If you’re feeling overwhelmed by the rising costs of insurance for your service business, despite your efforts to reduce expenses (ie: generate bottom line savings) through cost-cutting measures, then you are not alone! Many business owners struggle with finding the right insurance coverage to protect their business and employees while keeping costs low. In some cases, they may be paying for coverage they don’t even need. This can lead to frustration and a sense of helplessness. But there is a solution: captive insurance. By working with the right insurance company, you can take control of your coverage, lower your expenses, and gain peace of mind.
In this episode, you will be able to:
- Discover the advantages of captive insurance for your home service business.
- Uncover the benefits of owning a captive insurance company.
- Learn how to create tailor-made policies for your specific business needs.
- Find out how captive insurance can help lower your healthcare costs.
- Recognize the significance of adhering to IRS regulations for captive insurance companies.
The key moments in this episode are:
- [00:03:22] – What is a Captive Insurance Company?
- ([00:08:13]) – Captive Insurance and COVID-19
- [00:11:02] – Cyber Insurance and Captives
- [00:13:51] – Benefits of Captive Insurance for Home Service Businesses
- [00:15:40] – Turnkey Captive Management,
- [00:17:15] – Importance of Doing It Right,
- [00:20:14] – Retirement and Investment Opportunities,
- [00:21:40] – Businesses That Benefit from Captive Insurance,
- [00:25:44] – Captive Insurance as a Game Changer,
Lower expenses and gain peace of mind with captive insurance
Running a successful home service business is all about mastering the art of balancing risks and rewards. One of the best ways to protect your business and minimize expenses is by considering captive insurance. Unlike traditional insurance coverage, captive insurance enables business owners to create their own insurance company, which allows them to craft customized policies that directly address their specific needs. This can lead to lower insurance premiums, more comprehensive risk coverage, and even significant tax savings. Plus, having your own insurance company can provide you with an increased sense of security and control over your business’s future.
Randy Sadler shares his expertise on how captive insurance has helped his clients save on insurance costs and gain peace of mind. He explains that captive insurance companies can provide businesses with greater coverage against various risks, such as those stemming from weather-related incidents, without the limitations and exclusions often found in commercial policies. For example, Randy mentions a client who successfully claimed $85,000 from their captive insurance after suffering a weather-related loss, which directly protected their profit margin.
What is a Captive Insurance Company?
A captive insurance company is an entity that’s owned and controlled by the business it insures. This unique relationship allows businesses to tailor their insurance policies to their specific needs, resulting in more comprehensive coverage and reduced expenses. By having their own insurance company, a business can manage its own risks more effectively, while simultaneously providing the opportunity to develop a second profit center through the creation of warranty programs or extended service contracts.
Captive insurance companies allow businesses to vertically integrate their insurance needs, much like bringing manufacturing in-house to streamline supply chains. This enables businesses to retain a portion of the money previously spent on commercial insurance coverage. He also highlights how captives can help in areas where traditional insurance might struggle to keep up, such as cyber risks.
“A well-run insurance company is going to accumulate profits. Obviously. Not only can you take advantage of insurance taxation, but also you can invest and grow the money in your insurance company.” – Randy Sadler
Captive Insurance and COVID-19
The COVID-19 pandemic has posed unique challenges to businesses worldwide, such as business interruption and loss of revenue. Captive insurance can be a powerful financial tool when navigating these uncertain times, as it provides companies with more control over their business’s risk management.
Captive insurance policies have helped his clients have incredible resilience throughout the pandemic. He explains that all of his clients with business interruption claims due to COVID-19 have had those claims paid by their captive insurance companies. This highlights the effectiveness of having a solid coverage and monetary backstop, especially during challenging circumstances, that business owners might face.
Cyber Insurance and Captives
As our digital world continues to grow, new threats emerge that traditional insurance policies may not adequately cover. Captive insurance companies can provide broader coverage than commercial policies for hard-to-quantify risks, like cyber threats. By focusing on employee training, business owners can help protect themselves from these cyber risks, ensuring the overall safety of their business.
It’s important to have proper captive policies to cover risks like cyber attacks. Home service businesses should invest in employee training to minimize cyber risks.
Creating a Profit Center With Captive Insurance
Captive insurance has several advantages over traditional insurance coverage, particularly for home service businesses. Captive insurance companies allow businesses to lower their healthcare costs, offer bonding services, and can form a second profit center, such as warranties or sub-default insurance. By integrating captive insurance into their business model, home service businesses can gain a significant competitive advantage and build a more secure financial future.
Randy emphasizes the suitability of captive insurance for service businesses with operational complexity, employees, and various risks. He provides examples of businesses that would benefit from captive insurance, including home builders, HVAC, plumbing, roofing, gutter and siding, and electricians. By following the necessary regulatory guidelines and partnering with a reputable company, service entrepreneurs can reap the many benefits captive insurance offers, ultimately enhancing their operation and bolstering their financial well-being.
About Randy Sadler:
Randy has been a Principal with CIC Services since 2012. He has been a Sales and Marketing professional since 2007, when he joined Procter & Gamble’s Brand Management Group. His career transitions have taken him from P&G to Pfizer Pharmaceuticals to the Ellison Group to Jewelry Television. He now leads Business Development for CIC Services, LLC.
Randy has an entrepreneurial bent and is active in investment real estate. He is an Owner and Principal in Woodlands Management, LLC. His partnerships manage over 400 residential properties. Randy received his Bachelor of Science degree from the United States Military Academy in 1992. He served as a Tank Commander in the U.S. Army from 1992 to 1997.
Randy resides in Knoxville, TN with his lovely bride of 29 years, Shannon. They have five children. Randy and Shannon helped found Paideia Academy, a Classical Christian School in Knoxville that is entering its 18th year with over 250 students. Randy still serves as School Board President.
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