1. Customized Coverage: One size does not fit all in the insurance world. Your captive allows for tailored policies that meet the specific needs of your business, covering risks that traditional insurance may not. Any premiums, net of claims and costs, are retained by your captive insurance company, not a third-party insurance company. Because you own the insurance company, you control how much and what coverage you purchase in any given year.

2. Enhanced Risk Management: Owning a captive insurance company encourages businesses to adopt a more proactive approach to risk management, leading to a safer and more efficient operation. You and your company capture the economic benefit of reduced insurance claims.

3. Improved Cash Flow: Captive insurance can enhance your business’s cash flow by allowing you to retain underwriting profits and investment incomethat would typically go to an external insurer.

4. Tax Benefits: Captive insurance companies offer meaningful tax advantages, making them a financially attractive option for many small and medium-sized businesses.

5. Financing Benefits: Your captive insurance company retains the premiums paid into the company, net of any claims and losses, which are then invested in low-risk stocks, bonds, and mutual funds. As those retained premiums grow, your captive insurance company can make loans to your parent company. The interest payments are deductible costs for the parent company, which typically has a higher tax rate, and interest income for your captive insurance company, which will typically have a lower tax rate. 

6. Succession Planning: The captive insurance company can also pay dividends to you or your beneficiaries as its retained premium base grows.