05/29/2008

Umbrella Liability Insurance

Life presents us with many challenges. Whether we’re swimming upstream, fighting uphill battles, or just coasting, we do our best to weather the storms. Umbrella liability insurance (ULI) helps us prepare for unexpected financial storms. Personal liability due to accidents or injuries could result in legal claims against you. By providing liability protection above and beyond the basic coverage that homeowners/renters and auto insurance policies offer, ULI can protect you against the catastrophic losses that can occur if you are sued.

These days, it's not unusual to hear of millions of dollars in court judgments against individuals. If someone is injured in your home, or if you cause a serious auto accident, you could have to pay such a judgment. If you don't have an umbrella liability policy at the time of the accident, anything above the limits of your homeowners/renters or auto insurance policy will have to come out of your pocket.

ULI is often referred to as excess coverage. Your insurer will require you to have a basic liability coverage policy to start. If you are found to be legally responsible for injuring someone or damaging someone's property, the umbrella policy will either pay for the part of the claim in excess of the limits of your basic liability policy, or pay for certain losses that are not covered. Remember that certain types of liability claims are not covered under basic policies, but you can purchase ULI to get them covered.

ULI polices generally provide liability coverage worth $1 million to $10 million. You need to decide both how much insurance you need and how much insurance you can afford. Buy at least enough to match the value of all of your personal assets. You should also consider factors such as how often you have guests in your home, whether you operate a home-based business, how much you drive, whether you have teenage drivers in your home, and whether your lifestyle gives the impression that you have "deep pockets."

Almost any insurer who writes auto and home insurance policies will also sell umbrella liability policies. You may qualify for a multi-policy discount if you purchase an umbrella policy from your current insurer.

Talk to your friendly hometown banker about a personal referral to a professional insurance provider who will work with you to determine your coverage needs and help you select the products that will work best for you.

05/21/2008

Creative Ways to Lower College Costs

May is graduation month! Many plan to attend college, so let’s look at some ways to curb increasing college costs.

One surefire way to cut college costs is to enroll in a local community college for a couple of years, where costs are often substantially less than four-year institutions. Then, after two years, transfer to a four-year institution. Your child's diploma will be from the four-year institution, but your expenses won't.

Ask about tuition discounts or flexible repayment programs. For a discount, offer to pay the entire semester's bill up front, or schedule the money to be directly debited from your bank account.

Ask about accelerated programs that allow your child to graduate in three years instead of four. This can save you a whole year's worth of tuition and related expenses.

Earn college credits in high school by taking advanced placement courses or special academic exams. Your child may be able to take fewer classes in college, saving you money.

Take advantage of co-op courses. Cooperative education is where semesters of course work alternate with semesters of paid work at internships in local businesses.

Take a year off before starting college. It can give you some financial breathing room and allow your child to work and save money for a full year before starting college.

Attend a nearby college and live at home, even for a year or two, and substantially reduce costs by eliminating room-and-board expenses.

Take courses on-line if the college offers distance learning opportunities.

Investigate programs offered through the military, such as ROTC scholarship programs and the GI Bill. Local military recruiting offices or your child's high school guidance counselor can assist with this information.

Payments that grandparents (or others) make directly to a college aren't considered gifts for purposes of the federal gift tax rules. So, grandparents can be as generous as they want without having to worry about the tax implications for themselves. Keep in mind, though, that any payments must go directly to the college. They can't write checks to your child with instructions to apply them to the college bills.

Your hometown banker can help with college funding questions, whether you have 18 years or 18 days to go before college starts. Trust your hometown bank for all of your financing and investing needs.

05/15/2008

Health Insurance:  COBRA and HIPPA

Most of us count on our employer for health insurance coverage. But what would happen to your health insurance if you suddenly stopped working or no longer qualified for benefits? If something unexpected happened, you could be left without health coverage. Let's discuss some key issues regarding progress made in the areas of health care reform.

COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1986, is a federal law that protects employees and their dependents from losing health insurance coverage as a result of job loss or divorce. If you and your dependents are covered by an employer-sponsored health insurance plan, COBRA entitles you to continue coverage when you'd normally lose it. Most large employers are required to offer COBRA coverage. As an employee, you're entitled to COBRA coverage only if your employment has been terminated or if your hours have been reduced. However, your dependents may be eligible for COBRA benefits because of divorce, death, or certain other events.

If your employment has been terminated or if your work hours have been reduced, you can continue your health insurance for 18 months under COBRA. You can continue it for 36 months for other qualifying reasons. If your former spouse provided health coverage through work, COBRA can extend coverage for up to 36 months after the divorce or legal separation. You must pay the premiums, which cannot exceed 102 percent of the employer’s cost of the coverage. If you obtain other coverage or remarry before the 36 months are up, the COBRA coverage terminates. Even though COBRA is more expensive than what you previously paid, it's probably less than individual coverage. Your COBRA benefits and coverage will be identical to those provided to similarly enrolled individuals.

In 1996 HIPAA, The Health Insurance Portability and Accountability Act, took a significant step toward health-care reform in the United States by expanding COBRA provisions and creating other health-care rights. Some of its provisions are: 1) Allows workers to move from one employer to another without losing group health insurance, 2) Requires health insurance companies to accept small employers that apply for coverage, 3) Increases the tax deductibility of medical insurance premiums for the self-employed, 4) Pregnancy cannot be considered a pre-existing condition for a woman who's changing jobs if she was previously covered by a group health insurance plan.

Consult your home town banker for a professional health insurance referral.

05/08/2008

Estimating Your Retirement Income Needs

When do you plan to retire? Will you move to the vacation spot of your dreams? What will you do with all of that “free” time? All are valid questions for those looking toward retirement. A comfortable life after work involves planning for income to fund your retirement. Let’s look at some post-retirement income issues.

You work to fund your lifestyle that is filled with needs and wants. You have to determine if those needs and wants will change after you retire, then you can project what it will cost to fund them during retirement. Let’s start with everyday expenses like: housing, utilities, food, clothing, transportation, gifts, insurance, education, debts, taxes, travel, and insurance. Will spending in these areas change during retirement? Will some be eliminated? Pay off your house, car, and debts before retirement and you’ll have more money to spend in other areas. Remember two things in estimating retirement expenses: 1) medical insurance will increase as you get older; 2) the cost of living will increase an average of three percent per year.

Deciding what age to retire is not easy. And you have to estimate how long you'll be retired. Why? The longer your retirement, the more years of income you'll need to fund it. You must also estimate your life expectancy. You can use government statistics or life insurance tables to get a reasonable estimate of how long you'll live. There's no way to predict how long you'll actually live, but with life expectancies on the rise, assume you'll live longer than you expect.

What sources of retirement income will you have? You may have a pension that will pay monthly benefits that you can add to your anticipated Social Security benefits. Additional income may include a 401(k) retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest and the rate of investment return. If you plan to work during retirement, your job earnings will be another source of income.

With good planning, your expected income sources will be more than enough to fund a lengthy retirement. But if it looks like you'll come up short, don't panic. There are steps that you can take to bridge the gap. Try to cut current expenses. Shift your assets to investments that could substantially outpace inflation. Work part-time during retirement for extra income. Consider delaying your retirement for a few years.

Consult your friendly home town banker for professional assistance in planning for your retirement.

05/01/2008

You're The Boss!

Thinking of going into business for yourself? Whether you begin a start-up operation, plan to buy an existing company, or purchase a franchise operation, being your own boss can be very rewarding. Let’s discuss some key components to help you get your business started.

Building a business from the ground up is more risky than if you were buying an existing business or a franchise. Existing businesses and franchises have some operating history that you can use to gauge the likelihood of your success in the business. Most successful start-ups begin with a proven product or service and work with these to achieve some level of profit and success. Plan to raise enough financing to make a go of it. Banks or investors will want to see a plan of attack before they will approve a loan for your start-up. Always start with a strong business plan.

A business plan helps to organize thoughts and ideas about how the business should be developed. It creates a plan of attack that will help you stay focused, and it will assist you in getting financing. A good business plan includes:

• Strong introduction: The executive summary will be the first element that potential financiers or investors will see. Make it pop!
• Business description: You need to present a clear vision of what your business will be and how you see it developing over the next 5-10 years.
• Market positioning: Include details on the size of your market, anticipated sales inside the market, and how you plan on beating your competitors.
• Financial objectives: Prove that your business will make a sound investment by showing that you have evaluated the risks and rewards of your business. Project expected income and present a cash flow statement.
• Other areas: Your marketing plan, product development and delivery channels should go here.

The advantage to buying an existing business is that it has a proven track record of success. It is not unusual for the previous owners to stay on for a period of time to assist with the transition and to make introductions to clients.

The advantage to buying a franchise is that you also buy marketing support, business strategy, name recognition, and assistance with site location. You also give up some things, like never having the final say on decisions, never being entitled to all of the profits of your business, because franchisors typically take a percentage as part of their fees.

Talk to your friendly hometown banker when you’re ready to open your own business.

Back to President's Articles

05/29/2008

Umbrella Liability Insurance

Life presents us with many challenges. Whether we’re swimming upstream, fighting uphill battles, or just coasting, we do our best to weather the storms. Umbrella liability insurance (ULI) helps us prepare for unexpected financial storms. Personal liability due to accidents or injuries could result in legal claims against you. By providing liability protection above and beyond the basic coverage that homeowners/renters and auto insurance policies offer, ULI can protect you against the catastrophic losses that can occur if you are sued.

These days, it's not unusual to hear of millions of dollars in court judgments against individuals. If someone is injured in your home, or if you cause a serious auto accident, you could have to pay such a judgment. If you don't have an umbrella liability policy at the time of the accident, anything above the limits of your homeowners/renters or auto insurance policy will have to come out of your pocket.

ULI is often referred to as excess coverage. Your insurer will require you to have a basic liability coverage policy to start. If you are found to be legally responsible for injuring someone or damaging someone's property, the umbrella policy will either pay for the part of the claim in excess of the limits of your basic liability policy, or pay for certain losses that are not covered. Remember that certain types of liability claims are not covered under basic policies, but you can purchase ULI to get them covered.

ULI polices generally provide liability coverage worth $1 million to $10 million. You need to decide both how much insurance you need and how much insurance you can afford. Buy at least enough to match the value of all of your personal assets. You should also consider factors such as how often you have guests in your home, whether you operate a home-based business, how much you drive, whether you have teenage drivers in your home, and whether your lifestyle gives the impression that you have "deep pockets."

Almost any insurer who writes auto and home insurance policies will also sell umbrella liability policies. You may qualify for a multi-policy discount if you purchase an umbrella policy from your current insurer.

Talk to your friendly hometown banker about a personal referral to a professional insurance provider who will work with you to determine your coverage needs and help you select the products that will work best for you.

05/21/2008

Creative Ways to Lower College Costs

May is graduation month! Many plan to attend college, so let’s look at some ways to curb increasing college costs.

One surefire way to cut college costs is to enroll in a local community college for a couple of years, where costs are often substantially less than four-year institutions. Then, after two years, transfer to a four-year institution. Your child's diploma will be from the four-year institution, but your expenses won't.

Ask about tuition discounts or flexible repayment programs. For a discount, offer to pay the entire semester's bill up front, or schedule the money to be directly debited from your bank account.

Ask about accelerated programs that allow your child to graduate in three years instead of four. This can save you a whole year's worth of tuition and related expenses.

Earn college credits in high school by taking advanced placement courses or special academic exams. Your child may be able to take fewer classes in college, saving you money.

Take advantage of co-op courses. Cooperative education is where semesters of course work alternate with semesters of paid work at internships in local businesses.

Take a year off before starting college. It can give you some financial breathing room and allow your child to work and save money for a full year before starting college.

Attend a nearby college and live at home, even for a year or two, and substantially reduce costs by eliminating room-and-board expenses.

Take courses on-line if the college offers distance learning opportunities.

Investigate programs offered through the military, such as ROTC scholarship programs and the GI Bill. Local military recruiting offices or your child's high school guidance counselor can assist with this information.

Payments that grandparents (or others) make directly to a college aren't considered gifts for purposes of the federal gift tax rules. So, grandparents can be as generous as they want without having to worry about the tax implications for themselves. Keep in mind, though, that any payments must go directly to the college. They can't write checks to your child with instructions to apply them to the college bills.

Your hometown banker can help with college funding questions, whether you have 18 years or 18 days to go before college starts. Trust your hometown bank for all of your financing and investing needs.

05/15/2008

Health Insurance:  COBRA and HIPPA

Most of us count on our employer for health insurance coverage. But what would happen to your health insurance if you suddenly stopped working or no longer qualified for benefits? If something unexpected happened, you could be left without health coverage. Let's discuss some key issues regarding progress made in the areas of health care reform.

COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1986, is a federal law that protects employees and their dependents from losing health insurance coverage as a result of job loss or divorce. If you and your dependents are covered by an employer-sponsored health insurance plan, COBRA entitles you to continue coverage when you'd normally lose it. Most large employers are required to offer COBRA coverage. As an employee, you're entitled to COBRA coverage only if your employment has been terminated or if your hours have been reduced. However, your dependents may be eligible for COBRA benefits because of divorce, death, or certain other events.

If your employment has been terminated or if your work hours have been reduced, you can continue your health insurance for 18 months under COBRA. You can continue it for 36 months for other qualifying reasons. If your former spouse provided health coverage through work, COBRA can extend coverage for up to 36 months after the divorce or legal separation. You must pay the premiums, which cannot exceed 102 percent of the employer’s cost of the coverage. If you obtain other coverage or remarry before the 36 months are up, the COBRA coverage terminates. Even though COBRA is more expensive than what you previously paid, it's probably less than individual coverage. Your COBRA benefits and coverage will be identical to those provided to similarly enrolled individuals.

In 1996 HIPAA, The Health Insurance Portability and Accountability Act, took a significant step toward health-care reform in the United States by expanding COBRA provisions and creating other health-care rights. Some of its provisions are: 1) Allows workers to move from one employer to another without losing group health insurance, 2) Requires health insurance companies to accept small employers that apply for coverage, 3) Increases the tax deductibility of medical insurance premiums for the self-employed, 4) Pregnancy cannot be considered a pre-existing condition for a woman who's changing jobs if she was previously covered by a group health insurance plan.

Consult your home town banker for a professional health insurance referral.

05/08/2008

Estimating Your Retirement Income Needs

When do you plan to retire? Will you move to the vacation spot of your dreams? What will you do with all of that “free” time? All are valid questions for those looking toward retirement. A comfortable life after work involves planning for income to fund your retirement. Let’s look at some post-retirement income issues.

You work to fund your lifestyle that is filled with needs and wants. You have to determine if those needs and wants will change after you retire, then you can project what it will cost to fund them during retirement. Let’s start with everyday expenses like: housing, utilities, food, clothing, transportation, gifts, insurance, education, debts, taxes, travel, and insurance. Will spending in these areas change during retirement? Will some be eliminated? Pay off your house, car, and debts before retirement and you’ll have more money to spend in other areas. Remember two things in estimating retirement expenses: 1) medical insurance will increase as you get older; 2) the cost of living will increase an average of three percent per year.

Deciding what age to retire is not easy. And you have to estimate how long you'll be retired. Why? The longer your retirement, the more years of income you'll need to fund it. You must also estimate your life expectancy. You can use government statistics or life insurance tables to get a reasonable estimate of how long you'll live. There's no way to predict how long you'll actually live, but with life expectancies on the rise, assume you'll live longer than you expect.

What sources of retirement income will you have? You may have a pension that will pay monthly benefits that you can add to your anticipated Social Security benefits. Additional income may include a 401(k) retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest and the rate of investment return. If you plan to work during retirement, your job earnings will be another source of income.

With good planning, your expected income sources will be more than enough to fund a lengthy retirement. But if it looks like you'll come up short, don't panic. There are steps that you can take to bridge the gap. Try to cut current expenses. Shift your assets to investments that could substantially outpace inflation. Work part-time during retirement for extra income. Consider delaying your retirement for a few years.

Consult your friendly home town banker for professional assistance in planning for your retirement.

05/01/2008

You're The Boss!

Thinking of going into business for yourself? Whether you begin a start-up operation, plan to buy an existing company, or purchase a franchise operation, being your own boss can be very rewarding. Let’s discuss some key components to help you get your business started.

Building a business from the ground up is more risky than if you were buying an existing business or a franchise. Existing businesses and franchises have some operating history that you can use to gauge the likelihood of your success in the business. Most successful start-ups begin with a proven product or service and work with these to achieve some level of profit and success. Plan to raise enough financing to make a go of it. Banks or investors will want to see a plan of attack before they will approve a loan for your start-up. Always start with a strong business plan.

A business plan helps to organize thoughts and ideas about how the business should be developed. It creates a plan of attack that will help you stay focused, and it will assist you in getting financing. A good business plan includes:

• Strong introduction: The executive summary will be the first element that potential financiers or investors will see. Make it pop!
• Business description: You need to present a clear vision of what your business will be and how you see it developing over the next 5-10 years.
• Market positioning: Include details on the size of your market, anticipated sales inside the market, and how you plan on beating your competitors.
• Financial objectives: Prove that your business will make a sound investment by showing that you have evaluated the risks and rewards of your business. Project expected income and present a cash flow statement.
• Other areas: Your marketing plan, product development and delivery channels should go here.

The advantage to buying an existing business is that it has a proven track record of success. It is not unusual for the previous owners to stay on for a period of time to assist with the transition and to make introductions to clients.

The advantage to buying a franchise is that you also buy marketing support, business strategy, name recognition, and assistance with site location. You also give up some things, like never having the final say on decisions, never being entitled to all of the profits of your business, because franchisors typically take a percentage as part of their fees.

Talk to your friendly hometown banker when you’re ready to open your own business.

Back to President's Articles