For real estate professionals, there are a number of different types of insurance to consider, particularly if your firm hires one or more employees. While some insurance coverages are required by law and serve to protect your employees’ basic rights, other insurance types are optional but can serve as part of a comprehensive benefits package for employees. Taking the time to consider which coverages your business will need for your employees is a critical part of protecting the people that help to make your business what it is.
The types of insurance for your employees covered in this article are:
- Workers’ Compensation Insurance
- Key Person Insurance
- Group Health Insurance
- Group Life Insurance
- Group Disability Insurance
Workers’ Compensation Insurance
Workers’ compensation insurance falls under the broad category of liability insurance. It is designed to protect your real estate business from any potential lawsuits arising from employees getting injured or sick in the course of their work. It also provides a financial benefit to your employees by making monetary payouts to injured employees to provide for their medical bills and the time when they are unable to work. This type of insurance is no-fault, so it pays regardless of which party is at fault for the injury.
In many states, workers’ compensation is required by law for companies that hire employees. If you are a solo real estate professional such as an independent real estate agent, you may not need workers’ compensation insurance. However, if you employ staff such as a secretary, clerk, or other agents who are not independent contractors, you may be required to purchase workers’ comp.
A workplace injury is defined as any injury that occurs because of work-related activities. This can include injuries that happen in the workplace as well as ones that occur while an employee is traveling for work-related duties. However, it does not provide coverage for any injuries that occur while an employee is commuting to or from the workplace from home.
Workers’ compensation insurance also supports employees who become ill because of their workplace environment. For example, if your home inspection company often inspects houses that contain mold, and an employee develops a respiratory illness from frequent mold exposure, workers’ compensation insurance would cover his or her medical bills. By accepting the money, the employee agrees not to sue your company, even if it is at fault for the repeated exposures to mold.
Another example of an injury covered by workers’ compensation insurance might be: a real estate agent who is an employee of your company and is en route to a meeting with a potential client. On the way there, his car is struck by another car that has run a red light. The employee suffers a broken leg and is unable to work for several weeks. His workers’ compensation insurance would cover his medical costs as well as a part of his usual salary for the period of time he was unable to work.
The provisions of workers’ compensation insurance vary somewhat from state to state, so it is important to familiarize yourself with your state laws. Your state may have special requirements for how much of an employee’s regular salary it pays while they are unable to work. Some states allow for a maximum number of non-working weeks before salary benefits are terminated. Similarly, certain states have limits on the type of illness or injury they must cover.
Key Person Insurance
Key person insurance protects your real estate firm if a key owner, partner, manager, or other important employee unexpectedly dies. If you operate as a solo real estate professional, your business likely does not need key man insurance. However, if you have a more complex business with multiple partners, shareholders, investors, or officers, key person insurance may be appropriate for your business.
With key person insurance, your company takes out a life insurance policy on one or more key employees, with your company as the beneficiary. Your firm is responsible for paying the premiums and will receive a payout if the person dies.
Depending on your real estate business’ organizational structure, key people may include company owners, managers, top salespeople, or others. Essentially, key persons are defined as employees whose work contributions and skills are integral to the success of the company.
If one of these people were to die unexpectedly, your business could potentially suffer. You would need a significant adjustment period to learn to operate without the business that the particular employee brought in. Many companies also suffer productivity and organizational setbacks because of the amount of time they need to reallocate the duties of the late employee. He or she may have had clients that need to be reassigned, projects that need to be taken on, and more. Key person insurance is designed to help companies survive the loss of the people who are central to their operations. It gives them a safety net for the time in which they are trying to restructure.
Other considerations of key person insurance include the time and money it requires to replace late employees, losses in customer relationships, lost shareholders, loan payoffs, or even, in certain cases, liquidation. If your company would suffer significantly from the loss of a central employee or another figure, key person insurance may be a wise investment. It can often help businesses survive this tricky transitional period.
Real estate businesses rely on customer relationships to operate successfully. Often, real estate businesses find themselves struggling to adjust after the death of an employee because they left behind years of establishing relationships with clients. It takes time, effort, and money to restructure and rebuild those relationships with old clients and new employees. Some customers may not be interested and end their services.
For example, a company may employ a real estate agent who has spent many months helping a customer sell his house. They have gotten to know one another, and the customer likes and trusts the agent because of their long history together. What is more, she has offered him certain benefits for putting his house on the market that he appreciated. They have a distinct relationship of trust, and he likes her work. If the real estate agent suddenly passes away, the customer may not feel comfortable with an alternative agent and may walk away from the contract altogether.
Key person insurance is designed to offer protection from situations like these. Although it may come across as preparing for an extreme situation, having this coverage in place could potentially save your business.
Group Health Insurance
Many companies offer health insurance for their employees under a group health insurance policy. By law, businesses with fewer than 50 employees in total are not required to supply health insurance. Some small businesses choose to provide this insurance anyway in order to attract and retain valued employees. Larger companies must do so and so should review their choices carefully when deciding on a policy.
It’s a good idea to provide health insurance for the employees of your real estate firm. Studies show that these policies are consistently one of the most important benefits to workers. Offering a health insurance plan makes you more appealing to prospective employees, so bear that in mind when considering what to do. Offering health insurance can also give your business some helpful tax benefits. Monthly premiums count as business expenses and, therefore, are deductible. Meanwhile, since any payment made by employees for insurance is made using pre-tax dollars, your company pays lower payroll taxes.
Health insurance requires you to pay monthly premiums toward coverage. These usually come from a combination of company and employee funds. A certain amount of funds are withheld from each employee’s pay each month to go toward their health insurance policy. The cost of your premiums varies significantly based on the insurance plan that you select. In return for paying premiums, the insurance company will help your employees pay for the cost of medical care that they need.
There are many different options for group health insurance policies. These can be daunting to approach. You will need to decide what your company will offer in coverage, medical networks, and more. This, in turn, will affect your monthly premiums, copayments, and deductibles. It is a complex decision with a lot of considerations. It may be helpful to consult a professional, so you can make an informed choice that is right for your business and your employees.
Employers have a certain amount of freedom in choosing their employees’ health insurance policy. They can decide on monthly premiums, the extent of coverage, and whether the policy extends to employee dependents.
Group Life Insurance
Group life insurance is a life insurance policy on your individual employees. Under policies like these, your employees’ family and dependents will receive a certain sum of money in the event of his or her death. Employees choose their beneficiaries ahead of time when selecting their coverage. It is a simple way to supply some additional emotional security for employees in the event of an unexpected death.
Group life insurance is so called because companies take out a policy for all their employees together. These policies are guaranteed issue. This means that they apply to everyone equally without them needing to supply a medical history or a clean bill of health. Individual life insurance policies usually require a physical medical exam, and individuals can be disqualified for pre-existing medical conditions. All employees are eligible for group life insurance purely by virtue of working for your company.
Some life insurance policies also include an accidental death and dismemberment benefit, which is additional coverage for people who are killed in accidents, as opposed to death from an illness or other natural cause.
Some group life insurance policies also include coverage for the employees’ dependents. This usually does not pay the same full amount as for the employee. Instead, it supplies a portion of the coverage for some or all of his or her dependents. Many people prefer these plans to come through their employer rather than seeking them out from other sources because the coverage can cost less than insurance in the individual market.
Group Disability Insurance
Group disability insurance is a type of insurance that supports employees if they become disabled and can no longer work. A disability is usually defined as anything that keeps them from performing their regular duties. Disability insurance is primarily focused on protecting employees for disabilities that they suffer outside of work since workers’ compensation covers work-related injuries.
For example, if one of your employees at your home inspection company fell down the stairs at home on their day off and was no longer able to walk, they would not be able to perform their duties as an inspector anymore. In this event, disability insurance would provide this employee with a payment that would replace a part of their income while they were unable to work.
Disability insurance falls into two categories: short term and long term. Short-term disability insurance is intended for individuals who become disabled for shorter periods of time. They must leave work for that period but will eventually be able to return. During this time, their policy will supply a portion of their salary to them, so they can support themselves even while they are not working.
Long-term disability insurance is for more serious disabilities that do not resolve in the short term or do not resolve at all. These policies take much longer to kick in after the onset of the disability but also pay more. There are many different requirements for when an employee qualifies for long-term disability insurance. They require a benefits application after the onset of the disability.