How 831(b) plans offer relief in today’s insurance crisis

Across the country, small and mid-size business owners are finding themselves at a tipping point. Commercial insurance premiums are skyrocketing. Coverage is shrinking. And more often than not, business owners are left wondering why they’re paying more and getting less. For those operating on narrow margins — or in high-risk industries like construction, manufacturing, transportation or health care — this “new normal” in insurance isn’t just frustrating. It’s unsustainable.

The insurance crisis isn’t theoretical. It’s happening now. Whether it’s carriers exiting entire markets, deductibles doubling overnight or exclusions quietly added to renewals, many business owners are left with fewer options and bigger risks. Those who file a claim are often met with delays, denials or complex loopholes they never anticipated.

Meanwhile, others continue to pay into policies that haven’t been meaningfully tailored to their needs in years.

This is the uncomfortable truth: Traditional commercial insurance is no longer working the way it once did. And business owners are paying the price. One tool that’s proving especially valuable during this insurance crisis is the 831(b) plan.

Created by Congress in 1986, Section 831(b) of the tax code allows small businesses to form their own captive insurance company — essentially setting aside pre-tax dollars to insure against specific, often uninsurable, risks. While traditional insurance companies answer to shareholders and focus on generalized risk pools, an 831(b) plan allows a business to tailor coverage to its actual exposures.

That means the risks that often fall through the cracks — supply chain interruptions, fundamental employee loss, cyber liability gaps, reputational harm, political risk — can be covered under a plan that’s owned and controlled by the business itself. In times like these, that’s more than a benefit. It’s a necessity.

Premiums for commercial property insurance alone have increased more than 50% in some regions over the past two years. Natural disasters are more frequent and severe. Litigation risk is growing. And the underwriting process is more rigid and exclusion-heavy than ever.

Even well-run businesses with clean claims histories are being penalized — simply because they operate in an industry, location or risk profile that insurers deem too volatile.
831(b) plans can reduce overreliance on volatile markets, fill critical gaps and build a financial safety net that’s within the business’s control. That flexibility is why more small and mid-size businesses are turning to 831(b) plans — not as a workaround, but as a strategic move to strengthen resilience and plan for uncertainty.

Risk is part of business. It always has been. But in today’s insurance landscape, what’s changing is who bears the burden. Gradually, it’s becoming the business owner.

831(b) plans allow that burden to become manageable — by turning risk into a structured, proactive part of a business plan rather than a forthcoming unknown. Contributions to the plan are made during good years and can be accessed in difficult ones. Over time, this creates financial predictability in a world where very little feels certain.

The insurance crisis won’t come to a resolution overnight. And hoping for rates to “normalize” is no longer a strategy. Business owners need options that don’t just promise peace of mind — but actually deliver it.

Micro-captive insurance isn’t for every business. But for those with healthy cash flow, a strong risk profile and a desire to take charge of their financial future, it’s a tool worth exploring. You’ve worked hard to build your business. It’s time to protect it in a way that reflects today’s realities — not yesterday’s assumptions.

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