The tax code says self-insuring risk is not deductible
1986 congress introduced 831B – farmers were ensuring their crops. This began this concept.
Below are some notes were taken on this subject:
- Additive to regular insurance
- Not malpractice insurance
- Insure your brand with pre-tax dollars
- Eligible yearly premium – 10% of gross billing from the previous year
- Use a C-Corp
- Why? Self-insure against low probability intangible events within your business
- Business expense
- Lowers your taxable income
- Very similar to banking from yourself
- Used to pay out for warranties for your products – use for a marketing tool for your business
- You can leave the money in the program (insurance), borrow the money paying yourself insurance, declare a dividend
- Congress has increased (2015 Path act) 831B to $2M with inflation rider and got rid of lineal descendants
- Previously a red flag for tax auditing
- Fortune 500 companies always have insurance company offshore, try to do in USA with yours
- To ensure brand issues such a stupid comment on social media NOT incase your key employee leaves
