Many businesses pay a large amount each year in insurance premiums to cover losses that may or may not ever happen. Although the payments are deductible business expenses, they are lost and not returnable unless a claim is made that is covered by the insurance you have purchased.
Consequently, many companies have decided to insure themselves. They create their own insurance company to insure the risks of the company; these are referred to as captive. Although these are not a good fit for every company, they can be a great fit for some and save hundreds of thousands of dollars over the course of several years.
The benefits include paying your own captive insurance company to insure the risks of your company. If not used, those payments do not only remain tax deductible to the business, but they are tax free up to a high amount each year. So, in essence, you can pay a business you own to insure the risks of your companies or company. That means that as you do not make claims against your insurance, money builds up in your captive insurance company almost completely tax free to the captive and still tax deductible to the company.
There are several issues with a captive insurance company that can easily turn what seems like a good idea into a bad idea, so it is important to discuss with us the steps necessary to see whether or not your company would be a good candidate for a captive insurance.
If you have questions about whether and how a captive insurance company can benefit your business, contact us for a free consultation at 801-960-2750 or firstname.lastname@example.org.