Wholesaler · West Bountiful, UT · Member since 2011 · 12 posts · 7 votes
About two years ago my accountant mentioned "Captive Insurance" as a way to avoid paying a lot of taxes. When it seems too good to be true is usually is...blah,blah,blah, so I switched accounting firms (I had other reasons to move as well).
The other day I was speaking with a VERY Wealthy guy, and he got talking about captive insurance. I'm going to see what I can find out about it but I thought I would throw it out on this forum as well. Does anyone have any experience with captive insurance and/or currently running profits through a captive insurance company?
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
14y
Matt O.,
I'm familiar with captive insurance. And yes it can be a very beneficial situation. This is from both a taxation standpoint and an insurance standpoint. You will however, want to have insurance reasons for the captive and not just tax savings.
A captive can be very costly to start. You also have to be careful if there is any required licensing to be obtained.
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
14y
Minh L.,
Captive insurance companies are designed for yes both tax savings to offset profits; however, the were initially designed to provide insurance coverage that typically cannot be attained or to reduce the cost of coverage. The captive will have access to the Reinsurance market which means they can essentially purchase coverage directly from what could be considered wholesalers. This avoids the cost of premiums which can be 10-50% of the cost of a policy. Some of them offer warranty protection or provide coverage for policies that do not exist. They also provide cash flow into another entity for tax benefits and preferential rates. They also allow you to invest those premium funds until they need to be paid out for a claim.
There is a typically a reinsurance component with means that your captive purchases a policy.