831 (b) Captives

Although purchasing traditional insurance from a third-party company is a common choice among businesses, other options are also available. In some cases, these alternatives can provide superior benefits. One such alternative involves forming a Captive.

A Captive is an insurance company your company forms, owns and manages. Forming a Captive is an alternative to purchasing standard commercial insurance that can provide your business with a number of important advantages, including:

  • Reduced overall costs
  • Customized coverage
  • Increased control over coverage
  • Wealth accumulation
  • Asset protection

Captives can also provide your company with valuable tax benefits through an election allowed under section 831(b) of the Internal Revenue Code. To qualify as an 831(b) Captive, your insurance company must receive less than $1.2 million in premiums each year. The company can then file its election along with its first tax return.

Benefits of Forming an 831(b) Captive

If your business forms an 831(b) Captive, it can provide you any and all types of commercial coverage your business may need, including:

  • Professional Liability
  • Directors and Officers Liability
  • General Liability
  • Auto Liability
  • Property Insurance
  • And more.

All premiums paid to the company are tax deductible for your business. In addition, under section 831(b), the Captive itself must pay tax only on its investment income. All premiums received are tax free, as long as the annual total doesn’t exceed $1.2 million.

Contact the Warren G. Bender Co.

The rules surrounding the formation of an 831(b) Captive can be complicated and confusing for businesses. We understand all of these rules and regulations thoroughly, and all of our programs have ratings of A or better. Our team can analyze your company’s risks, needs and current insurance coverage in order to determine whether your business could benefit from forming an 831(b) Captive. Contact us today to get started!