The Bottom Line
What does the bottom line really mean for captive insurance? Premiums become profits, protection becomes pragmatic, and millions of dollars are at stake.
Webster Says
bottom-line (adjective): 1. concerned only with cost or profits. 2. Pragmatic, realistic.
bottom line (noun): 1a. the essential or salient point. 1b. the primary or most important consideration. 2a. the line at the bottom of a financial report that shows the net profit or loss. 2b. financial considerations such as cost or profit or loss. 2c. the final result.
Captive Insurance and the Bottom Line
Concerned only with cost or profits: Premiums are an asset, not a sunk cost. In fact, premiums become profits. Captive insurance does have premiums, additional expenses, and profits.
Pragmatic, realistic: Captive insurance insures risks of your operating company. For qualified business owners, owning your own insurance company should be your reality.
The Essential Point
The crux of captive insurance varies from owner to owner. However, for profitable businesses who have a problem, captive insurance is the answer. Captive insurance is much more than just insurance — it is often essential for retirement, expansion, buy-outs, philanthropy, retaining more of your earnings, or other common challenges.
For business owners who don't have any problems — see above.
The Primary Consideration
Captive insurance begins and ends with protection and management of risk. The intent and usage of new retained earnings vary and often become the most important consideration.
The Financial Report
Insurance companies are designed to be profitable. Your captive insurance company should be profitable.
There are multiple financial considerations: premiums, savings, retained earnings, distribution rates, and overall efficiency should all be considered, including tax (income tax, estate tax, long-term capital gains tax), gross revenue, net income, loss ratios, claim experience, and pooling fees. All may be a particular owner's bottom line.
The Final Result
If only it was so easy to identify the bottom line. The bottom line means different things for different people. What's your bottom line?
Millions of dollars are at stake. Take the time to talk to an expert in the field of captive insurance. Do not make a multi-million dollar decision based on a search engine result, what you heard five years ago, or the advice of someone who is not versed in the wonderful complexities and opportunities that come from the captive insurance solution.
Three Important Questions
- Do I qualify?
- What does a captive look like for me?
- How and when do I start?