Micro Captive Insurance Company Coverage and Policies
MICRO CAPTIVE INSURANCE AND ALTERNATIVE RISK TRANSFER STRATEGIES
Traditional risk transfer techniques involve purchasing conventional, guaranteed-cost insurance policies. Although this provides successful risk transfer, it offers little control over your claims and rising premium costs. Micro Captives are an effective, efficient and tax-advantaged alternative.
MICRO CAPTIVE BENEFITS
- Greater control and management of claims
- Reduced expenses
- Customized coverage not otherwise available in the standard market
- Enhances and integrates with existing insurance policies to fill any gaps in coverage
- Can supplement a Group Captive
- Facilitates recapture of premiums not used to pay claims
WHAT IS A MICRO CAPTIVE INSURANCE COMPANY AND HOW DOES IT WORK?
A Micro Captive is a captive insurance company operating with an annual gross premium up to $2.2 million. In the United States, qualified under Internal Revenue Code 831(b), a Micro Captive will pay tax only on investment income and not on underwriting profit. The underwriting profit can either be returned as a dividend or subject to limitations prescribed by the IRS, remain in the captive as surplus. The Micro Captive must qualify as a bona fide insurance company and serve a business purpose.
IRC SECTION 831(b) PROVIDES THAT:
- Insurance companies with less than $2.2 million of annual premium (as adjusted for inflation) pay $0 income tax on insurance profits.
- Investment income is taxed as income to C-corporation
- 831(b) must be timely elected and cannot be revoked without the submission to and approval by the Secretary of the Treasury
TAXATION (Consult with your Tax Advisor):
- Premiums are deductible when paid under IRC Sections §162 and §212
- Income tax on investment income only
- Minimum premium taxes
- Dividends are taxed as qualified dividends
- Termination surplus are taxed as capital gains
IS AN 831(b) MICRO CAPTIVE SUITABLE FOR YOU?
To help determine if a Micro Captive is right for you, Chernoff Diamond will perform a full review and actuarial analysis of your current program (including incurred and realized claims). Our certified insurance counselors will deliver a feasibility study that forecasts your risks and potential to obtain necessary coverage and capture savings through a Micro Captive Plan.
MICRO CAPTIVE INSURANCE COMPANY COVERAGE AND POLICIES
The insurance in a Micro Captive is designed to expand, complement, and close gaps in existing insurance programs.
EXAMPLES OF MICRO CAPTIVE COVERAGE:
- Everything a Business Currently Self-Insures:
- Losses more than traditional limits
- Environmental Liability
- Loss of Income as a Result of Insurable Risks:
- Losing key employee/salesperson
- Loss of license/professional risks (professionals)
- Loss of a Key Contract Resulting from Insurable Events:
- Weather, terrorism, etc.
- Liability Defense Expenses:
- Employee lawsuits – sexual harassment, wrongful termination, discrimination, etc.
- Professional claims
EXAMPLES OF MICRO CAPTIVE POLICIES:
- Professional Liability Gap Coverage
- HIPAA/Billing Audit Liability
- Contractual Liability
- Cyber Liability
- Environmental Liability
- Excess Environmental Liability
- Labor Shortage/Strike Loss
- Employment Practices
- Employee Dishonesty
- Patent Infringement/Intellectual
- Property & Liability:
- General Liability Gap
- Property Management Professional
- Professional Misconduct
- Product Recall
- FDA Administrative Actions Liability
- Product Liability Gap
- Directors and Officers Liability
- Punitive Damages
- Loss of Key Employee
- Wind Deductibles on Property
TAKE CONTROL AND INCREASE YOUR BOTTOM LINE WITH AN 831(b) MICRO CAPTIVE
Contact one of our risk advisors at 411Risk@ChernoffDiamond.com to learn more about the lower costs, broader coverage and greater control that can be yours with Micro Captive Insurance.