Save money on your business insurance premiums
by Ben H. Sherwood

Dealers, distributors, and manufacturers are all looking for ways to cut expenses without hurting their businesses. One area they should seriously investigate is business insurance expenses, including health care insurance options for employees.

I recently asked a friend of mine, who has a large insurance agency, if there were some good ways boat and motor dealers could save money on their business insurance. He came up with the following really good tips.

Get an annual checkup
Dealers, distributors and manufacturers should set up a meeting with their insurance agencies to review their present coverage and see what savings can be realized by increasing deductibles on facility insurance and health insurance, bumping up co-pays, and perhaps offering a health savings plan. This review should become an annual event for your business.

Higher business deductibles
Typically deductibles go from $250, $500, $1,000, $2,500 up to $5,000. Going to a $5,000 deductible may not offer enough savings versus a $1,000 or $2.500 deductible. It all depends on the values insured and the deductible credit the company uses. Check with your agent.

Scrutinize employee health insurance benefits
Dealers need to consider the possibility of shifting more costs to employees, which can result in employer savings.

Higher deductibles
Many businesses are having their employees pay a higher deductible, some as high as $1,000. Others are increasing that portion of the insurance premium employees have to pay. Although businesses usually don’t like to do this, and employees sure don’t like it, employers should consider it in a tough economy like we have now.

Institute an IRS Section 125 Cafeteria Plan
Section 125 Cafeteria Plans are one of the most underused employee benefits for small businesses today. These plans simply allow employees to withhold a portion of their salaries on a pre-tax basis to cover the cost of qualifying insurance premiums, medical expenses and dependent care expenses. Because Section 125 Cafeteria Plan benefits are free from federal and state income tax, an employee’s taxable income is reduced which increases take-home pay. And because the Section 125 Cafeteria Plan reduces employee gross income for purposes of income tax, the employer also enjoys a reduction in his payroll tax liability  The "qualified benefits" permitted to be offered in a IRS Section 125 are group term life insurance; medical, accident, and disability benefits; group legal services; and dependent care assistance.

The IRS has a cap of $5000 placed on the amount you can contribute to the account.

Advantages for employers
Employers can benefit from offering the option of enrolling in a flexible spending account to their employers. At first glance, it may seem that it is costly for employers to offer these plans, but when you look closer, you can see how they can benefit. Any employee that enrolls in the program can have up to $5,000 per year deducted from earnings and deposited into the account. This requires more work on the part of the employer in the Section 125 administration of the plans. As a participant, if you spend all the money in your plan, you won’t be able to use the plan for the rest of the year. However, any money left in your plan at the end of the year reverts to the employer. Many employers use this money to help pay for the administration of the plan. They also receive tax savings throughout.
 
Consider a Health Savings Account (HSA) plan
This is a tax-advantaged savings account available to taxpayers who are enrolled in a High Deductible Health Plan.  The funds contributed to the account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account, HSAs are owned by the individual, not the company, and any unused funds roll over and accumulate year over year if not spent.

Check out health insurance programs from industry associations–Norman-Spencer, Inc. and the Marine Retailers Association of America have formalized an agreement to offer health insurance to dealers can save up to 42% over other plans. Check it out at: www.mraahealthplans.com.

I would encourage dealers to set up a meeting right away with their insurance agencies, if they haven’t already done so, to review present coverage and to see if there can be significant savings with some of the above suggestions.

Ben H. Sherwood is an industry veteran and a  marketing consultant who operates Sherwood Marine Marketing in Pleasant Prairie, Wis.  He can be reached by phone at 262/694-6636 or via e-mail: ben@bensherwood.net.