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