Forming a Captive Insurance Company: The Secret Weapon For Saavy Business Owners

Captive Insurance Partners, through their website, www.whatisacaptiveInsurancecompany.com , continue to powerfully match business owners with captive insurance company management companies. These management companies engage in the industry’s best practices and provide for their business-owner clients a turn-key solution to form, fund and manage a Captive Insurance Company.

There is a growing interest from owners of profitable companies to find new and powerful ways to reduce their business risk, raise operating profits, improve cash flow, create additional profit centers, protect assets and avail themselves of any and all tax advantages. The formation of a captive insurance company can make a significant and positive contribution in all of these areas.
By owning a captive insurance company, a business owner can much more specifically write policies to cover a host of uncovered, or inadequately covered business risk. Every business has a significant amount of risk that it either ignores or simply chooses not to insure because obtaining a policy through a traditional carrier would be prohibitively expensive. But, when a captive insurance company is present, a business can have this risk underwritten based on it’s actual claims history, and in so doing, can obtain affordable protection for all facets of its operations. The cash flow implications are obvious. Since the captive allows a business to be evaluated based on its actual claim history, if a company has a good claim history, the captive can reward it with lower premium payments. Typically, a company is evaluated by its category and the risk pool it is lumped into and, even in the case of a low claims history, the company receives no significant discount in the premiums it pays. Again, with the captive, the business will pay a lower premium and will improve cash flow.

Owning a captive insurance creates new profit center. Premiums paid into the captive are tax-deductible and can be invested in a wide variety of vehicles. Where, previously, a business owner simply paid premiums to a third party insurance carrier, they now pay premiums to a company that they have ownership of allowing them to retain and invest the dollars paid for premiums.

Finally, there certainly are tax advantages associated with owning a captive insurance company. These tax advantages, while attractive, should not be the primary reason to form a captive. However, these benefits shouldn’t be overlooked. If the captive qualifies for the Small Business Insurance Company Tax Election under IRC section 831(b), it can receive up to $1.2 million in tax-free premium dollars each and every year.

On the surface, forming a captive insurance company may seem like a complex process. And, in truth, it can be complex process. This is where Captive Insurance Partners, through their website,www.whatisacaptiveInsurancecompany.com can assist business owners. Captive Insurance Partners provides both free educational materials and referrals to experienced captive management companies that can assist a business owner in the assessment, formation, funding and ongoing management of a captive insurance company.

To know more about captive insurance and captive insurance management, please contact:

Jeremy Fesyuk
800-683-9707