Things to Consider When Organizing an Association Captive

Motels Workers Compensation

Association Captives

As businesses continue to experience greater competition in the industry, many are looking toward forming association captives as an alternative to traditional insurance plans. There are several ways that businesses can use an association captive to gain profitability and customize benefits for their specific industry. While large corporations and universities have been using captives for years, financial advisors are now suggesting them to smaller businesses as a great way to cut health insurance costs for employees. Here are some things to keep in mind if you are considering a captive insurance plan.

  • Make sure that you are eligible. Not every business will benefit from using an association captive. Those who need to manage risks, has a business of significant worth that needs protection or wants to diversify their assets may be good candidates.
  • Be sure to reserve enough money to cover any claims that may occur throughout the year. With an association captive, you are responsible for paying out claims that come up.
  • Captives allow you to deduct premiums on your taxes. If your claims required less money than the cost of your premiums, you are able to receive the excess money as dividends, which also have a lower tax rate.
  • You can organize your estate by establishing association captives in the names of your dependents. You can then transfer their inheritance to them bypassing any estate taxes that may have otherwise been established.

As association captives increase in popularity, it is important to research the subject before delving in full-force. Talk to an experienced financer about the risks and benefits of opening up an association captive for your business.

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