What is Reinsurance?
How Much Money are You Leaving on the Table?
The Truth About Reinsurance: Fact Vs. Fiction
Myth #1
Reinsurance companies are not generally accepted by the IRS.
Fact:
The IRS has specific sections of the tax code for the purpose of regulating Reinsurance Providers. (See IRC Section 831b election)
Myth #2
Larger Dealers must elect a non-controlled foreign corporation for their reinsurance company formation.
Fact:
The IRS has recently increased the annual written premium limit from 1.2 million to 2.2 million, allowing larger Dealerships to make the 831 election.
Myth #3
Reinsurance companies are expensive to form and require extensive capital contributions.
Fact:
Most reinsurance company formations are capitalized through their initial contract sales and formation/accounting expenses are usually around $3,500 per year.
Make sure that you are in control
Reinsurance is the ability for participants to share in the underwriting profits and investment income generated by the sale of F & I products.
Reinsurance Advantages of DOWC® vs. The Other Guys:
- The DOWC® program is completely controlled by the dealer/shareholder
- Dealers can self-direct investment strategy
- Programs qualify for preferential tax treatment
- Shareholders are not taxed until distributions are declared.
- Distributions receive preferential tax treatment by declaring a qualified dividend or long-term capital gain.
- Dealers can choose a domicile of his or her preference.
- No custodial trust necessary; dealer can access earned and unearned premium.
- Virtually no initial capital requirement necessary (Dealers first month contract sales will capitalize their company)
- Ability to borrow earned and unearned premium in lieu of profit distribution.