Captive Insurance Firms & Setting Them Up the Right Way

Having your captive insurance firm is a necessity if your business profits exceed $600,00 annually. It will save you a lot in insurance costs resulting in considerable savings and will also reduce the taxes that you pay from your business income. Captives efficiently facilitate wealth transfer to members of their family or other beneficiaries. Another major advantage of being a captive is that you can insure your entities that are in operation against various risks.

Why You Should Form Your Captive Insurance Firm

Captive insurance formation provides cover for things that are either not available or have high prices. The business of your client could benefit from being a captive company as this scheme reduces various operational costs. These costs could be about gaps present in the existent coverage, or huge deductions by the existing cover. They also could be from unexpected expenses from litigations or liability of the officials or directors. Exaggerated costs for protection, as well as unfair competition, are quite significant factors here, too.

You will make the captive feel more relaxed because they will enjoy assets protection from creditor claims. Federal laws allow this arrangement, and they classify it under C corporations. Captive reserves are also under the protection of by the laws of insurance for payment of claims which might arise. Another reason to give you good night sleep is that tax does not eat on your reserves when you are a captive.

Your client will enjoy a better-quality life after retirement from receiving funds that they could have lost to taxation. From the huge amounts of premiums deducted from a client’s business every year, the funds can be a good source of retirement income.

Forming Your Captive Insurance Firm

Insurance agent shaking hands

Evaluate the advantages of the insurance company by carefully assessing various coexistent variables. If with this knowledge the client feels comfortable with forming a captive, s/he should set up a team of members with expert knowledge on:

Plan designing & Administration of the Plan

The design should include projections of the cash flow, have legal documents summaries, and a flow chart for your clients. Having a goal is necessary when forming a captive to establish the next step to take. The systems on project management that are available on the web can be of great help.

Expertise in Tax Law & the Rules & Policies

Having wide knowledge of tax-related issues can be an asset during captive formation and in its eventual performance. Every organizational jurisdiction has a varying set of rules that manage captives as well as the trusts which own them. By understanding a client fully, it would be easier to decide on the structure that could perform the best. It is good to know how specific policies can give better benefits than the ones outside of insurance. The life, property and casualty insurance are a perfect example of these policies.


The key benefit of captive insurance formation is providing a company with solutions to tough decisions. Captive insurance will guarantee the required security when transferring wealth. Be keen though to know how you can use captive funds in the future to fund business agreements and retirement program plans. You can use them for planning programs for wealth and estates, too.

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