How to Value an Investor's Stake

I'm currently looking at a draft version of an entrepreneurship course written by, among others, people from Cambridge's Judge Institute, and hosted by Epigeum.
Something that I found particularly helpful was how to decide what
percentage of a company to sell to an investor for the particular amount
of money the company needs. I've summarised it here.

The Value of a Stake

If the company is seeking capital worth c, then the issue is to calculate s, the percentage of the equity that should go to the investor providing that capital.

Firstly, assuming this is venture capital, the investor will look to exit probably within five years. Call this number of years y. Let r be the amortised annual rate of return that they desire, say 45%.

Hence, we can say that when the business is sold after those y years, the investor's stake should be worth w = c(1 + r)^y, as this provides the desired rate of return.

Therefore, the stake is simply the fraction that w is of the selling price (market value), p, of the business. Of course, how does one estimate p?

The
answer lies in using the Price/Earnings (PE) ratio for a similar,
established, company, which details their worth as compared to their
sales. Assuming that we can predict the likely earnings of the company
in y years' time, then we can multiply this by the PE ratio in order to obtain p.

Investors
may well discount the PE ratio, either because they do not believe it
to be realistic, or because of the perceived risk, or because the
expected revenue is uncertain.

As an example, assume a £1 million investment is needed, that r = 45%, and y
= 5. This means that w = £6.4 million. If projected sales in year 5 are
£1 million, with a PE ratio of 15, p = £15 million. Thus, the initial
stake would be 6.4/15 or 43%.

Which is food for thought. It does
very clearly show how VC investors "need" to take very large equity
stakes in order to make the desired rates of return. Hardly surprising,
but it's nice to at least vaguely understand the mathematics behind it
all.

Understanding Dilution

This brings us neatly on to what actually happens when you sell the stake.

Let's
say that an investor offers you the £1 million for 43% of the equity.
That means that the investor is valuing the entire company (prior to the
investment) at £2.33 million, and in particular, valuing the 57% stake
you will be left with at £1.33 million.

Suppose that prior to the
investment the total number of issued shares (all owned by the
founders) is 10,000. This means that the price placed on those shares is
£133/share.

Why is it not the case that the
price is calculated based on £1 million for 43% of 10,000 (giving
£233/share), leaving the founders' 57% stake being worth £1.33 million?

Whilst the ownership percentages would be correct, this is not done because dilution takes place. In other words, the company issues new shares to the investor, rather than re-assigning existing shares.

In
the above example, given a price of £133/share, the investor must be
given £1 million/£133 = 7,518 shares. Post-investment, the company will
be worth a total of £2.33 million, divided into 17,518 shares. The
founders will hold their 10,000 shares (as before), but these are now
only 57% of the company, whilst the investor will hold 43% (17,518
shares), worth a total of £2.33 million * 0.43 = £1 million.

There
you have it: the end result is as proposed, i.e. the investor bought
the agreed percentage for the agreed price. The only somewhat
potentially confusing part is how this is brought about by dilution,
rather than share re-distribution.

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Steve Johnson on Product Management

More notes from another Business of Software 2008 lecture by Steve Johnson from Pragmatic Marketing.
He talks about what product managers' role is, what they actually end
up doing, and what they need to do, in order to be meaningful
representatives of the actual product's users.

• Companies
  tend to start off as technology-driven, then become sales-driven (each
  new sale requires custom development), then become marketing-driven
  (lots of money spent on their brand image).
• Then they cut costs,
  and go full circle to technology-driven, and repeat the cycle. Good
  product management can help to break this cycle.
• Illustration of
  how wills are only executed: you are already dead when the will gets to
  court. So the document needs to be long enough to deal with all
  possible arguments.
• Application specifications have the
  advantage that the specifier is normally still alive when the
  development teams come to implement them!
• But we keep writing
  specification documents (product requirements, marketing requirements,
  functional specifications...) in order to cover all managers'
  worries/requests.
• The right answer is not to create more
  artefacts. Tightening your grip will mean more slips through your
  fingers. Instead it's to have someone who really understands what's
  needed, and can back up their assertions with evidence.
• Many
  companies are like Star Trek (original series): Spock (development)
  logical, trying to be human. Bones (marketing) upset about what he
  hasn't got, or what he's being asked to work with. Kirk (sales) always
  committing the ship to more than it can do. Scotty (product
  manager/sales engineer) lies to Kirk at all times, then says "OK, let's
  go!".
• Agile development crowd wants to improve these
  development/specification processes by having a customer representative
  on hand to try out each iteration on.
• Problem: most of us don't program for individuals. We program for multiple customers!
• Agile/Scrum methods seem to make us more
  introspective. We spend so long in development team meetings that the
  product manager does not go out and talk to the customers!
• Sales
  don't tend to understand why some of their development requests are not
  possible. An interesting idea is to turn this round and ask similarly
  unrealistic questions to sales. Example: "Why can't you give me a
  well-defined feature set by a guaranteed date?" is replied to with "Can
  you tell me what hour of the day and the exact amount that you're going
  to close this contract for?"
• In many cases, the only people who
  talk to customers are technical support. But are they talking to all of
  our users? (Hopefully not!) They're only talking to the people with
  problems, and not even all of them. What comes out of this?
  "Remember the 'L' in (L)user is silent". "Losers" are those who you have
  to teach basic computing to. "Power Losers" are those who are trying to
  use your product in ways that you never intended. But you can't just
  try to market to "smarter" users!
• Biggest contribution that a product manager can make is to be representative of users. That means the PM has to leave the building, and talk with users, and potential users!
• Causing customers to switch is one target, but selling to potential customers is hugely important.
• Three
  groups: current customers, evaluators (people currently shopping: only
  sales talk to them. If they don't buy, then product management analyses
  why), and the untapped potential market. The last group is very
  important.
• Customers tell us what new features they want, but potentials tell us what would convince them to buy. Get evidence for what features are really asked for by customers. That helps choose which of the many ideas that come out of our company are to be implemented.
• Development
  and Sales have different views of product managers should do. Sales
  tend to want people who can demo/explain the product. This is probably
  best done by sales engineers. (See Steve's post on sales people as order takers.)
• Work
  out what areas of the business that are thought of as product
  management are not actually officially assigned to someone at your
  company: they will be happening, but are they happening well, or "just
  being done"?
• Jargon: Inbound marketing is understanding what
  customers want the development team to do (product management). Outbound
  marketing is about actually selling the product (product marketing
  manager).
• The product management triad: executive direction,
  marketing, and technical management. All require different skills. May
  end up splitting into three separate roles.
• Sales people tend to
  think one deal at a time, which is as needed. But when sales comes back
  with a new idea, put it in the list of possible new features, but wait
  and see how many people actually want it, rather than just the one deal
  that that salesperson is currently progressing.

To me, it's
interesting how broad the role of product management can be. It's also a
salutory reminder that when two companies recruit for a position with
the same name, it might well be for totally different roles...

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Do You Need Employers' Liability Insurance?

I'm involved with three companies: N-Sim, a software consultancy, Accuvex, a holding company, and Verieda,
which works on EDA tools. When each of them has been started, the same
question has gone through my head: "do we need to take out employers'
liability insurance?".

Employers' liability insurance, or ELI for
short, is normally required by law in order to protect your employees.
For example, if an employee on a building site falls from some
scaffolding, (hopefully!) the company's ELI will pay out. In the United
Kingdom, the minimum cover is £5 million, and most policies offer cover
of £10 million.

For many companies, the question of "do I employ
anyone?" has an obvious answer. Construction workers are a case in
point. However, when it comes to software companies, it might not be
such an easy question. "Surely", the argument goes, "I don't need ELI if
I don't employ anyone, if all my work is done by contractors?".

Exemptions from ELI

The UK Health & Safety Executive have a guide to ELI for employers, which describes what exemptions there are. In particular the following are exempt:

• Most public organisations (government departments, police...), and health bodies.
• Family businesses where all employees are closely related to the owner (but not when the business is a limited company).
• Companies which only employ their owner, where that owner owns 50% or more of the issued share capital.

I'll
assume that we're dealing with a private limited company, probably
writing software, and hence that the first two exemptions aren't
relevant. The 2004 amendment to the 1969 Employers' Liability (Compulsory Insurance) Act
allows only for a company with a single employee (who fulfills the 50%
criterion above) to be exempt. Hence, two directors who split the equity
equally and are employees are not exempt.

That's
fine, but what about companies with unequal shareholdings, or more than
two directors, or with contractors? Who counts as an employee?

Who's an Employee?

For
income tax purposes, directors of limited companies are treated as
employees, and hence fill in the "Employment" pages of their
self-assessment tax return. In most cases, this is reasonable, since the
directors are likely to be deriving benefit (salary or dividends) from
their work, and moreover are essential (difficult to replace) in the
company's normal function. They cannot subcontract their
responsibilities, nor (generally) do they provide their own tools for
doing the job. All of these aspects are some of the tests of whether someone is employed by the company, or a self-employed contractor.

On the face of it, then, companies that employ more than one director need ELI.

However, the HSE's guide to ELI for employers
also says that "you may not need [ELI] for people who work for you,
where they do not work exclusively for you". Clearly, this is relevant
when a contractor performs some work for the company, but also carries
out similar work for other entities. It is important to note that the
HSE's definition of who is an employee is distinct from HMRC's (Revenue
& Customs) definition: someone's tax arrangements may mean they are
defined as self-employed, but from an ELI perspective, they may be an
employee. I'm going to assume that this provision does not apply to
part-time employees of your business, who have another job. It's
unclear, though.

Of course, if you're a start-up company, and you
don't pay your directors anything, then they don't count as employees
for ELI (see HSE's guide to ELI for employers
again), but the company can still be held liable in case of a claim for
compensation, so taking out ELI might still be wise. Hence, one
exemption might be to have a director, who owns a majority shareholding,
being an employee, whilst having another person helping you out, who is
unpaid. Bad luck for the unpaid person...

So Who Does Need Employers' Liability Insurance?

If
you're a one-person band (with a majority shareholding), and only use
contractors (who satisfy HSE's tests for not being employees, rather
than just having self-assessment status for tax purposes), you're likely
to be exempt. In any other case, you're not.

Which brings us to
an interesting conclusion: if two friends start-up a limited company
that sells shareware software, both of them being directors with 50%
holdings, and carrying out part-time work for the company for which they
are paid, say, £10 a month (it's a small company!), it seems that they
need ELI. This is despite the fact that they are both directors, working
from home, earning tiny amounts, and would be stupid to sue themselves.
Perhaps this is one reason that such small companies shouldn't bother
incorporating.

Having said that, note that if you have a limited
company that is not paying its directors (e.g. because it's just
starting up, or is dormant), it appears that ELI is not necessary.

(Note
though, that if you're a director, when you want to fill in your tax
return, you'll need an "employer's PAYE reference". This can only obtain
by registering the company as an employer with HMRC. And then not
paying yourself anything to avoid needing ELI. Oh well...)

But ELI Costs Too Much!

It's
definitely worth shopping around: different insurers quoted us wildly
disparate premiums. Policies tend to be based on how large the company's
wage bill is, hence the premium doesn't have to be unmanageable.
Different companies will have different minima for such total wage bills
(one reason for shopping around). At present, N-Sim uses Zurich Insurance, who meet our needs well, though they do include (for free) a public liability insurance that does not cover our main line of business which is selling software consulting services. Nevermind...

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TEN TIPS ON HOW TO GET THE BEST DEAL ON CAR INSURANCE

With the high cost of gasoline nowadays, most new drivers think twice of getting car insurance. Driving without any car insurance is a very big risk. Most drivers might think that car insurance is way too expensive, but in the long run it may save you a lot of money. Take for instance this example, if you are in a car accident it may cost you thrice the amount you might have paid for a car insurance to cover for hospitalization and for buying yet another car. Plus without car insurance you will be paying police fines as well as paying for suspended licenses. A total of 47 states require some kind of insurance for your car. It would be wise to know the basic law covering car insurance. Here are ten tips you can refer to on how you can get the best deal on car insurance. 1. Know the different types of car insurance policy The first thing to know in buying car insurance is to understand the different policies they offer. Choose a policy or policies that would best suit your needs.

 Liability - This policy covers physical injuries and damages to property. This includes paying for hospitalization and other medical expenses. Damage to property includes vehicles and other tangible property that might have been damaged during the accident. Liability also includes expenses for court proceedings if the vehicular accident requires one. Collision – This policy covers any damages if your vehicle is crashed to another vehicle, lamp posts, house or any another objects. Comprehensive – This policy covers damages caused by natural disaster like flood, storm, hail or wind. This also includes damages by theft or vandalism. Medical Coverage – Medical expenses are covered by this policy not considering if the cause is a vehicular accident or not. Personal Injury Protection (PIP) – A personal insurance of the driver. This policy covers for medical expenses and treatment caused by an auto incident. Uninsured Motorist – If by chance you are hit by an uninsured driver, this policy covers the damages done to your vehicle. Underinsured Motorist – This policy will cover the remaining cost for repairing your damaged car if ever the incident is caused by an insured driver with inadequate liability insurance. Rental Reimbursement – In case of a damaged car due to a vehicular accident, this policy will give a daily allowance for rental fee. 2. Know your credit rating: In most states, credit rating has always been the number one factor affecting car insurance rates. Be sure you have a copy of you credit report and check its accuracy and immediately contest any erroneous information. 3. Motor Vehicle Report (MVR) You can get a copy of your Motor Vehicle Report in your respective Department of Driver Services or Department of Public Safety in your state. A three year record may cost you 5$ and a seven year record would cost you 7$. Like credit reports, verify that all information are correct. 4. Accident Reports You can get a copy of your Motor Vehicle Accident Report from the local police department. It may take around six weeks before you can receive the detailed report. You might need to pay a higher car insurance rate if you have reported accidents within the last eighteen months. 5. Scout for a good insurance package There are some insurance companies that are offering multi-vehicle discounts. You would get a lower rate if you have two or more vehicles that you want to get insured. Also, you can get a good deal from one company that packages all their insurance policies, including home and health insurance. 6. Check out various discounts Most insurance company offers a discount to drivers over 55 years of age. It always pays to be a good student; you can get a student discount if you have a3.0 point average or higher. 7. Obtain a Driving Safety Certificate It is common for car insurance companies to give certain discounts to those who finish a safety driving course with a very good standing. 8. Check the model of your car Insurance rates can be different from vehicle to vehicle. A fancy car will obviously have a higher rate than an older model. 9. Take advantage of added features Be sure you are receiving lower rates for safety and security features like antilock brakes and air bags. 10. How much are you willing to pay Choose the option where you can handle the down payment and the monthly paying scheme. Compare other insurances’ prices before purchasing one. You can try calling a toll- free number (1-888-588-5111) where you can ask for car insurance assistance and compare rates

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Risk & Business: Delaware Business Insurance Update by CNC Insurance Associates, "Drones May Be Adjusting Your Claim" 12-7-14

Risk & Business: Delaware Business Insurance Update by CNC Insurance Associates, "Drones May Be Adjusting Your Claim" 12-7-14

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Knowledge About Insurance: different insurance and life insurance

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Make Sure Your Protective Systems Are Operational, or You May Get Hosed

Many policies have an endorsement that is placed on the policy if you
claim that you have a protective safeguard i.e. alarm, fire sprinklers,
etc. The protective safeguard endorsement is way a company can deny your
claim.

For example, a company states on its application that it
has a fire suppressant sprinkler system. The owner benefits by having a
discount on his policy. Unfortunately, the system broke down and the
owner didn't have the time or money to make the repairs. The owner
never got around to telling the agent or the insurance company that the
system wasn't working.

A few months went by and a tenant left a
burning cigarette in a community trash can that started a fire. The
owner is relieved that he has insurance for the $150,000 in damages.
The insurance company finds that for a number of months the fire
suppressant sprinklers were out and to the owners dismay, deny the
claim.

The owner now must pay for the repairs and will get no payment for loss of rents.

Even if you don't own a building, this could apply to your office or even your home.
There is a similar endorsement that has to do with theft and burglary alarms.

Is
your alarm armed every time you leave your office or house? Are you
doing quarterly maintenance on your fire alarm systems? Are fire
extinguishers tested? Are batteries replaced?

The company is
giving a discount due to your protective safeguards, but if your system
isn't operational then your claim could be denied. Make sure to ask
your agent if you have this endorsement on your policy.

This is how the actual form on The Hartford policy reads.
"Exclusion

We will not pay for loss or damage cause by or resulting from fire, if, prior to the fire, you:

a. Knew of any suspension or impairment of any protective system so described in the property choice - schedule of premises and Coverages and failed to notify us of that fact; or

b. Failed to maintain any protective safeguard so described in the Property Choice - Schedule of Premises and Coverages, and over which you had control, in complete working order.

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What Insurance Should a Technology Start-Up Consider?

At different stages of the Start-Up process, you may want to consider different policies. 

In the beginning stages you may want to pick one or two of the following policies because of limited resources. 

Once you procure funding and are trying to attract the best of the best, you may want to purchase all of the policies below.

Here are the policies you may want to consider in no particular order:



•Technology Errors & Omissions (Tech E&O) –
Insurance for failures in your technology service that could cause
customers damages. Tech E&O is most likely your most important
policy because most everything you do would be considered a professional
service and is excluded from the General Liability policy.



•Data Breach/Privacy Coverage – In case you lose
sensitive employee or customer data, this policy pays to notify, monitor
credit, and anything else you need to do in case of a breach.



•Media Coverage – If you are doing any kind of
media/social networking. Some of these coverages are added automatically
to the Personal & Advertising injury section of the General
Liability policy, but are explicitly excluded for companies with a media
focus. Examples of these exposures include: unintentional copyright
violations, libel, slander, etc.



•International Coverage – If you have operations outside the coverage area (US, US Territories, and Canada)



•General Liability Coverage – This is your most basic
insurance that most contracts will require: covers basic trip and fall.
You can also add supplementary auto coverage for rented and non-owned
(including employee) vehicles. If you have company vehicles, you should
consider purchasing a Business Auto Policy.



•Property – Cover your computers, servers, tenant
improvements. In addition, business income is added to this policy; look
for coverage including business income for Denial Of Service attacks,
etc.



•Directors & Officers – Insurance if you have
investors or stakeholders. Directors and Officers can be held personally
liable for decisions of the company, so this coverage can be crucial in
securing high profile board members.



•Disability – Insurance for the owners if they are in an accident and no longer able to work.



•Key Man Life – Insurance policy in case something
happens to your partner. Both partners buy life insurance policies on
each other, so they can buy out the partner’s share. This way you avoid
becoming partners with that person’s significant other.



•Health Insurance – Great way to keep your employees on board and attract great talent.



•Workers’ Compensation – Mandated by CA state law even
if you just have one part time employee. Good news is that rates for
most technology workers are very inexpensive.



•Employee Practices Liability – Protect yourself from employment related lawsuits: wage & hour, wrongful termination, discrimination, etc.



Some of these policies are offered in packages, while others are sold
separately. Most large companies that contract smaller technology
services companies will require you to have General Liability,
Technology E&O, Workers’ Compensation, and Business Auto.



Talk to an independent agent to see which of these coverages would be a best fit for your business.

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Freeway Auto Insurance Quote

Things You Should Know About Freeway Auto Insurance Quotes





Of us in the pitfalls of these large and expensive insurance for us
laymen Many say some technical details, and believe it is the only
option and not get any better deal than that. It's the only mistake we
make. We explore our options we have. Freeway Insurance Company
is an insurance company that offers several choices to get yourself
insured. Even insurance for your car with the best road car insurance
quotes.



Freeway Insurance Company is one of the oldest insurance companies with
more than 20 years of experience in the insurance industry based in
California.





Unlike other insurance companies that offer the same policies at a high
price, this offers 30 options to choose from. Therefore, it is
advisable to choose a safe path, no matter if you need high risk
insurance base. These documents are available at different prices, you
can choose your own price for you. Freeway auto insurance quote is given regardless of driving experience on the roads in the U.S. and your driving record.



Freeway auto insurance quotes
options in all areas that can be added during the creation of his
contract. It offers auto insurance high risk in places like Arizona and
California.



Auto insurance quote Freeway offers basic coverage that pays all
responsibility and coverage so that it is important that the United
States, if you want to drive in those places. It's like paying the
premiums, so when you select the one you choose, choose one with low
premiums. Also choose one with roadside assistance, as a matter of
regulatory policy and choose which is cheaper.



If you are one of the owners of cars in the U.S. to pay high premiums
and fees for car or auto insurance? If you live in California and is
looking for the best auto insurance company car insurance then the
Freeway and get the best car insurance quote freeway.



Freeway Auto Insurance is a customer oriented company that focuses more
on customer satisfaction and long-term relationships rather than their
own benefit.

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Full Coverage Dental Insurance

Complete Data Coverage Dental Insurance

If you had the
dentist lately, you know the full need for dental care. When you need a
dentist, check your policy to see what happens. Some policies will also
cover the higher expenses as mentors or root canal, while others do not
offer coverage. If the policy covers the work, it will only be
responsible for deductibles and co-pays.

Yes, like health insurance, dental insurance
require that you pay at the time to pay your dentist. You will find the
annual deductibles and annual limits. The policy will then work to
prevent further damage to the teeth with preventive dentistry. Almost
all dental insurance covers a full
coverage of regular checks and cleaning. Further work may or may not be
covered by your policy. It is important to read the policy to see what
is covered.

Some people will have their full coverage dental insurance
paid by their employer. Others may have to pay a portion of the monthly
premium. These days, few employers cover the cost of the premiums for
the family of the employee. If you do not have access to coverage
through your employer, several companies offer this insurance through
individual or family policies. While full coverage dental insurance
may seem to be expensive, it is often close to the cost that you would
pay for regular dental checkups. In case of a dental emergency, the
policy may be worth its weight in gold.

If you are researching dental insurance,
you need to know that there are three types of plans in the range of
coverage. Basic coverage pays for health checkups and preventive care.
This type of insurance provides care to prevent future dental problems.
It covers the cost of basic quotes you may have with your dentist,
including cleanings and x-rays.

The next level
of dental care insurance covers minor. Minor dental care is covered at a
percentage less than basic care, but includes fillings and can cover
other services including root canals or plates.

The third
level of coverage is important for dental care. This includes the more
expensive dental care. This coverage may be very limited in most
policies. Fortunately, this coverage is rarely used. In general, dental insurance
is found to be affordable. It provides the necessary care for a bright
smile. Some employers offer a cafeteria plan that allows you to set
aside a portion of the salary of each month to pay the deductible.

Your Complete Dental Insurance Coverage Explanation

What is the full dental insurance coverage?

Definition of full coverage dental insurance

With insurance,
payments are based on raw numbers to use. Full dental coverage, this
means that you not only have insurance for maintenance treatments, but
major surgery or dental procedures. Complete coverage of dental
insurance may cover almost all dental procedures, including surgical.
Find the plan full dental insurance coverage is easy if you use the Internet. You can visit the various websites of insurance companies and make appointments.

So what to do when you focus on obtaining a full dental insurance coverage?

If you are planning to get a complete dental insurance,
then you should take the time to plan properly. Would defeat the
purpose of just getting any pre-packaged full dental insurance coverage
regardless of their personal needs.

This is what we should focus on:

Type of Insurance

There
are several types of dental insurance you can get: Traditional
insurance means that you pay monthly, even weekly, and benefits that
could cover 80 to 100% of your dental expenses.

The next type
of insurance is the repayment plan. Be warned though, normally, the
employer will reimburse only part of the cost, not total spending.

If you have
dental insurance, but your employer can not give you, you can join a
small group in the office and request a volunteer group insurance. The
advantage of a group plan is that rates are generally lower than an
individual plan.

Then there is
the discount dental plan is like a membership club with discounts. There
will be a registration fee, plus monthly service fees.

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15 (Fifteen) Insurance Policies You Don't Need

1. Private Mortgage Insurance

The infamous private mortgage insurance (PMI) is well known to homeowners because it increases the amount of their monthly mortgage payments. PMI is an insurance policy that protects the lender against loss when lending to a higher-risk borrower. The borrower pays for this insurance but derives no benefit. Fortunately, there are several ways to avoid paying for this unnecessary policy. PMI is required if you purchase a home with a down payment of less than 20% of the home's value. The small down payment is viewed as putting you at risk of defaulting on the loan. Put down at least 20% and the PMI requirement goes away. Alternatively, you can put down 10% and take out two loans, one for 80% of the sale price of the property and one for 10%, although interests rates can prevent the economics of this maneuver from working out in the homeowner's favor.

2. Extended Warranties

Extended warranties are available on a host of appliances and electronics. From a consumer's perspective, they are rarely used, particularly on small items such as DVD players and radios. If you purchase a reputable, brand-name product, you can be fairly certain it will work as advertised and that the extended warranty is statistically likely to be unnecessary. If you spend $5,000 on a giant, flat-screen television, the policy is still unlikely to pay off, but might make you feel better. For everything else, forget it.

3. Automobile Collision

Collision insurance is designed to cover the cost of repairs to your vehicle if you are involved in an accident. If you have a loan out on the car, the loan issuer is likely to require that you have collision insurance. If your car is paid off, collision is optional; therefore, if you have enough money in the bank to cover the cost of a new car, collision insurance may be an unnecessary expense. This is particularly true if you are driving an old car, because cars depreciate so quickly that many vehicles are worth only a fraction of their purchase price by the time the loan is paid in full.

4. Rental Car Insurance

Most auto insurance policies offer additional coverage for the cost of car rentals, touting it as a useful feature if your car is ever involved in an accident and needs to spend some time in the repair shop. This may sound like a good idea, but in reality, most people rarely rent a car, and when they do, the cost is relatively low and hardly worth insuring against. Although rental car insurance is relatively inexpensive, amortized over the course of a lifetime you are still likely to spend far more than you will benefit.

5. Car Rental Damage Insurance

Many auto insurance policies already cover rentals, so there's no need to pay for this twice. Check your policy before you pay. Depending on where you rent the vehicle, you may also be able to pay a small fee for insurance on your rental when you pick it up at the rental center. If this fee is less than what you'd pay for a year in your old policy, choose the fee over the policy.

6. Flight Insurance

Flight insurance coverage is completely unnecessary. Despite media portrayal, airline accidents are relatively rare, and your life insurance policy should already provide coverage in the event of a catastrophe.

7. Water Line Coverage

Water companies have made an aggressive push to sell policies that cover the repair of the water line that runs from the street to your house. The odds are in your favor that you will never use this coverage, particularly if you live in a newer home. If you live an average suburban neighborhood and you do need to repair the water line, the distance to the street is short, the likelihood of a problem is low and repair costs are a few thousand dollars or less. The same goes for policies offered by other utility companies.

8. Life Insurance for Children

Life insurance is designed to provide a safety net for your heirs/dependents. Because children don't have heirs to worry about and, statistically speaking, most kids will grow up safe and healthy, most parents should not purchase life insurance for their kids. Instead, use the money that you would have spent on life insurance to fund an education plan or an individual retirement account (IRA).

9. Flood Insurance

Unless you live in a flood plain or an area with a history of water problems, don't even bother buying flood insurance. If none of the homes in the area has ever been flooded, yours is unlikely to be the first.

10. Credit Card Insurance

Purchasing coverage to pay your credit card bill in the event you cannot pay it is a waste of money. A far better idea is to avoid running up your credit cards in the first place, so you won't need to worry about the bills. Not only do you not save on the insurance premiums, you'll also save the interest on your debt.

11. Credit Card Loss Insurance

Federal law limits your liability if your credit card is stolen. Your out-of-pocket costs are limited to $50 per card and not a penny more. In fact, many credit card companies don't even try to collect the $50.

12. Mortgage Life Insurance

Mortgage life insurance pays off your house in the event of your death. Rather than add another policy - and another bill - to your list of insurance plans, it makes more sense to get a term-life policy instead. A good life insurance policy will provide enough money to pay off the mortgage and to cover other expenses as well. After all, the mortgage isn't the only bill your survivors will need to pay.

13. Unemployment Insurance

This coverage makes minimum payments on your bills if you are out of work, which sounds like an attractive proposition. A better plan is to save your money and build up an emergency fund instead. You won't have to cover the cost of the insurance policy and, if you are never out of work, you won't spend any money at all.

14. Disease Insurance

Policies are available to cover cancer, heart disease and other maladies. Instead of trying to identify every possible disease that you may encounter, get a good medical coverage policy instead. This way, your medical bills will be covered regardless of the problem you face.

15. Accidental-Death Insurance

Unless you are extraordinarily accident prone, an accident is unlikely. Major catastrophes such as car wrecks and fires are covered under other policies, as is any harm that comes to you while at work. Accidental-death policies are often fraught with stipulations that make them difficult to collect on, so skip the hassles and get life insurance instead.

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15 Insurance Policies You Don't Need

15 Insurance Policies You Don't Need

1. Private Mortgage Insurance

The infamous private mortgage insurance (PMI) is well known to homeowners because it increases the amount of their monthly mortgage payments. PMI is an insurance policy that protects the lender against loss when lending to a higher-risk borrower. The borrower pays for this insurance but derives no benefit. Fortunately, there are several ways to avoid paying for this unnecessary policy. PMI is required if you purchase a home with a down payment of less than 20% of the home's value. The small down payment is viewed as putting you at risk of defaulting on the loan. Put down at least 20% and the PMI requirement goes away. Alternatively, you can put down 10% and take out two loans, one for 80% of the sale price of the property and one for 10%, although interests rates can prevent the economics of this maneuver from working out in the homeowner's favor.

2. Extended Warranties

Extended warranties are available on a host of appliances and electronics. From a consumer's perspective, they are rarely used, particularly on small items such as DVD players and radios. If you purchase a reputable, brand-name product, you can be fairly certain it will work as advertised and that the extended warranty is statistically likely to be unnecessary. If you spend $5,000 on a giant, flat-screen television, the policy is still unlikely to pay off, but might make you feel better. For everything else, forget it.

3. Automobile Collision

Collision insurance is designed to cover the cost of repairs to your vehicle if you are involved in an accident. If you have a loan out on the car, the loan issuer is likely to require that you have collision insurance. If your car is paid off, collision is optional; therefore, if you have enough money in the bank to cover the cost of a new car, collision insurance may be an unnecessary expense. This is particularly true if you are driving an old car, because cars depreciate so quickly that many vehicles are worth only a fraction of their purchase price by the time the loan is paid in full.

4. Rental Car Insurance

Most auto insurance policies offer additional coverage for the cost of car rentals, touting it as a useful feature if your car is ever involved in an accident and needs to spend some time in the repair shop. This may sound like a good idea, but in reality, most people rarely rent a car, and when they do, the cost is relatively low and hardly worth insuring against. Although rental car insurance is relatively inexpensive, amortized over the course of a lifetime you are still likely to spend far more than you will benefit.

5. Car Rental Damage Insurance

Many auto insurance policies already cover rentals, so there's no need to pay for this twice. Check your policy before you pay. Depending on where you rent the vehicle, you may also be able to pay a small fee for insurance on your rental when you pick it up at the rental center. If this fee is less than what you'd pay for a year in your old policy, choose the fee over the policy.

6. Flight Insurance

Flight insurance coverage is completely unnecessary. Despite media portrayal, airline accidents are relatively rare, and your life insurance policy should already provide coverage in the event of a catastrophe.

7. Water Line Coverage

Water companies have made an aggressive push to sell policies that cover the repair of the water line that runs from the street to your house. The odds are in your favor that you will never use this coverage, particularly if you live in a newer home. If you live an average suburban neighborhood and you do need to repair the water line, the distance to the street is short, the likelihood of a problem is low and repair costs are a few thousand dollars or less. The same goes for policies offered by other utility companies.

8. Life Insurance for Children

Life insurance is designed to provide a safety net for your heirs/dependents. Because children don't have heirs to worry about and, statistically speaking, most kids will grow up safe and healthy, most parents should not purchase life insurance for their kids. Instead, use the money that you would have spent on life insurance to fund an education plan or an individual retirement account (IRA).

9. Flood Insurance

Unless you live in a flood plain or an area with a history of water problems, don't even bother buying flood insurance. If none of the homes in the area has ever been flooded, yours is unlikely to be the first.

10. Credit Card Insurance

Purchasing coverage to pay your credit card bill in the event you cannot pay it is a waste of money. A far better idea is to avoid running up your credit cards in the first place, so you won't need to worry about the bills. Not only do you not save on the insurance premiums, you'll also save the interest on your debt.

11. Credit Card Loss Insurance

Federal law limits your liability if your credit card is stolen. Your out-of-pocket costs are limited to $50 per card and not a penny more. In fact, many credit card companies don't even try to collect the $50.

12. Mortgage Life Insurance

Mortgage life insurance pays off your house in the event of your death. Rather than add another policy - and another bill - to your list of insurance plans, it makes more sense to get a term-life policy instead. A good life insurance policy will provide enough money to pay off the mortgage and to cover other expenses as well. After all, the mortgage isn't the only bill your survivors will need to pay.

13. Unemployment Insurance

This coverage makes minimum payments on your bills if you are out of work, which sounds like an attractive proposition. A better plan is to save your money and build up an emergency fund instead. You won't have to cover the cost of the insurance policy and, if you are never out of work, you won't spend any money at all.

14. Disease Insurance

Policies are available to cover cancer, heart disease and other maladies. Instead of trying to identify every possible disease that you may encounter, get a good medical coverage policy instead. This way, your medical bills will be covered regardless of the problem you face.

15. Accidental-Death Insurance

Unless you are extraordinarily accident prone, an accident is unlikely. Major catastrophes such as car wrecks and fires are covered under other policies, as is any harm that comes to you while at work. Accidental-death policies are often fraught with stipulations that make them difficult to collect on, so skip the hassles and get life insurance instead.

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Types of Insurance A-2-Z: Berkshire Hathaway

Types of Insurance A-2-Z: Berkshire Hathaway: Berkshire Hathaway Inc.  (NYSE: BRK.A, BRK.B) is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, U...

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List Of Car Insurance Companies In USA

There is our list of car insurance companies in the USA. To find the best cheap car insurance, drivers have to shop around and compare car insurance quotes collected from different auto insurance companies.

 

Why Car Drivers Need The List Of Auto Insurance Companies

To check what auto insurance companies are available in their state, car drivers need to visit the websites or local offices of these insurance companies. Because drivers may find the selected car insurance companies is out of service or have no business in their states.

To get cheaper car insurance, auto drivers need the list because they cannot be sure that they are going to buy  the cheapest auto insurance if they select only one insurance company to shop. If drivers get car insurance rates from  as many companies as possible, they can compare car insurance companies and buy the best ones that are cheap.

To get the options, because if car drivers have any problem with their current auto insurance companies, they can switch to another one.

The List Of Car Insurance Companies In USA

Progressive

 

Progressive auto insurance is one of the popular car insurance company in USA. People use to refer Pregressive because you can save money in various ways and they reward their loyal and potential customers. Their payment is flexible and the customers can choose and change the due date anytime.

Liberty Mutual

 

Liberty Mutual auto insurance helps the drivers get back to road as soon as possible after the incident and has variety ranges of discount based on seniority, teen drivers and good driving records. Their coverage protect you in every aspect and ensure the safety.

GEICO 

GEICO auto insurance is one of the largest auto insurance companies in USA. They have variety kinds of auto insurance policies and also offers different kinds of discounts. You can get cheap car insurance and save money on your policy. GEICO have 21 million car drivers who are still with them and almost 150 local agents all over the country.

Allstate

 

Allstate auto insurance is one of the best auto insurance companies in USA. Thousands of people have car insurance deal with them. Though many drivers complaint about awful customer services its market share still growing.

Nationwide

 

If you want discount as well as customer satisfaction then Nationwide auto insurance is best for you. They have continuously retained 95% customer satisfaction.  

Esurance.com

 

 

With Esurance you can get auto insurance quotes fast and easier, you can compare many car insurance rates side by side and manage your policy with phone.

21st Century

You can get great coverage with less premium and 24/7 customer services with special discount from 21st century auto insurance. 

  8. Mercury

  9. Farmers

10. USAA

11. AmericanFamily

12. AmericanNational

13. Amica

14. AAA – American Automobile Association

15. Auto-Owners

16. Travelers

17. State Farm

18. The General – Auto Insurance

19. MetLife

20. Safe Auto Insurance

21. Conseco

22. Direct General

23. Eastwood

24. Encompass

25. Erie

26. Allianz

27. GMAC

28. Hanover

29. Hartford

30. Safeco

31. Sentry

32. Western Auto Insurance

Among these auto insurance companies there are the best five car insurance companies in USA. If you really want to buy the cheap car insurance and want to find which is the top rated car insurance company, search and go to these website and compare the insurance rates.

  

 

  

 

 

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