The Features & Benefits of an 831(b) Captive Management Solution
FEATURES AND BENEFITS Explained:[ Open All | Close All ]
1) Your Own Insurance Company [+]
FEATURE:A captive insurance company is a form of alternative risk management. It is a privately owned, closely-held, property and casualty insurance company organized by the owner or partners of a successful operating company or family of companies.
BENEFIT:The captive puts the management of business risk in the hands of the business owner rather than an unaffiliated outside insurance company. You control the coverages, the premiums (within certain parameters), and the claims process.
2) Replacement or Supplemental Coverage [+]
FEATURE:Captive insurance companies are utilized to replace and/or supplement the existing risk coverage of the operating company.
BENEFIT:The captive can be used to cover gaps, exclusions and deductibles in existing insurance policies. It can also issue policies for surplus and custom-tailored coverages that are often too costly or not readily available through standard commercial insurance providers. Your insurance company can insure virtually any legitimate risk that can impact your business. As a result, you may be able to reduce or replace your commercial insurance, and in process, REDUCE YOUR COMMERCIAL INSURANCE COSTS!
3) Issue Policies and Service Claims [+]
FEATURE:Under a typical captive insurance arrangement the operating company pays premiums to, or purchases insurance from, the captive. The captive insurance company issues policies insuring the risks of the operating company, and services claims filed by the policy holder.
BENEFIT:Insurance premiums are paid into your own properly structured captive insurance company. You are insuring the risks of operations of your company and you service your company’s financial needs as necessary. You choose which coverages to insure, and you decide when and how to pay any claims that may arise.
4) Premiums Are Deductible [+]
FEATURE:Insurance premiums paid by the operating company to the properly structured captive insurance company are deductible for income tax purposes as ordinary and necessary business expenses.
BENEFIT:Your company is the beneficiary of the tax deductions, not someone else.
5) Section 831(b) Captives [+]
FEATURE:Under section 831(b) of the Tax Code, qualifying small insurance companies with no more than $1.2 million in annual premium may elect to be taxed on investment income only.
BENEFIT:You control more of your tax deductions and benefit from them in the most strategic manner. If the captive insurance company is properly formed, under U.S. Tax Code section 831(b), the premium you pay to your captive is considered non-taxable income to your insurance company.