Small Business Management Ch 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

Term insurance

A form of insurance that does not accumulate any value over the contract term

Civil Rights Act 1991

A series of acts by Congress that prohibit discrimination on the basis of race, color, religion, sex, or national origin

Rehabilitation Act of 1973

An act of Congress that provides training for workers who are injured on the job

Americans with Disabilities Act of 1990

An act of Congress that requires that businesses make provisions for access by disabled people

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 the insurance company

Fidelity bonds

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

Coverages

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

Credit insurance

Covers abnormal losses from credit customers not paying their bills

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 for taxation

Employee theft

Misappropriation of business property by employees of that business

Adverse possession

Occurs when the owner of the real property does not enforce property rights and allows a non owner to use the property as if it were his/her own

Product liability

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

Personnel insurance

Protect both you and employees and include key person insurance, life, disability, and medical coverage insurance

Protected classes

States of beings that are expressly prohibited from suffering discrimination: Race, color, religion, sex, gender, national origin, age, disability

Insurable value

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

-Maintain tools and equipment in good condition -Provide appropriate safety equipment and training in its proper use -Provide medical examinations

The best way to meet the basic laws of OSHA is to provide a place of employment that is free of recognized hazards and to:

Business risk

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

-Meet with whomever is conducting the audit -Establish that you/ you and the board have final authority to approve the audit plan -Write an engagement agreement -Provide efficient authority to the auditor

To be sure that a business audit effectively meets your goals in having it conducted, you should?

-Financial risk from types of investment -Nonpayment of debts owed to business -Changes in technology that render businesses obsolete

What are common sources of business risk?

-Tangible property -Building and land -Computers and data -Intangible property -Resulting from events involving personnel -Violations of tax regulations -Employees violation of government regulations -Internal audit -Insurance

What are different things business owners have to manage risk for?

-Make specific plans and arrangements for events -Creating and enforcing an appropriate code of conduct for yourself and employees -Ensuring that valuable assets are physically secured -Actively working to get ride of any hazards in the workplace

What are four things a business can do to minimize the probability of an event occurring and the amount of loss experienced?

-Employee theft -Violation of governmental regulations -Loss of key employees

What are some business risks related to personnel?

-Must be calculable -Value of any loss must be measured in dollars -Must have an insurable financial interest -Pool of potential policy holders must be a sufficient size

What are the requirements for a risk to be able to be insured?

-Internal Revenue Service -Equal Employment Opportunity Commission (EEOC) -Occupational Safety and Health Administration (OSHA)

What are the three agencies who's rules small businesses find problematic?

-Related to property of the business -Related to personnel -Related to customers and others

What are the three types of events that cause business risk?

-Property/catastrophic -General liability -Product liability

What types of insurance are not required for businesses but good to have?

-Unemployment -Wokers comp (illness/injury) -Vehicle

What types of insurance are required for businesses?

-The scope of coverage -All exclusions -Types of employee dishonesty not covered -Coverage for employee actions off-premise

When obtaining fidelity bonds, you should consider what?

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 the asset

Key employees

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

-Injuries suffered while upon business property -Injury or damage that is caused during the use of the business's products

What are the two primary areas that risks related to customers and others arises?

-Firewall -Antivirus program -Antispyware program

What are three things you can install to manage risk to computers or data?