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.
Understanding Financial Forecasting for Small Business
If you run a small business, you’ll need to get comfortable with finances. Although you may not be a financial guy or gal, like it or not, your small business’s finances are critical to its success. While knowing where your small business stands financially is handy, something else that can help your small business be even more successful is financial forecasting.
In this article we’ll look at the importance and benefits of using financial forecasting for small business. Once you gain a better understanding of what financial forecasting is and why it matters, next we’ll look at the most useful financial forecasting options out there.
The Benefits of Using Financial Forecasting
Financing forecasting for a small business isn’t a requirement, but it’s highly recommended. Unlike big businesses, small businesses don’t have endless financial resources. One bad decision and it can mean the end of a small business. That’s why it’s so critical to accurately forecast a small business’s finances.
Not only do banks require it in order to get financing, it serves as a road-map of sorts to help guide your business into the future and help determine which new business ventures are worth pursuing.
In a nutshell, financial forecasting looks at the current internal information of your small business as well as external economic information. This is then processed through a financial calculation. These financial calculations are critical.
They help figure out how profitable a potential expansion of your small business may be.
The Most Useful Financial Forecasting Options
Now that we’ve explained the importance and benefits of using financial forecasting for small businesses, let’s look at a few of the most useful financial forecasting tools. You can choose to use some of these, all of these or none of these. The choice is yours. Some of these financial forecasting options will be more useful than others depending on the industry you operate in.
1. Cost of Capital
Financial forecasting for cost of capital looks at the interest rates your small business pays on debt or equity financing versus the present or future operations of your business. The capital asset pricing model and weighted average cost of capital are two financial forecasting tools used by small businesses to compare interest rates of financing. These financial forecasting tools use the going rate or market cost of debt and equity (usually prime rate) to figure out if a company should use outside financing or not when deciding whether to accept a new business venture.
2. Net Present Value
The net present financial forecasting determines your small business’s future cash inflows from expansions of your business or new business ventures. Theses cash inflow amounts are then discounted back to the value of money today.
The discount rate you use for your small business is typically a rate of return, figured out in advance, that your company wants to get on any new business ventures your business undertakes. The typical rate used by businesses is between 10 and 12%, although it may be adjusted down based on the industry your business is in and the fact that we’re in a low interest rate environment thanks to COVID-19.
After you add up the amount of the discounted cash flows for your small business, next you compare it to the original cash outflow to start any new business ventures or expand existing operations. If those future cash flows are greater than your small business’ beginning cash outflow, it’s considered a good opportunity worth further investigation.
3. Financial Statement Analysis
This is probably the most basic type of financing forecasting. It’s fairly common for companies to study and compare various financial statements during a set time-frame to figure out if there are any ongoing trends from your small business’s financial information. Examples of trends include higher or lower company sales revenue, the costs of goods or service, and your small business’s expenses found on your income statement.
Companies big and small also make use of financial ratios to analyze their balance sheet and figure out how good of a job they’re doing at earning value from use of their assets. Ratios show how good a job your small business is doing at meeting its short-term financial debts, making a profit from selling goods and service and earning capital from your assets.
4. Decision Forecasting
Although not as common, small businesses sometimes use financial forecasting to make decisions for the business. This is known as decision forecasting. Examples of financial models commonly used include game theory, supply and demand analysis, and decision trees.
To do this type of analysis, as the small business owner, you must look at various decisions you can make with respect to the operation of the business. The potential impact of the various decisions will be clearly spelled out in the forecasting models used.
If you’d like to take this financial forecasting further, you include a percentage for the likelihood of a decision forecast earning a profit. As a small business owner, you can then select the business decision that’s likely to lead to the highest profits.