The Small Business Administration succinctly says, “Business insurance protects you from the unexpected costs of running a business. Accidents, natural disasters and lawsuits could run you out of business if you’re not protected with the right insurance.”

Every type of business in this country needs insurance to operate successfully. Manufacturers are required to have product liability insurance. Contractors will have a general contractors policy. Financial professional's errors and omissions insurance, etc. Purchasing and maintaining adequate insurance coverage is an absolute requirement to protect your company in our litigious society.

That being said, speak with any number of company owners, and they will tell you that they are being backed into a corner by rising premium costs exacerbated by reduced or excluded coverage. The result is the business incurring increasing levels of risk caused by gaps in coverage.

So, what is going on with the insurance industry?

Like any business, an insurance company must control costs and make a profit. Doing so now is harder than ever. Four key factors lead to rising insurance premiums: economic inflation, social inflation, weather and reinsurance costs.

Does this mean you are trapped on a never-ending hamster wheel, continually shopping and comparing insurance company offerings to find the insurance you need at a fair price?

Not at all. You can remain in the driver's seat and eliminate gaps in coverage, mitigate premium costs and create a tax-deferred reserve of funds for unexpected emergencies.

The solution to explore is a part of the tax code created by Congress nearly 40 years ago and is commonly referred to as an 831(b) plan or microcaptive insurance. The genesis of this plan was the famous hard insurance market in the early 1980s that drove premiums sky high, so high that many businesses could not afford to maintain their insurance and keep their doors open. To avoid a financial meltdown, Congress elected to empower businesses to be more hands-on with their insurance coverage.

How can an 831(b) plan wrap around your commercial insurance, keeping it in place while controlling the premium costs?

Deductibles: Insurance 101 says to reduce premiums, you can choose to be on the hook for larger deductibles. You spend good money on insurance to ensure a safety net if a severe threat arises. But what if those higher deductibles are a financial threat in themselves?

The 831(b) plan has a menu of options, one of which is to elect a deductible reimbursement policy. Just like it sounds, if you incur a deductible, you can submit a claim to your 831(b) plan for full reimbursement. Yes, the larger deductible is a premium reduction strategy, but now the 831(b) plan becomes your safety net.

Coverage Gaps: Insurance carriers are notorious for reducing coverages and adding exclusions to minimize liabilities. If you have a significant claim and the insurance benefits fall far below the actual cost, you must make up the shortfall from savings or cash flow, which can be catastrophic to your business.

An 831(b) plan will cover these gaps in coverage.

Uninsurable Risks: In our rapidly changing business environment, there are intangible risks that are not readily quantifiable by insurance underwriters.
• Attacks on your brand name by bad actors or social media.

• The financial impact of the loss of a key employee.

• Supply chain interruptions outside of your control.

• Third-party or sub-contractor defaults.

• Lawsuits and other disputes brought against you.

The 831(b) plan can be funded with tax-deferred funds to fully address diverse threats often excluded from traditional insurance or too expensive to underwrite, such as data breaches, business interruptions and more.

Instead of waiting until the cost of insurance becomes a business-crippling problem. Wouldn't it be prudent to take some time now to discover how an 831(b) plan can solve many of these issues? To learn more about how the plan can provide you with the gap coverage you need, please visit

Van Carlson is founder and CEO of SRA 831(b) Admin.