Captive Insurance can be a business’s PRIMARY or SUPPLEMENTAL insurance service. It can cover claims that any other insurance company can, like liability, third party insurance, umbrella insurance, and destruction by hazards such as fire, etc. Above and beyond this, Captive Insurance is the ONLY insurance that will cover for GOVERNMENT SHUT DOWN or LOSS OF LICENSE, as well as key employee loss, key vendor loss, and theft. And above and beyond all of this still, Captive insurance allows businesses to recoup their premiums if no claim has been made in that fiscal year. That means you can save the money you normally lose to insurance premiums each and every year!
There are also added benefits for Captives because you can allow the surplus to accumulate in the Captive bank account and then make investments out of the company, and even borrow against the funds on a 30 year note. Or, if one wanted to withdraw the surplus at any time, it would be taxed as capital gains which is a lower rate than if you were to declare it without putting it through your Captive the company. This allows you to SAVE YOUR MONEY and PAY LESS TAXES!
Most accountants aren’t terribly intimate wth the workings of Captive Insurance. The first thing they see is that it’s on the dirty dozen list and that there have been cases that have been challenged by the IRS, where the IRS has won citing tax evasion and more. I want to reassure you that the cases that have created such a bad name for Captive Insurance are cases that SET OUT towards tax evasion and did not comply with all of the requirements for the 831(b) mechanism. A Captive Insurance company must operate as a bona-fide Insurance company. It can’t just be a shell which one moves money into and out of. The determination for claims and their amounts must be in compliance with industry norms. And one definitely can’t touch the Captive’s premiums for anything other than claims during their active fiscal year.
My partner and I are just finishing up the website and some promotional videos, and we will be formally launching in a week. I will re-post with that info once it is ready. Until then, please feel free to contact me if you want to chat further about Captive Insurance, my team’s experience on more than 300+ Captive cases, and the EXPERT TEAM we work with for US income tax law, underwriting, accounting, and actuarial.