SmBs Chapter 17

Insurance

A contract between two or more parties in which one party agrees, for a fee, to assume the risk of another.

Co-insurance

A contract stipulation that requires a policyholder to carry insurance in an amount equal to a stated minimum percentage of the market value of the property insured.

Internal control

A set of rules and procedures that work to limit the opportunity for employee theft or malfeasance.

Separation of duties

A type of internal control that separates the physical control of an asset from the person accounting for that asset.

Joint venture

An agreement between two or more entities to pool resources in order to complete a project

Surety bonds

An agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements.

Deductible

An amount of loss that will not be paid by an insurance company.

Fidelity bonds

Bonds that repay employers for losses caused by dishonest or negligent employees also called dishonesty bonds

Coverages

Contractual provisions of insurance policies that specify what risks the insurance company is assuming.

Key employees

Employees whose experience and skills are critical to the success of a business

Buyout insurance

Insurance that provides money to owners of a business to buy the shares of any deceased owner from that owner's heirs.

Regulation of the workplace

Laws and governmental rules that limit the freedom of business owners to manage their businesses as they please.

Tax codes

Laws and regulations that specify the requirements of taxation include franchise or corporation taxes, income taxes, employee taxes, sales and use taxes, and property taxes

Employee theft

Misappropriation of business property by employees of that business.

-financial risk -nonpayment of debts -changes in technology -injury and illness suffered by employees -injury from accidents incurred by customers -natural events -theft of business property -misbehavior by employees

Most Commonly Identified Sources of Risk

Product liability

Payment for injury or damage that occurs during the use of the business's products

Insurable value

The amount of an asset for which a company will write an insurance policy.

Business risk

The level of probability that the future economic state of the business will be worse than expected.

Personnel insurance

available to protect both you and your employees from specific risks Life, Disability, Medical coverage

Credit insurance

covers abnormal losses from credit customers not paying their bills

Must balance:

giving credit to customers will increase your sales offering credit guarantees sooner or later some customer will not pay as promised.

Medical Insurance

most highly desired form of insurance for most employees

Key person

protects you in the event that a key employee dies or is disabled and cannot work

Protected classes

States of being that are expressly prohibited from suffering discrimination: race, color, religion, sex, national origin, gender, age, or disability.

Life insurance

provided to employees to provide security for their families