Are you considering setting up a captive insurance company?
If yes, it’s clear you’re looking for a way to manage the risks your business is facing. You’re onto an effective solution, no doubt.
A captive insurance company is just what it sounds: an insurance company. However, unlike traditional insurance firms, a captive company is wholly owned by another company, for which it provides insurance coverage. In other words, you create an insurance company to cover your business’s risks.
So, are captive insurance companies any good or it’s better to purchase insurance from a traditional insurance firm?
In this article, we’re sharing the benefits of creating a captive insurance company. Read on!
1. Lower Insurance Premiums
If you’ve ever bought business insurance, you certainly know how high or exorbitant insurance rates can be a pain. What’s worse, you’ve little to no control over the premiums you’re charged.
If you go to purchase worker’s compensation insurance, for instance, you’ll have no choice but to pay the premiums your insurer asks you to pay.
With a captive insurance company, you’re able to control the amount of money you pay in premiums, as well as the level of coverage you get. Since you own the entire company, you’re in control of the decisions the captive insurance company makes. You’ll get lower premiums for almost every insurance policy you buy.
2. Gain Access to a Wide Range of Insurance Coverage
Ordinarily, your insurance needs are limited by the range of insurance products that are already in existence. For instance, if you want to cover your business against, say terrorism, because you believe your business is exposed to that risk, and yet no insurance company offers terrorism insurance, there’s little you can do.
A captive insurance company eliminates this problem. Since you own it, you can easily create insurance products that don’t already exist in the market. And by doing so, you’ll be able to cover your business against risks that you wouldn’t be able to cover had you been relying on traditional insurance companies.
3. Tax Benefits
As a business, you’re entitled to a wide range of tax deductions. One of these is your insurance premiums. If you pay $2,000 in insurance premiums every year, you can deduct the same amount from your federal taxes every year.
A captive insurance company offers a unique tax benefit.
In essence, you’ll be paying insurance premiums to yourself since you’re already own the company. On top of this, you’ll be able to claim the amount you pay from your taxes.
Trying to crunch the numbers to see the cost savings? Under this benefit, think of it as the government paying you for insuring your business!
Captive Insurance Companies Offer Significant Benefits
Captive insurance companies do more than provide insurance coverage to the insureds. They also offer the owners a number of unique and significant benefits. Having read this guide, you now know how you stand to benefit.
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