Most small businesses probably assume that this is exactly the kind of thing an insurance policy should be protecting them against.
Presents
A Better Way
There’ s a better way to insure, an advantage derived from Section 831( b) of the Internal Revenue Code. The tax code allows policy holders to pursue cooperative insurance efforts using taxdeferred dollars, in a way that’ s similar to an individual Health Savings Account.
The beauty of these insurance groups— often dubbed 831( b) micro-captives— is that they combine self-insurance with group financial power, tapping the strength of hundreds of small businesses in a collective.
The self-insurance part involves a taxdeferred fund that a participant can use when disaster strikes. The group insurance part spreads the risk of an attack( as well as the costs of the protections). But even better is that these groups often have much more reasonable cyber-insurance rules that truly protect the members.
Consider that some 831( b) administrators, for example, will not find exclusions for state attacks nor any of the other restrictive exclusions used by the major insurance carriers. The reason is simple: The companies using the 831( b) microcaptive insurance have ownership in the insurance plan. That’ s the control part.
And of course, 831( b) administrators protect their members from problems caused by employee errors too, which, as we said before, traditional insurance companies likely won’ t.
The point is that there are many alternatives to the major carriers these days, especially for small businesses. The large insurers will insist on making unreasonable exclusions as long as there are enough businesses willing to tolerate it. But the choice of 831( b) firms and other approaches means that small businesses have realistic alternatives.
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DUSTIN CARLSON is the president of SRA 831( b) Admin, which offers 831( b) insurance plans for small and medium-sized businesses.
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APRIL 2025 | FINANCIAL ADVISOR MAGAZINE | 35