CAPTIVE INSURANCE PROGRAMS

2020 MADE US REALIZE WE ARE SELF INSURING SOME RISKS AND EXPOSURES

Most Garage Insurance Policies either have limited coverage or no coverage for the following exposures, meaning you already self-insure these events.  Why not set aside funds to cover these events, taking a deduction, deferring taxes, and paying tax on ordinary capital gains. Coverage is provided above and beyond traditional garage policy limits or coverage availability. 
  • The cost of garage liability insurance has forced most dealers to increase their deductibles to manage their premiums, insurers have eliminated deductible caps on weather related inventory claims, Employment Practice deductibles are routinely $50,000 or more and worst of all, earthquake deductibles are 10 to 25% of the limit not the loss.  Under a 831(B) Safe Harbor Plan, you can set aside funds to pay for uninsured risk, which include deductibles.
  • Customer complaint defense limits are often limited to $25,000 per occurrence with an annual aggregate.  Dispute resolution coverage is available with increased limits and broader language.
  • Business interruption coverage is available for pandemic related shutdowns.
  • Coverage is available for third party business interruptions, and supply chain disruption.
  • Brand protection from adverse publicity.
Use the tools that are used by Fortune 500 companies with an 831(B) captive insurance company.
  • Take advantage of tax code passed by Congress in 1986
  • Owner contributions (premiums paid in) are tax deductible
  • Allows for accumulation of assets to indemnify you in the event of a covered loss
  • If annual premiums are under $2,300,000, underwriting profits are taxed when distributions are taken
  • Distributions are taxed at qualified capital gains
  • You decide who owns shares in the company

Types of 831(b) Programs

Safe Harbor Plans

When there are a number of “units” of risk or exposures on a single policy, this type of structure is considered a 831(b) Safe Harbor Plan Structure, just like a vehicle service contract reinsurance program.  Below is a partial list of available Safe Harbor Plans, including some non-automotive programs.

Enterprise Risk Management Policies

When insurance policies are issued for a specific risk or exposure under a Enterprise Risk Management policy 831(b) program, there needs to be risk distribution (sharing) among unrelated parties or businesses.  The below list is a sample of the risks that are reinsurable.

Information on this site is for information and educational purposes only, and should not be construed as tax or legal advice.  Please engage your attorney or CPA for guidance on products and services related to 831(b) plans.