The Insurance Solution I Wish I’d Known During My Construction Days

By JASON MONCZKA 

After selling my construction business, I entered the commercial insurance industry with one clear goal: to help business owners reduce insurance premiums.

What I discovered along the way changed everything I thought I knew about protecting a business.

Coming from the construction industry, I understood the daily realities that business owners of construction companies face – from razor-thin margins to unexpected equipment breakdowns and the supply chain nightmares that would keep me up at night. I’d regularly experience increased premiums and shrinking coverage, further straining our already tight operations. In an effort to find a better solution to this issue, I began educating myself on alternative insurance solutions – not to find another product to sell, but to find real answers to the real problems I had experienced firsthand.

This search led me to Section 831(b) of the tax code, a tool that I now believe to be the most important business tool available to any small business generating more than $2 million in annual revenue.

Traditional Insurance is Failing Business Owners

Let’s be blunt about what we all know: today’s commercial insurance system is broken. Premiums continue to climb, coverage continues to shrink and if you don’t file a claim the money you paid simply vanishes. For businesses operating on tight margins, this model is unsustainable.

I saw this play out repeatedly in my construction years. We would pay hundreds of thousands of dollars every year in premiums, do everything we could to avoid claims and have nothing to show for it other than another renewal notice with higher rates. Meanwhile, the risks that are actually a detriment to business – equipment failures, supplier bankruptcies, regulatory changes or “acts of God” – would remain uninsured by mainstream providers.

It doesn’t need to be this way.

The Solution to the Insurance Crisis

Section 831(b) of the tax code outlines what those of us in the industry refer to as “micro-captive” insurance. These plans turned out to be the solution I had been searching for. These plans ensure that small businesses are able to insure their actual risks, not just the niche coverage mainstream insurers dole out at higher premiums. Unlike these mainstream plans, micro-captive insurance plans allow you to set aside pre-tax dollars into your own insurance company. If claims don’t materialize, the capital you invested remains yours and stays in the insurance account; it doesn’t disappear like mainstream insurance premiums.

Properly structured micro-captive plans create a strategic asset for your business, allowing you to stabilize revenue, fund future growth in the company or even act as a wealth-building vehicle in years without risk. In short, they allow you the opportunity to grow during the good years and remain operationally stable in hard years – they are catch-all saviors for small businesses struggling to manage their risk economically.

Continued Education on the Topic

However, these plans aren’t well known among business owners. The tax code is often confusing to read, and the policies can be challenging to implement without a tax and risk professional. I know when I first encountered these plans, they seemed too good to be true. However, after further research and hands-on engagement with real business owners that rely on these plans, I realized that this tool isn’t just a theory or marketing hype; it’s an actual tool used by real businesses and run by real people, just like you and me, who are benefiting from a strategic benefit others in their industry have not yet caught up on.

From these experiences, both in researching micro-captive insurance and as a former member of the construction industry, I became determined to educate CPAs and other small business owners about the benefits of these 831(b) plans – not to sell insurance policies, but to ensure America’s small business owners are equipped to navigate the risks of tomorrow with the assurances they need to survive and thrive.

The education push on this topic is critical because, as I’ve witnessed firsthand, too many people in the insurance industry sell plans without truly understanding why they work or why they matter to small businesses. This superficial approach to risk management is exactly the reason we are experiencing the insurance crisis today. Micro-captive insurance isn’t a “one-size-fits-all” answer to risk management. It’s a customizable solution to your company’s niche needs.

We’re beginning to see more members of the industry pick up on this tool and share it with their networks of small businesses, as is evident by its focus among accredited continuing education events nationwide. Industry leaders regularly gather across the country to share education on risk management, proper implementation of micro-captives and tax considerations when utilizing Section 831(b). Business owners have been demanding better solutions, and this is it.

The Future of Business

Every well-structured business already sets aside money for a rainy day, but an 831(b) plan allows you to do so strategically, tax-deferred and in a way that actually insures your operations against the risks that could sink a business. After years in the construction space, I am convinced micro-captive insurance is the future of how smart business owners will protect and build their companies.

A well-crafted, well-managed micro-captive plan is the key to the future of business risk management and may very well be the solution to the insurance crisis. If you want to learn more, I encourage you to research the topic and consider enrolling in an accredited continued education program near you.

Jason Monczka is Head Honcho, Jr. (Rainmaker) at PomeroyGroup Insurance Brokers & 831(b) Micro-captive Experts.