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When running a small family-based business having the right insurance plan can be a source of great benefits in terms of health coverage. This is especially important for the “spouse employee” situation.

What is spouse-employee insurance?

From the insurance point of view, a spouse-employee is the worker of a business who is a spouse to the business owner but is not an owner themselves or a professional specialist. A spouse-employee cannot be classified as an “independent contractor” as well. Speaking simply, the spouse of the business owner should work as a simple employee with no formal power to influence the profits or the decision-making process within the business.

There are a lot of elements that the IRS takes into account when qualifying a business owner’s spouse as an employee. For instance, if the spouse hare a share of more than 2% in a sub-chapter S corporation then they are classified as a business owner even if they work at the enterprise as an employee.

What’s the point?

There are certain benefits of having employee-spouse insurance:

1. The cost of covering accidents and health is deductible by the business owner if there’s such insurance option provided to his or her spouse.

2. The costs of coverage and medical bills are not included into the gross income of the spouse-employee.

In most cases, health and accident coverage the business owner gets as an employee of his own business is still subject to taxation as it is regarded as income. However, we all know that the business owner and his or her spouse-employee live in the same household and usually have the same family budget. So, if the spouse is hired as an ordinary employee the business owner can cut insurance costs and the premiums paid are not regarded as income. As a result, the spouse-employee gets health insurance free of charge. Sure, it’s the business insurance policy that pays the premiums, but it’s not included in their family budget. So if the business owner hires his spouse or any other family members as legal employees, they can benefit from virtually free health and accident insurance that the business pays for them. (more…)

When you decide to insure your house, you’ll be asked to set a limit for coverage on contents of your house. And the higher is the limit the heftier your premiums will get. Some providers will let you cover your house’s contents without a specific limit and this will cost you even more in premiums, while you will only be reimbursed with the actual value of the damaged contents in case of an insurance situation, and not a cent more.

The main problem here is while the typical amounts of coverage may seem like large sums of money, people often tend to underestimate the value of their house’s contents and get lower coverage, risking being insured inadequately. For a typical house to be covered adequately the coverage limit should start somewhere around $100,000. However, the best way to get an exact amount is to make an inventory of all the items in your house and have the insurance agent to evaluate it according to their current value.

Underinsurance

You should keep in mind that some insurance companies use the principle of averaging when paying out claims. This means that the amount you will be reimbursed with will be based on the overall coverage amount you have for your entire house, and not the actual value of its contents. This means that if you have a lower amount of coverage than the overall value of your house contents then you’ll be paid out only a partial sum instead of reimbursing the actual value of items damaged. This can even apply if you claim for a single item being damaged, which is below your policy limit. (more…)