How The Captive Insurance Industry Can Increase Your Profits

Have you ever gotten your business insurance bill and felt like you were hemorrhaging money?

Well, you’re not alone. Many contractors and tradespeople struggle to find affordable coverage that really protects their business.

In this episode, my guest Randy Sadler and I dive into the power of the captive insurance industry – a strategy that can help you stop the bleeding, plug those profit leaks, and even create a new revenue stream for your company.

Randy shares real-world examples of how captive insurance has been a game-changer for his clients. Learn how captive insurance could be a unique solution for you to take control of your insurance costs and boost your bottom line.

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How The Captive Insurance Industry Can Increase Your Profits

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You’ll Learn how to…

The captive insurance industry can save you on insurance and create a profit center
To get tax benefits from owning a captive insurance company
Captive insurance plans can offer unique protection against things like regulatory changes or loss of key employees.
How captive insurance provided critical coverage and payouts during COVID-19
To know if your business makes enough to benefit from a captive insurance plan
To get more “found money” through warranty programs and subcontractor coverage

Key Moments…

[00:02:07] – What Is A Captive Insurance Plan And Why Home Service Businesses Need One
[00:04:34] – How A Captive Insurance Plan Can Create A Second Profit Center
[00:07:45] – How To Use A Captive Insurance Plan To Save On Insurance Costs
[00:10:08] – Using A Captive To Insure Subcontractors And Offer Extended Warranties
[00:15:12] – Types Of Risks That Can Be Insured In A Captive Insurance Plan
[00:19:37] – How The Captive Insurance Industry Helped Businesses Survive COVID-19
[00:27:29] – A Hidden Profit Leak That Can Be Addressed With A Captive Insurance Plan

What Is A Captive Insurance Plan And Why Home Service Businesses Need One

The captive insurance industry helps you own your own insurance company and self-insure your business. This can help you save money on your insurance costs that you’re already paying. By having your own insurance company, you can lower expenses like healthcare and maximize your warranty work to make it more profitable. Captives also provide asset protection by walling off money in a separate entity that’s difficult for creditors to access.

How A Captive Insurance Plan Can Create A Second Profit Center

Owning a captive insurance plan can create a second profit center for your business. You can vertically integrate your insurance by writing a check from your main business to your captive insurance company. This allows you to take a deduction in your main business while your captive can be taxed as an insurance company, potentially leaving you with more money. You can also use the captive insurance industry to insure things like subcontractor default coverage or offer extended warranties, creating additional revenue streams.

How To Use A Captive Insurance Plan To Save On Insurance Costs

By owning your own insurance company, you can save money on a wide range of insurance coverages like general liability, property, and casualty risk. The captive insurance industry can also help you save on healthcare costs and warranty work. The key is that the money stays within your own insurance company, allowing it to grow and be used when needed, rather than going to an outside provider.

Using A Captive To Insure Subcontractors And Offer Extended Warranties

Your captive insurance plan can be used to insure subcontractors, requiring them to purchase coverage from your captive rather than a third-party. This creates “found money” that stays within your business. Similarly, you can replace manufacturer warranties with your own extended warranty program, backed by your company in the captive insurance industry. This allows you to generate additional revenue and control the warranty process.

Types Of Risks That Can Be Insured In A Captive Insurance Plan

The captive insurance industry can insure a wide range of risks beyond the standard coverages. This includes things like business interruption, supply chain disruptions, legal/regulatory changes, loss of key employees, environmental pollution, and key contracts. Many home service businesses only insure the bare minimum, but a captive allows you to affordably insure these additional exposures.

How Captives Helped Businesses Survive The COVID-19 Pandemic

During the COVID-19 pandemic, the captive insurance industry was able to pay out business interruption claims that traditional insurance policies denied. This allowed captive owners to keep their businesses afloat and even gain market share as competitors went out of business. The ability of captives to respond quickly and pay valid claims made the difference between survival and closure for many home service companies.

A Hidden Profit Leak That Can Be Addressed With A Captive Insurance Plan

One major profit leak that the captive insurance industry can address is not taking full advantage of warranty programs. By replacing manufacturer warranties with your own extended warranty, backed by your captive, you can create a new revenue stream and keep those profits within your business. The captive structure allows you to defer taxes on this warranty income while also controlling the claims process.

As a home service business owner, exploring the captive insurance industry can unlock hidden profits and protect your company from a wide range of risks. Reach out to a captive insurance expert, such as Randy Sadler and find out if this strategy could benefit your business.

About Randy:

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.

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