Premiums: Profit or Expense?

The Epiphany of Paying Insurance Premiums

Traditionally premiums are viewed in a negative light when it comes to insurance. We can categorize insurance premiums into three traditional thought processes:

1. Premiums are required.
2. Premiums are paid voluntarily, intentionally for the returning benefit from the insurer.
3. Premiums become profit.

How Do You View Your Premiums?

1. Required premiums. Clearly some insurance premiums are required by law such as health insurance, car insurance, homeowners insurance, general liability or workman's comp. There are returning benefits from the insurer coming back to the payer such as health coverage, employee retention, deductions, and of course the general or specific coverage for the insured.

Poorly managed risk management programs result in increasing premiums, and even well managed programs often result in a "sunk cost" -- premiums paid for years without ever filing a claim. The saying goes, the insurance company always wins. They collect the premiums for years and/or they increase rates because of frequent claims or inflation.

2. Voluntary premiums. Insurance coverages such as life insurance or directors & officers coverage are not required by law, yet many companies and individuals appropriately choose to pay premiums for these and many other lines of coverage for a variety of reasons but ultimately for the protection or benefits provided. Permanent life insurance is a great example as the insured gains multiple benefits both while living and upon their passing including the death benefit, tax-free accessible cash value, buy-sell agreements, estate planning and more.

Premiums Become Profit

When paying premiums to your own insurance company, premiums become profit. Captive insurance provides the opportunity not just for an epiphany regarding the power of the premium, but also the opportunity to become the insurance company.

For businesses and business owners, paying premiums to their own insurance company provides all the protection, all the insurance either required, or not required. Premiums are no longer a sunk cost. Instead of griping at insurance companies, become one!

Insurance companies are designed to win, to be profitable. Your captive insurance company is the same. When paying premiums to your own company, these funds become profits of your insurance company -- not expenses. Still regulated, providing protection, and paying claims.

Who Qualifies?

There are of course operational expenses, fixed costs of owning your own insurance company. These frictional costs include administration, compliance, claims processing, risk distribution, actuarial work, reporting, and more.

So who qualifies? Businesses who have the cash flow to pay premiums. Often times, simply by reallocating existing assets, paying your company instead of a third party, and addressing deductible limits, we can show you how to fund your captive insurance company.

You can and should turn premiums into profits. Ask how, get educated, engage, and own your own captive insurance company today.