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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 38910
Experience:  Retired (mostly)
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I am starting a company that offers protection plans on new

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I am starting a company that offers protection plans on new cars covering minor dents and scratches for paying members. What do I need to offer these memberships through a dealership’s finance department in Washington state? Also, what do I need to offer the memberships to companies to propose making them a part of their employees benefits?
Submitted: 6 years ago.
Category: Business Law
Expert:  socrateaser replied 6 years ago.
Service contract providers must register with the Washington State Insurance Commissioner.

Re offering memberships to companies, this is the sort of product that requires consent by the employee. It cannot be taken from wages pretax. Most employers will never permit this sort of product to be offered to their employees, because it suggests the possibility of fraud or coercion -- especially if the vendor is offering the employer an incentive to offer the product.

The only common verison of this sort of product is AFLAC (yes, the goose). They manage to get a lot of workers to purchase their disability product and voluntarily assign wages to pay the premiums I know of no other business that has been similarly successful.

But, except for health care, accident, life and disability insurance companies can get their benefits paid for "pretax," because the Internal Revenue Code doesn't permit the deduction.

So, while you can certainly try to sell your product into various businesses -- you can forget about making it an employee benefit, unless you find an employer that wants to make a tax-protected gift to its employees. And, if you do, let me know, because I want to work for that employer.

Hope this helps.

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Customer: replied 6 years ago.
What would I need to offer the memberships through finance departments at auto dealerships?
Expert:  socrateaser replied 6 years ago.
If you're registered as I described above, then the only thing you would have to do is convince the dealer to offer the product to purchasers.

Edited by socrateaser on 10/5/2010 at 12:46 AM EST
Customer: replied 6 years ago.
By 'registered' do you just mean having a ubi#?
Customer: replied 6 years ago.
One last thing. Do you think I need to register to simply offer memberships directly to he public?
Expert:  socrateaser replied 6 years ago.
RCW 48.110.030(1) requires registration before a service contract provider can operate in Washington State. No exceptions.
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