Protect Against Collisions and More If you drive a car in the United States, liability insurance must cover it. This type of policy pays for medical and property damage resulting from a vehicular accident. You can also purchase comprehensive and collision insurance to cover other costs. These additional coverages help protect the value of your car should it be damaged. If you are calculating how much it will cost to buy a car, you need to take into consideration the cost of insurance as well. In this article, we’ll review the basics of car insurance and the best auto insurance companies in America, including costs, pros and cons. This is a brief introduction to automobile coverage. Liability Coverage When an accident occurs, liability insurance covers you, household members and authorized drivers for the costs associated with property damage and bodily injury. It covers the cost to repair or replace property damage that you caused. [youmaylike] You are also covered if you cause the bodily harm or death to someone else while you are driving the car. This includes medical expenses, loss of income and specified legal defense costs. Collision Insurance If you are involved in a collision, this type of insurance will help pay for repairing or replacing your vehicle. If the collision is your fault, the coverage may extend to other damaged vehicles involved in the accident. States do not mandate that you buy collision insurance, but your lender or car dealer will if you finance or lease the car. Policies offer a range of deductibles, which is how much you’ll have to pay for repairs before the insurance kicks in. Larger deductibles lower the policy premiums but expose you to more out-of-pocket expenses if a collision occurs. Comprehensive Insurance Comprehensive insurance covers damage to your car that occurs for reasons other than a collision, including theft, fire, vandalism, weather and natural disasters. This coverage is often required if you finance your automobile. You can add riders to this insurance to provide coverage of additional costs, including auto towing, glass repair, daily rental while your car is in the shop and emergency roadside service. As with collision insurance, you can set the deductible on your comprehensive insurance policy to cut your premium costs. Gap Insurance If your car is severely damaged in an accident or other incident, you might find that your comprehensive and collision damage won’t provide enough coverage to pay off the amount you owe on the vehicle. Many policies pay only the fair market value of a totaled car, which might be only 80% of the amount you owe. You can buy additional insurance to plug this gap and ensure you can pay off the car loan in full if the vehicle is destroyed or stolen. Normally, car leases require you to buy gap insurance. If you pay cash or pay off your loan, you can save money by avoiding or dropping gap insurance when no longer needed. Top Five Auto Insurers These five insurers all offer full coverage policies and many additional services. Amica Amica is a superstar among car insurers, winning accolades from Consumer Reports and J.D. Powers. It’s known for handling the claims process smoothly. The average annual cost for full coverage: is $1,360. Pros You can have your car repaired at any body shop, without restrictions. Offers a premium package which, for an additional cost, provides full glass coverage, rental coverage, good driving rewards and identity fraud monitoring. Superior financial stability rating from A.M. Best. Cons Missing some discounts, such as military, low-mileage and prepay discounts. Must speak on the phone to get a quote. Sparse website when it comes to customer education. State Farm State Farm is the country’s largest multi-line insurance company. It excels in customer service and regularly garners high marks from customers. The average annual cost for full coverage: is $1,337. Pros Superior financial stability rating from A.M. Best. Excellent online quote tool, getting customers a quote in as little as five minutes. Easy claim handling and top service from its more than 18,000 agents and its easy-to-use mobile app. Cons Doesn’t offer coverage for new car replacements or uninsured motorists. Missing prepayment and automatic payment discounts. The Hartford While only 11th in size, The Hartford is big when it comes to policy options. It offers rates based on your actual driving as well as full replacement of new cars when destroyed shortly after purchase. Average annual cost for full coverage: N/A. Pros Solid benefits, including superior roadside assistance and towing programs. High marks from customers for their purchase experiences. One of the few insurers with mechanical breakdown coverage for out-of-warranty repairs. Cons Mediocre service interaction according to J.D. Power surveys. Sparse online learning materials. Geico Geico is the second-largest U.S. car insurer. It is a favorite among tech-savvy geeks who appreciate the insurer’s mobile app and excellent online service. The average annual cost for full coverage: is $1,627. Pros Geico offers plenty of ways to save, such as multi-vehicle, driving history and vehicle safety equipment discounts. Special savings for active and retired military members and federal employees. Full-featured mobile app for getting quotes, buying insurance, managing your policy, submitting claims, summoning roadside assistance and making payments. Cons Human help may be in short supply, as just about everything is handled online. No gap insurance is offered. USAA No insurer matches USAA for service to military members. Unfortunately, it's only available to active service members, their families and retired veterans. Average annual cost for full coverage: $896. Pros Superior financial stability rating from A.M. Best. Top-ranked purchase experience score from J.D. Power. Cons Missing gap coverage. Doesn’t offer interior vehicle coverage or new car replacement coverage. Limited availability. The Right One for You Competition in the insurance industry helps drive down prices and prompts insurers to offer money-saving features. For example, your carrier might reward you for a safe driving record and for having a long-term relationship with the insurer. The right insurer for you is highly rated for service, offers the exact coverage you want and does so at an unbeatable price. You should always gather multiple quotes before selecting an insurer, and make sure you get credit for all applicable discounts.
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Most people are aware of how to make a personal budget. You tally all your sources of income, and then plan your expenses accordingly. It’s not a very complicated endeavor.
A business budget, though, is much more difficult. Figuring out personal needs and wants are easier than figuring out the same for your business. It becomes more complicated when you try to determine how much a business should invest for the future, and how to weigh this against current needs.
This is an important aspect of a business plan, so let’s take a closer look at how you can build a budget to ensure your business thrives for years to come.
Understanding the Basics
What exactly is a business budget, anyway?
Simply put, a business budget is a blueprint of your business’s finances. Depending on what type of business you’re in, this budget could be very simple or immensely complicated.
Many folks start out with a home-based business. These new ventures are attractive because they don’t need much in start-up capital, nor do they require big operating expenses. Some of these businesses don’t cost their owners a nickel in start-up costs.
The one problem is these home-based businesses don’t tend to scale very well. You’re limited to your own output, which means upside is limited. To really achieve growth, a business owner will need to expand to a new location, hire employees, advertise and incur other expenses. This is when things get much more complicated.
Items to Include in a Business Budget
The first step toward establishing a business budget is figuring out how much your revenue will be.
This is easier said than done, especially if you’re planning a brand-new business versus expanding on an existing one. It’s best to be conservative here. Many potential businesses have failed because their owner ran out of money before the concept took off.
One thing business owners struggle with is pricing their product. Many think there’s a viable business opportunity undercutting the competition, but I’d argue against it. Yes, some successful businesses do just that, but many fail trying that strategy, because they underestimate their own expenses.
The next step is looking at expenses. There are two types of expenses: fixed and variable. Fixed expenses are going to be the same every month, while variable expenses will go up and down depending on how much success the business has.
The biggest fixed expense for most businesses is real estate. It usually makes sense for a business to rent its space — at least to begin with — to limit the amount of capital the owners must provide. It’s much cheaper to rent a $1,000 per month space than it is to shell out $200,000 for the same building.
These fixed expenses don’t just stop at rent. You’ll have to pay to keep the lights on, and other utilities like phone and internet access aren’t free either. Any employees you hire will be a fixed expense too. Yes, you can always get rid of staff, but you don’t want to do that after a bad month or two. Firing a qualified staffer should be a last resort, especially after spending money to train them.
Other fixed expenses might include the cost of leasing equipment, payments on any loans the business has, and the cost of raw materials.
Variable expenses including advertising, promotional giveaways, investing in additional training for staff, donations or gifts to various organizations, and anything else that might better belong in the “wants” category rather than the “needs” category.
Once you have an accurate picture of your revenue and expenses, it’s time to put everything together. Remember to build in a healthy profit margin — after all, that’s why you’re in business — or at least a plan to get there if you’re comfortable taking less profit at first.
Finally, don’t forget about start-up costs. You’ll likely have to pay for some machinery, put a security deposit down on a rental property to house the business, buy office furniture and do a bunch of other little things. These costs add up. Make sure there’s ample start-up capital to account for all these expenses, plus extra just in case profitability doesn’t come quickly.
How to Save Money
Much like personal budgeting, having a good business budget is all about the details. Every item in the budget must be scrutinized to really justify the expense.
Say you’re opening a restaurant, and two different locations are available. The first is your dream restaurant, a turn-key operation that can seat 150 patrons. Everything is brand new, but you’re paying $10,000 per month for the location.
Compare that to a much smaller location that’s a little rough around the edges. This location needs a little work to bring out its full potential and can only seat 40 people, but the rent is a mere $1,500 per month.
Every entrepreneur dreams big. They want to own a high-class restaurant, so taking the first option is ideal. But a prudent business owner would start out with the second location, saving money while perfecting their craft. Then, once the concept is proven to work and there’s a bunch of cash in the bank, move to a larger location.
This type of behavior can be applied to other business expenses. Giving out coupons is a cheaper way to market your business versus buying expensive radio or television advertising. A normal business doesn’t need the top of the line internet package. Independent contractors can be hired over full-time employees.
Before authorizing any expense, ask yourself if this will directly add to the bottom line. If the answer is no, then save that money for something that offers a better return on investment.
The Bottom Line
Even opening a small business can be incredibly tough. It requires an entrepreneur to wear many different hats. You must be competent at expense control, marketing, human resources, and a dozen other things, never mind doing the work required by the business itself.
Setting up a good business budget can help take the guesswork out of buying decisions, leaving that mental energy free for other parts of the business; there’s already enough to worry about.