As seen in the November issue of Goering Center for Family and Private Business E-Newsletter.
In today’s challenging economy and uncertain tax climate, a captive insurance company can offer multiple benefits. While a captive insurance arrangement is not a good fit for every, or even most businesses, for those businesses with a certain risk profile and the available cash flow, forming a captive insurance company can help to minimize insurance costs, control risks, improve cash flow and even serve as a wealth accumulation tool.
A captive insurance company insures the risks of its owner, affiliated business or group of companies. It issues policies, collects premiums and pays claims no different than any other insurance company. A captive is unique in that it typically provides insurance only for its parent or other associated entity. Captive insurance is not self-insurance. When someone self-insures, funds are set aside for a future event, but when a captive is used premiums are paid to a separate entity and a policy is issued. It is also important to note that captives are not a replacement for traditional insurance coverage. Captives generally act as a supplement to a commercial insurer, as they rarely underwrite all the risks of their parents. Certain types of risk are generally not carried by traditional insurers, but may be placed with a captive.
Please see full article below for more information.
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