WHAT IS A CAPTIVE INSURANCE COMPANY?

A captive insurance company is a company that is established with the primary objective of insuring or reinsuring the risks arising from the operating business of its owners.

WHY WOULD A BUSINESS OWNER PURSUE A CAPTIVE STRATEGY?

Owning your own insurance company gives your business the opportunity to retain favorable, i.e. profitable, risks within the captive, and transfer the less favorable risks to the traditional insurance marketplace.

A captive insurance company, an insurance company owned by your business, or by you personally, allows for a more tailor-made policy that covers the exact risks of your business at a much lower cost than traditional third party insurers.

As an added bonus, the captive premium expense is tax deductible to your business and the premium income of the captive is favorably taxed, if at all. Over time, as these premiums accumulate, they can be invested to generate additional income which can then be distributed back to the shareholder.

In short, payments which were once a sunk cost can be turned into a new source of income.

Other Advantages of a Captive Insurance Company

Asset Protection: A captive is a very effective asset protection tool as the funds that you accumulate in your captive are insulated from creditors.