The 5 most important insurances for founders

adminonMarch 18, 2023April 6, 2023Leave a Comment

With the step into self-employment also arises the question of insurance against associated risks. The decision for and against certain insurances is anything but easy. After all, each of these costs money, and that is usually scarce at the beginning of a business start-up.

At the same time, the negative consequences can be severe if you fail to provide sufficient security for yourself. But which insurances are necessary from the beginning and which can be postponed until the business is up and running?? In the following article we present the five most important insurances for founders.

1. Health insurance

With the start of self-employment, you have the choice of whether to remain in the statutory health insurance (if you were previously insured there) or opt for private health insurance. In contrast to employees, you do not have to observe an income limit when switching, unless you work as an artist, publicist, farmer or gardener.

Which option is better for you depends on various factors. For many founders, private health insurance has significant advantages. Because in this case you have the possibility to pay only for the services you need most urgently. You can even save money this way.

If you have survived the hot phase of the start-up, you can switch to a more powerful tariff. Depending on age and state of health, the PKV also offers more benefits than the GKV. In the GKV, on the other hand, family members without income are also insured free of charge.

2. Pension insurance

While there are insurances for founders that you can safely postpone when starting your own business, you should consider retirement provision as early as possible. In this case time is money.

Keep the following points in mind:

Members of certain professions are still required to pay pension insurance even if they are self-employed or freelancers. This includes, for example, artists and publicists, teachers, trainers, nurses and midwives.
If this does not apply to you, you can make voluntary contributions to the statutory pension scheme or a private pension plan.

If you pay into the statutory pension scheme, you can take advantage of the Riester pension scheme. The so-called Rurup pension can also be considered as an alternative to private old-age provision. In addition, you have various other options for providing for your old age. Whichever you choose, don't wait too long to do so.

3. Occupational disability insurance

Absolute security does not exist. With an occupational disability insurance, however, you insure against an emergency that occurs more frequently than many people think. In fact, occupational disability arises in most cases from illnesses. With the appropriate insurance, you will receive a monthly pension in the event of an emergency.

Keep in mind when purchasing disability insurance:

The earlier you take out the insurance, the lower the premiums are.
Read the contract conditions carefully. In some cases, insurers may insist on a change of occupation in the event of an emergency.

You do not always get occupational disability insurance without further ado. In the case of serious pre-existing conditions, the search is often difficult. Then you have the possibility to exclude certain illnesses from the insurance coverage in order to be accepted after all.

4. Public liability

Public liability insurance is a useful supplement to private liability insurance for founders. It takes effect in the event of claims for damages from suppliers, customers or employees and is offered in different variants. Which one you choose depends primarily on ..

The industry in which you work and the associated risks.
the value of the equipment and resources you handle.
the size of your business.

Get good advice when choosing a business liability insurance, also regarding the coverage amount. Many founders are not fully aware of the risks and dangers associated with their profession.

Tip: A good supplement to business liability insurance is professional liability in some industries. It takes effect when, for example, financial damage is caused by incorrect advice. Additionally, product or environmental liability may be an option.

5. Legal expenses insurance

Legal proceedings can be expensive. As an entrepreneur, you are quickly confronted with such a situation, for example if an employee wants to take action against his dismissal or if you have to enforce compensation for a loss of earnings. In such a case, legal protection insurance will cover court costs, litigation costs and legal fees.

Here, too, pay attention to the differences between various offers. A legal protection insurance can usually be adapted to one's own needs according to the modular principle.

6. Weigh carefully

There are other insurances for founders, depending on your personal and professional situation resp. can be useful in your line of business. This includes voluntary unemployment insurance in case things suddenly don't work out as they should.

Here, as in many other aspects of setting up a business, the following applies: Seek advice when making your choice.
An expert will not only help you choose the right insurance policies, but also tailor them to your specific needs.

They are looking for support? We can help you choose the right insurance and answer many other questions about setting up a business. Contact us here for a non-binding initial consultation.

How life insurance can help with accumulation

The primary goal of personal life insurance is to cover final expenses and protect beneficiaries from a loss of income or debt burden in the event of a family member's death. Permanent life insurance policies, however, build cash values that can be used for retirement or emergency use. Whole life and variable universal life (VUL), if properly funded, offer the opportunity to accumulate cash that can be accessed as needed through policy loans or direct withdrawals.

Whole life policies

Life insurance policies tend to be among the most expensive policies to purchase. The cost of insurance is based on the age and health of the applicant. Tobacco use also increases premiums charged for coverage. As a rule of thumb, younger policyholders pay lower premiums than older policyholders. A 25-year-old male nonsmoker might pay about $900 per year for a $100, 000 death benefit policy, whereas a 40-year-old male smoker might expect to pay $1, 800 per year for the same face amount. A portion of the annual premium is applied to the pure cost of insurance, commissions and administrative expenses, while the balance is allowed to grow at fixed rates determined by the issuer.

Cash values accumulate slowly in the first few years of a whole life policy's life. It takes several years for interest rates at historic lows in 2016 to reach a break-even point when total premiums paid equal the cash surrender value of the policy. At any point, however, the equity in the policy can be acquired through credit or withdrawal. Premium rates set at the time of issuance may also be increased by the payment of dividends from a mutual insurance company whose policyholders have an interest in the property.

In addition, some policies offer paid additional coverage options that allow policyholders to contribute additional dollars, increase death benefits and earn interest. Unchanged, whole life cash values can grow to substantial sums, depending largely on the number of premium years and the internal rate of return offered by the insurer.

Variable universal life

Policyholders with an appetite for risk can opt for a VUL policy. These policies allow flexible payments and offer the option of a separate account in which premiums are invested in mutual funds. Unlike whole life insurance, the cash values invested in the separate account are neither fixed nor backed by the insurer's financial strength. Rather, funds directed to mutual fund subfunds are subject to investment risk. The primary benefit of VUL policies is participation in equity or bond markets, which over time can exceed the fixed rates set by the insurance company.

Compared to whole life policies, which can credit premiums at a 4% interest rate, cash values grow faster in a VUL equity portfolio that averages 7% returns over the life of the policy. A 30-year-old nonsmoker can contribute $100 per month for 35 years for a whole life or VUL policy. The difference in accumulated cash values is substantial if the VUL subaccounts manage to exceed the fixed interest rates credited to the whole life premiums.

Excluding insurance and policy expenses, the difference in the cumulative value of regular monthly $100 contributions over a 35-year period would exceed $85.000 if the VUL portfolio were to earn an average 7% rate of return. %. Long time horizons and moderate risk tolerances apply to policyholders who want to use VUL policies as an additional cash accumulation vehicle.

Key impressions

Permanent life insurance policies are designed to pay death benefits. Such policies are not marketed as savings or pension funds. However, cash values subject to fixed interest rates or favorable investment returns can adequately supplement individual retirement accounts (IRAs) or accounts of nonqualified deposits and provide liquidity and income when needed.

Traditionally, it is detached from traditional commercial banking as it has different social objectives, while traditional commercial banking focuses on small savers and those in need of financing, investment banking focuses on large corporations.

Investment banking, also called business banking, is the one whose main purpose is to negotiate with large companies and strategic sectors in search of profitability for their clients and shareholders.

Investment banking functions

Its action lines are in particular:

It is responsible for issuing and marketing securities.
Helps to carry out operations such as capital increases, loans, shares and corporate bonds.
Your main job is to advise and manage the process of stock distribution, which you do for large companies.
Investment banks can also buy stocks or bonds of companies they consider attractive and strategic. Either because of its current situation (profits or dividends) or because of its future increase in value.
You create investment products.

In addition, investment banks have created their own investment products, placing them through the financial markets or traded directly through their own units.

Structure of an investment bank

Investment banks have different departments to carry out their activities:

Front office : Beginning with the front office (the people with whom the customer comes into direct contact and who manage the pre-sales, sales and post-sales services). The front office is in turn supported by the middle office.
Middle Office: The Middle Office is the part responsible for evaluating the risk of the client and the environment, deciding on the possibilities of carrying out the operation and other matters of great importance.
Back office: finally, there is a back office for recording transactions and linking to other areas of the bank.

In general, North American investment banking and, to a lesser extent, U.K. investment banking have been the most recognized and widely used "investment banks," making them major players in commercial banking worldwide.

In this way, national investment banking was eclipsed in various countries and became a multinational like Merrill Lynch, Goldman Sachs, Morgan Stanley and the now defunct Lehman Brothers.