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Captive Insurance - PowerPoint PPT Presentation


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Captive Insurance. Insurance company and insured are controlled by the same parties with the same interests. Advantages of Captive Insurance. Risk management Creative coverage Asset protection Lower net insurance cost Access to reinsurance market Estate tax planning Gift tax planning

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captive insurance
Captive Insurance

Insurance company and insured are controlled by the same parties with the same interests.

advantages of captive insurance
Advantages of Captive Insurance

Risk management

Creative coverage

Asset protection

Lower net insurance cost

Access to reinsurance market

Estate tax planning

Gift tax planning

Flexible investment opportunities

Improves cash flow

Tax savings

coverage characteristics
Coverage Characteristics

High

Severity

Low

High

Frequency

coverage characteristics1
Coverage Characteristics

Policy Limits $1M/$1M

Exclusions

Indemnity Only

Reimbursement

diagram 1 payment of premium
Diagram #1 – Payment of Premium

Shareholders

Operating Corp

$1.2 Million

Insurance Expense

Tax Deduction

Captive

$1.2 Million

Tax Free

Pool

Up to $1.2 Million Premium/Yr*

*Note: The premium is considered tax deductible insurance expense if the captive meets

IRS requirements for risk shifting and risk distribution.

diagram 2 risk sharing w single captive
Diagram #2 – Risk Sharing w/ Single Captive

Operating Corp #1

$100k

Insurance Expense

Tax Deduction

Operating Corp #2…

$100k

Insurance Expense

Tax Deduction

Operating Corp …#12

$100k

Insurance Expense

Tax Deduction

Captive

$1.2 Million

Tax Free

$1.2 M Premium/Yr

Up to $1,200,000 maximum yearly

premium, paid by multiple entities.

*Note: The premium is considered tax deductible insurance expense if the captive meets

IRS requirements for risk shifting and risk distribution.

diagram 3 estate planning children s trust
Diagram #3 – Estate Planning: Children’s Trust

Shareholders

Children’s Trust /

Family Limited Partnership / LLC

Operating Corp

$1.2 Million

Insurance Expense

Tax Deduction

Captive

$1.2 Million

Tax Free

Pool

Up to $1.2 M Premium/Yr*

*Note: The premium is considered tax deductible insurance expense if the captive meets

IRS requirements for risk shifting and risk distribution.

total expenses capital
Total Expenses & Capital
  • One time turn-key set up fee: $75,000
  • Estimated operating costs: $50,000 - 61,000
  • Pool retains 5% of 51% (2.55% of gross)

Cost up to $30,600 (assuming $1.2M in gross premium).

  • Minimum capital required: $250,000
annual expense
Annual Expense

Estimated annual costs: $50,000 - $86,600

  • Management Co $2,500/month
  • Actuary review $7,500 - $10,000
  • Audit $5,000 to $7,500
  • Income tax filing $2,500 to $3,500
  • Premium taxes $5,000
  • Reinsurance exp. Zero to $30,600

(2.55% of annual premiums paid to your captive)