What is a Captive Insurance Company (CIC)?

We speak to many groups of business owners and professionals about Asset Protection and tax-favored wealth planning, and we are often asked about captive insurance companies. ‘Captives’ or tax-exempt closely held insurance companies (CICs) are useful for not only asset protection, but also for insurance premium savings and tax planning – provided they are suited to your economic needs, and you qualify for their considerable tax benefits.

The CIC is a legitimate insurance company. It is licensed to write insurance in the U.S. and registered with the IRS. Many Fortune 500 companies have long used CICs to protect their excess cash, to gain tax advantages, and to lower their own insurance costs. Now individuals, smaller business owners, and professionals also take advantage of CICs by setting up their own.

By owning your own CIC, you can insure all or a portion of your business or professional practice from significant risks – such as malpractice or other liabilities or losses for which you would typically carry insurance. By insuring yourself through your own CIC, you get a present year tax deduction on the premiums and you can pay any claims with pre-tax dollars out of the CIC’s loss reserves. Your CIC can also insure low liability risks, or your CIC can transfer risk to another reinsurer. Whether you own a CIC or you are a member of a group you can take a significant deduction each year and grow your funds in the CIC tax-free. You can later reclaim the funds and pay long-term capital gains tax. This three-tier tax advantage is unavailable through pensions, IRAs or other retirement plans.

In addition to its tax benefits, the CIC offers Asset Protection. Your CIC can supplement your existing liability policy. This ‘excess’ malpractice protection also gives you the security that you won’t be wiped out by a lawsuit in excess of your present coverage. Also, the pre-tax premiums paid to your own CIC are protected from the creditors of your business or professional practice. You accomplish all this without losing control of your funds.

To speak with an attorney about setting up a CIC and if it would be a good fit for your business contact us today. The Presser Law Firm, P.A. offers complimentary preliminary consultations directly with one of our experienced Asset Protection attorneys who will review the details of your situation and offer you specific relatable advice on how to best protect your assets in general and through a captive insurance company.

The Presser Law Firm, P.A.

6199 N. Federal Highway, Boca Raton FL 33487

(561) 953-1050 or e-mail Info@AssetProtectionAttorneys.com


For additional information, watch this webinar replay on Captive Insurance Companies