Ancillary Benefit Of A Captive Insurance Company – Formidable Asset Protection
It seems that every time I drive on the interstate, I pass billboards for attorneys who will “get me the money I deserve” or “turn my wreck into a check.” This article will not discuss the merits or demerits of our current legal system. But, the fact remains that we live in a very litigious society and successful business owners and professionals provide a particularly promising lawsuit target.
One of the surest methods to protect assets from lawsuits and other creditors is to place them out of reach. A well-structured captive insurance company can do just that.
In addition to gaining the ability to self-insure and to own a profitable second business, a captive insurance company is one of the most formidable asset protection vehicles available to businesses and business owners.
However, 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
These are well known reasons that legitimate captive insurance companies are formed by businesses. Assuming a captive insurance company is formed for the above reasons (or similar ones), it can also serve as the backbone (and full body armor) of a business owner’s asset protection strategy.
A Common Business Challenge– Protecting Accumulated Wealth From Lawsuits And Creditors
I’ve heard many successful business owners say that one of the worst things about building a successful business is the fear of losing their business and/or wealth in a lawsuit. Most of us know good people who were acting in good faith who have been seriously hurt financially (possibly even destroyed) as a result of a lawsuit.
The Significance Of The Challenge
Juries and Judges are notorious for exorbitant rewards in many lawsuit cases. And, many states allow for punitive damages above and beyond compensatory damages. In some cases, a well insured business owner acting in good faith can be wiped out in a lawsuit.
A business that owns a captive insurance company can insulate a significant amount of wealth from lawsuits and creditors. This is the case because a captive insurance company is a C Corporation with a very limited purpose. This limited purpose protects the assets in the captive.
Why Is Owning A Captive Insurance Company An Effective Solution?
There are almost no circumstances where a captive insurance company would be liable for its actions. Likewise, there are almost no circumstances where a business or business owner’s creditors would be able to level a claim against a captive insurance company. In a matter of speaking, a captive insurance company is like an innocent bystander that is lawfully disassociated from the business and its owner in matters of liability.
What Is A Captive Insurance Company?
A captive is a unique insurance company. It includes its own corporation, insurance license, reserves, policies, policyholders, and claims. It is a formal way for business owners to self-insure risk, and captives are generally formed to insure primarily though not exclusively the risks of one or more businesses owned by the same or related parties.
What Is The CIC Services Difference?
The primary reason for forming a captive is ALWAYS risk management.
All risk management is Financial. It’s all about the money.
A financially strong captive is a more powerful risk management tool.
CIC Services LLC structures captives to optimize both risk management and asset accumulation. The greater the asset accumulation, the more effective the captive is to serve its insured parties and owners.
We do this through the following:
– Comprehensive Business Risk Assessment
– Strategic Risk Management Plan
– Superior Structuring within a Captive
– Superior Asset Management Strategies
– Superior Exit Strategies