Commercial and residential construction is big business in the United States. In fact, it’s estimated that the industry earns over $1.5 trillion each year.
There are many moving parts that business owners should consider at the onset of a signed contract—including risks. Construction businesses are faced with numerous risks such as extraordinary weather events causing business disruption, like a major winter storm or hurricane, regulatory changes, and physical damage to equipment, which may lead to high out-of-pocket costs. Negative outcomes may be avoided by having an alternative risk management plan in place, such as the formation of a captive insurance company. The animated video below explains.
Have questions? Call Capstone at 1.800.500.3190, or submit your information via the form. One of our experts will be in touch. We’ll discuss how we can help you or your client form a captive insurance company to insure the risks of your construction business.
Fund Losses, Fight Construction Risks
In the conventional insurance market, construction insurance coverages are available, but they can be extremely limited. The fact is, the inconsistencies in coverage and policy triggers from insurer to insurer put business owners in a precarious situation: they often pay more to obtain full, comprehensive coverage.
One type of coverage readily seen in the conventional market is the standard Insurance Services Organization (ISO) Commercial General Liability (CGL) policy. Its form has a list of 17 specific coverage exclusions listed in the policy. Of course, separate coverages are available but they come at an extra cost to the insured. The moving parts of construction projects and the industry in general, require a risk management solution that can be customized to fit a company’s unique needs.
With captive insurance, construction business owners can insure their risks, utilize more comprehensive coverages, and mitigate the potential for serious financial and operational losses.
Sample coverages include:
- Extraordinary Weather Events
- Regulatory Changes
- Physical Damage to Equipment
- Builder's Risk
- Property Damage
- General Liability
- Supply Chain Breakdown
- Legal Defense
- Employment Practices Liability
The benefits of forming a captive insurance company can be fully realized when business owners partner with an expert captive management team, like Capstone Associated Services. Keep reading to learn more.
So here’s how it works:
Construction companies pay premiums to the captive insurance company, just as they would to a commercial insurance company. Funds accumulate inside the captive and can fund losses in the case of a loss event. IRC 831(b) captives offer a 0% Federal income tax paid on the captive’s underwriting profits.
Moreover, if there is undistributed earned surplus, i.e. there are no claims made in a given year, the funds can be distributed as a dividend or as a secured loan back to the operating company. Premium costs are lower, because in the commercial markets, “special” coverages tend to be more expensive. These coverages may not be available at all commercially. Business owners have better control over their risk management efforts, more comprehensive coverages, and a more advantageous planning solution.
Bottom line: Captive insurance for construction companies is a powerful alternative to commercial insurance alone. Savvy business owners in construction who form their own captive insurance company can count on a new level of risk management, as they combat risk in such a competitive industry.
Attorney-led Captive Planning for Construction Businesses
Capstone is the most integrated and largest outsourced provider of captive insurance services for the U.S. middle market. In association with The Feldman Law Firm LLP, Capstone offers platinum level attorney-led captive planning and administers property & casualty captive insurance companies that provide alternative risk financing services throughout the U.S.
Now in its CAP_YEARS_SUPER year, Capstone provides turnkey services usually under a joint engagement with The Feldman Law Firm LLP, to businesses in the construction industry, and many others.
Unlike most other captive management companies, Capstone’s turnkey service providers do not disclaim tax and legal support. The company has an award-winning track record for standing with clients in the design, implementation, ongoing management, and defense of their property & casualty captive insurance programs. Capstone has successfully administered and successfully managed over CAPTIVE_FORMATIONS captives since 1998. The Feldman Law Firm LLP has experience in more than TAX_CONTROVERSIES tax controversies, all to successful conclusions.
Capstone's staff of insurance professionals includes Chartered Property & Casualty Underwriters, Associates in Risk Management, accountants and administrators, in addition to the affiliated The Feldman Law Firm LLP's tax, corporate, financing and regulatory lawyers, and outside CPAs, risk managers, property & casualty professionals, and actuaries.
Together, this team offers middle market companies the most comprehensive risk planning solution available.
Learn More About Captive Insurance
- Get the basics. "Captive Insurance Explained in Plain English" provides a simple overview of how captives work without the industry jargon.
- Want a little more depth on captives? Check out our Captive Insurance page for more information.
- See captives in action with "7 Ways Businesses are Using Captive Insurance."