how much does business insurance cost by tonibraxton


									                                                                                                               0 6 /06 /03

In the April 11, 2003 issue of The Communicator, we discussed the fact that Initial Public Offerings (IPO’s) are not
working in our current economy. This drives the creation of new business starts to Venture Capital firms to provide
the funding required to float new ventures.

Typically, new businesses are created to provide a new product or service that is dependent upon one or several key
people who have the idea, the experience, and the enthusiasm to make the new venture succeed. Recognizing the
peril to the venture if the key person(s) cannot show up to perform their crucial leadership duties, brings into focus
how vulnerable the investors are to the good health and wellbeing of the people hired to make the venture a success.

THIS NICHÉ is a large one as to numbers of cases and as to the dimensions of the capital involved. Relationships
with Venture Capital firms will lead to substantial use of VENTURE CAPITAL DISABILITY INSURANCE.
Venture Capitalists realize their business faces perils and if those perils can be negated by reasonable cost insurance
plans, the likelihood of utilizing VENTURE CAPITAL DISABILITY INSURANCE is high.

The PRODUCT provides a broker with a position of uniqueness, for the VENTURE CAPITAL DISABILITY
INSURANCE is not a common product and is not offered by many sources. Because of the peril the plan
addresses it is quickly understood and appreciated by the investors.

The respected MERCK MANUAL lists over 5,000 diseases that can affect the Key Person(s). There are
uncountable numbers of accidents that can instantly effect the Key Person(s). Unlike personal insurance where we
recognize death is certain and disability only a probability, we must put into perspective that the investor’s interest is
not a lifetime interest but only an interest until the firm is afloat and profitable.

We cannot quantify such costs on a generalized basis for each case is custom built. It is with knowledge of past cases
that we can say that most venture capitalists will find the risk/reward ratio to be not only acceptable, but modest.

                                                 PLAN DESIGN
Monthly Benefits following a chosen elimination period can be designed to handle the ongoing and relentless
overhead of the firm, including the compensation of the Key Employees, the cost of added help and the losses due
to reduced production.

A Lump Sum benefit can be designed to step in at a chosen time (one year or longer) when it can be determined that
the Key Person has suffered a career ending disablement and provides relief to the investors of a failed investment.

                                             HOW TO PROCEED
Provide us a name, age, occupation, compensation, agreement, experience of the proposed insured(s) in this field,
the loss investors face if the Key Person(s) is unable to perform his duties relevant to the success of the venture.
                                                                    By W. Harold Petersen, RHU, DFP
The only difference between-a Key Person’s body and an industrial machine is that the human
body has a soul. The body has virtually no salvage value as to it’s working parts, and at rest is
an unproductive machine. But the body at work, like a machine at work, is very productive.

A machine or a body occasionally breaks down. It is important to get it repaired quickly and
back into production. Mechanics charge $100 per hour to fix a machine. The human body is
more complex and preproduced replacement parts are not always available. Therefore we must
hire the most expensive mechanics on Earth to get the body productive again.
                                  They are called Doctors.

As a society, we have learned to fear the cost of human body repair. Over eighty-five percent of
the American people have sought out insurance to help pay for the costs of such repair.
                               This is called Medical Insurance.

The people who own productive machines do not insure repair costs, but instead they insure the
loss of production, due to forces of nature that adversely affect the productivity of the machines.
                        This is called Business Interruption Insurance.

The loss created by fire, windstorm, flood or other interruptions to production may create a
burdensome loss to the owners, but buildi ngs can be rebuilt and machines can be repaired. The
firm suffers interruption, but not destruction. The Key People in the firm can reproduce it’s
physical facilities.

The loss of a Key Person machine is of greater concern, for in this machine is the knowledge,
experience and creativity that is the soul of the business. When accident or sickness affects the
Key Person machine, repair or rebuilding may be impossible. Financial relief is as logical as
work interruption due to physical plant destruction.
         This kind of Business Interruption Insurance is called Disability Insurance.

The Key Person machine at work directing the productivity of the physical components of the
business leads to success of the venture. The Key Person, broken, disabled and ineffective,
leads to failure of the venture. Statistically, disability is the most likely peril that will negatively
affect the Venture; Acts of Nature 1 / 1250, Disablement, 1 / 30.
      1. Facilities and overhead to produce a product or service
      2. The people who know how to produce a product or service.

                     Andrew Carnegie, one of America’s most successful industrialists of all
                     time is quoted, "Let flood or fire destroy my plant from the face of the
                     earth, but if I retain my organization, I would be whole in six months."
                     --Andrew Carnegie quoted by Samuel Harden Church, 18 December
                     1926. Also: "If I had to lose my mills and my money tonight, if I had my
                     men, I could start anew tomorrow."

 Venture Capital is frequently invested in the knowledge, the experience and capability of one
 or several people whose duty it is to make the venture a success. The loss of this talent can
 jeopardize the success of the venture.
                                 CAPITAL SITUATIONS
                    Fire, Liability, Business Interruption, Life, Disability
   Disability Insurance is frequently overlooked in securing the investments in venture
                                                capital firms
 Prudently most venture capital risks are lowered by the use of insurance to indemnify the
 investors(s) against periods of non-productively.
                THE PERIL                                          CHANCES OF IT HAPPENING
O Destruction of facilities by fire -            Chances are 1 /1200
O Death of a Key Person                 -        Chances are 1 / 150
O Disability of a Key Person            -        Chances are 1 / 30
                       23929 Valencia Boulevard, Suite 215, Valencia, California 91355
                           (661) 254-0006 (800) 345-8816 Fax (661) 254-0604
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