged.
- Look carefully at large icicles. If the icicles are confined to the gutters and there is no water trapped behind them, this does not indicate the presence of an ice dam. However, large icicles can pose a danger to people when they fall off. Try to safely knock the icicles off from the ground, making sure not to stand directly beneath them. If you cannot reach them safely from the ground, consider hiring a contractor to help.
Generally speaking, property owners are responsible for the cost of preventive maintenance. However, each claim is unique, and coverage and claim decisions always require an expert analysis by a licensed Claim professional. Keep in mind that the cost of snow removal is likely to be considerably less than the cost of roof damage or interior property damage caused by water leaks.