In addition to gaining the ability to self-insure and to own a profitable second business, a captive insurance company can also facilitate the purchase/sale of a business. Prior to addressing this unique benefit, it’s worth noting the primary reasons that businesses form their own insurance company – specifically a captive insurance company.
- To manage business risk by formally self-insuring certain risks with pre-tax dollars
- To protect assets from creditors of the operating business and its owners or other risks
- To realize profits and accumulate wealth inside of a separate business entity