company insures itself through its own insurance company, referred to as captive insurance, you get to keep the prot and accumulate wealth. Here’s how.
No matter what industry you’re in, you likely pay for insurance. How a Captive Insurance Company Works
There’s a reason why 90% of Fortune 1000 companies utilize captive insurance.
Captive insurance companies provide combined insurance and tax savings of 15-50% .
Anatomy of a Captive
Insurance When you own a captive insurance company, the premiums are paid to you—you keep the prot after claims are paid out. For example, you receive $2 million in premiums, pay $100k in operations and pay $50k in claims , then you have $1.85 million in underwriting prot.
Recieve $2 Million (Premiums)
Pay $100k (Operations)
Pay $50k (Claims)
Profit $1.85 million
Insurance
Tax Rate 0%*
Taxes Underwriting prots are deferred due to loss reserving or taxed at 0% in some cases.
Loss Reserves Remaining $1.85 million
Investment Income
Investment Income The captive is able to invest a larger amount due to tax-favored treatment.
$92,500
As an example, after one year, at 5% interest, you’ve earned $92,500 .
Wealth Accumulated
Wealth Accumulation Using the same example, $1.94 million loss reserves in accumulated wealth.
$1.94 million
In short, a captive can do the following: Manage risks Help control insurance costs Improve asset protection
Improve company’s bottom line Create profit center Accumulate wealth
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