Exclusions

Twice in two weeks I have reviewed professional liability insurance policies with an exclusion for:

"any claim arising out of or connected with... an entity... in which any insured is a director, officer, partner or principal stockholder."

So, a consultant who volunteers as a board member for a nonprofit who at the same time acts as an advisor to the entity, is not covered.

Main Point: Read your insurance policies (or have someone else read them) focusing on the exclusions. Consider how each impacts the operation of your business.

Beyond Simple Life Insurance

Anna Vander Broek, 12.16.08, 09:35 AM EST

Life insurance gives your family security if you die, but it can also help you while you're still alive.


You're young and invincible. The phrase "life insurance" probably means even less to you than the phrase "saving for retirement."

Even if you're not ready to buy life insurance for yourself (or are happy with the minimal coverage you may be already getting through your employer), it's still good to understand what life insurance is all about. It might be something you're interested in.


First, why would you want life insurance? If you have people who depend on you, such as a spouse or children, life insurance is used as a security measure to make sure they are taken care of if anything were to happen to you. If you're single and without debt, you don't necessarily need life insurance as a protective measure now.
Stay invested in the right mutual funds. Click here for NoLoad Fund*X for the current model portfolio.

Life insurance can also be used as an investment opportunity.

It is complicated, but there are basically two different types; term and permanent. Permanent can be broken down into whole, universal and variable insurance.

Term life insurance is pretty much like any other form of insurance. You get exactly what you pay for. Term is probably the type of coverage you're getting from your employer. Since term life insurance is temporary, it's usually inexpensive. If you do have a family, term insurance is important and many will pay for it until their children are out of college (when presumably they can support themselves).

Permanent insurance combines insurance with an investment or savings option. The premium of permanent life insurance is going to be higher than that of term. The additional money is then invested.

How much life insurance do we need?

"How much life insurance do we need? I make about $100K; my husbank $50K; we have a daughter who is about 1 year old. We have no debt other than our mortgage which is $360K. I have a total of $985K term insurance and he has $600K term insurance but I think I may need more because I make more. Please advise."

Determining the right amount of life insurance depends on a number of factors. If you had no children, or your husband earned enough to support your current lifestyle for himself and your child, there might not be a need for insurance. But in your case the loss of your income would have a major impact on your family. Financial planners usually recommend you have enough life insurance to replace your income until your youngest child is 21. After that your widowed spouse will have only himself to provide for and will have had time to make a career change, if necessary, so that he is ready to do so.

You may qualify for a Social Security Survivor Benefit to replace some of that income. (See the Social Security Administration website to determine the number of quarters of work required for your current age.) Assuming you are age 35 and qualify, your family would receive around $1,760 per month in benefits until your child is 16. You also have not indicated if you have any savings which your spouse could use to supplement his income.

Not all of your income needs replacing, as some is lost to taxes. However you should consider whether you need to cover the non-monetary benefits you may get, such as health insurance and dental insurance. Also decide whether you want insurance to pay off your mortgage or provide for a college education.

Assuming you want to replace 75 percent of your income ($75,000). If you receive Social Security Survivor Benefits (21,000) you will need to replace $54,000 per year for 15 years, and $75,000 for 5 years (between your child's age 17 and 21, when no SSDB is received). With a 4 percent rate of return - about the average inflation rate - you would need a lump sum of $1.5million. Add in your mortgage and a college fund and the amount jumps up to about $1.9million.

This is just a rough estimate and you should consult a financial planner or insurance agent to make a more precise determination for both you and your husband. It is most important not to cancel any current policies before you have put new policies in place and remember that the younger and healthier you are, the less life insurance will cost.

Insurance Sneak Peek 2009

Brian Zajac, 12.22.08, 06:00 PM EST
After a difficult year, insurers are hoping for a rebound. Bullish and bearish analysts offer their outlook.

It is easy, in hindsight, to see that life insurers were out of favor in 2008. Is this a buying opportunity, or will these stocks continue the downward trend? Liquidity concerns have dampened investment income. Some insurers, faced with investment losses, are trying to raise capital through the Troubled Assets Relief Program. San Francisco analytical research firm StarMine steered us to two highly ranked industry analysts, one a bull, the other a bear, to comment on the outlook for the industry.

StarMine cites Colin Devine, Managing Director for Citigroup Investment Research, as one of the most bullish analysts tracking insurance stocks.


The Watch List

Devine's stock selections have all seen steep declines in the market in 2008, but they fit in with his buying opportunity stance. All trade at less than seven times the next 12-month earnings estimates, according to Thomson IBES consensus figures. He is somewhat cautious about the fundamentals of Lincoln National (nyse: LNC - news - people ) but considers it to be a takeover target.

Picks

Ameriprise Financial (nyse: AMP - news - people )
Manulife Financial (nyse: MFC - news - people )
Lincoln National

Forbes Industry: Insurance
StarMine Industry: Insurance
Analyst Name: Andrew Kligerman
Company: UBS
Outlook: Bearish

UBS Managing Director & Senior Research Analyst Andrew Kligerman is among the most bearish of analysts tracking the insurance industry, according to StarMine.

The Big Trend

It is going to be a binary year, says Kligerman. He explains, "There are going to be big winners and big losers." He adds that we still have not seen the worst out of commercial mortgage-backed securities. The insurers that are most exposed to these investments will feel the pain as investment losses erode capital. Portfolio quality is critical to get insurers through these tough times. Kligerman's stock picks and pans follow this view.

The Misplaced Assumption

Not all life insurers are created equal. That is, they do not manage risk equally. Yet the industry tends to move in unison in the stock market. Life insurers have been hit hard in the market in 2008. Closer detail to each firm's investment portfolio is needed.

The Bold Prediction

From a merger and acquisition standpoint, MetLife (nyse: MET - news - people ) and Prudential (nyse: PRU - news - people ) will have opportunities to take advantage of those insurers in search of capital. Kligerman likes both companies because of their sound capital levels, liquidity and they have diverse and defensive investment portfolios.

The Watch List

Principal Financial Group (nyse: PFG - news - people ) is one stock, in particular, that Kligerman thinks investors should avoid. He says that Principal has some pluses, such as top-notch global asset management and pension businesses, with talented management. His concern is that the company has a higher risk in its investment portfolio. He points out that Principal's commercial mortgage-backed securities and commercial mortgage loan-related investments represent 150% of equity, highest of its peer group, and its corporate bonds are vulnerable to realized losses.