Business Self-Insurance: Using the 831(b) Strategy

Do you ever think about how much money your business pays in Taxes?  At McLean Insurance, we think about it and we’re always looking for ways to save you money and increase your protection.  That’s why you might want to consider a self-insurance strategy that uses a section of the IRS tax code – 831(b) – to let you essentially become your own “Captive Insurance Company.”  McLean Insurance can make it easy for you to do.

Let’s talk! Call us at 703-637-4331.

What is a Captive Insurance Company?

For years, Fortune 500 companies have been using “831(b)s” to cut hundreds of thousands of dollars off their tax bill. Now, becoming a captive insurance company is a strategy available to smaller businesses that pay less than $1.2 million in annual insurance premiums.

What are the advantages?

  • Tax savings: no Federal or state tax on underwriting profits you make on premiums, so those profits accumulate tax-free. Dividends are taxed at less than half of the 35% ordinary income tax rate. Premiums are deductible at normal business expense.
  • Estate planning: Efficient way to transfer wealth with NO estate or gift taxes.
  • Risk management: Many business owners today use the Captive to cover low severity risks while purchasing catastrophic risks from the commercial marketplace. The flexibility is yours, since Captive Insurance companies can cover many risks, including:

Directors & Officers Liability

Errors & Omissions

Employment Practices

Advertising & Marketing Failure

Loss of Key Customer, Supplier or Employee

Antitrust & Unfair Competition

Credit Default/Accounts Receivable

Intellectual Properties

Mold

Wind, earthquake, flood

Breach of data

Regulatory Liability

Machinery Break Down

Lender Failure

And more

How do you operate a Captive Insurance Company?

You don’t need to know the ins and outs. McLean Insurance can connect you with a management company that will handle all the day-to-day operational and regulatory matters. However, you – as the Captive Insurance Company owners – will have complete control of the company, money, and how funds are invested and claims are paid.

What is the ROI of becoming a Captive Insurance Company?

Setting up a Captive Insurance Company can cost as little as $30,000 so the pay-back is rapid – and the savings are substantial. In fact, large companies across the US are already using the “Captive” insurance companies to cut corporate tax bills by up to $400,000.

If you’re interested in learning more, call us at 703-637-4331.