Warranties/Extended Service Agreements

Offering an extended service agreement or warranty for goods and services is an excellent way for businesses to build confidence with their customers, retain good clients, generate additional revenue and stand behind their product.

Re-insurance using an 831(b) is an excellent way to fund such programs and received some excellent tax benefits for doing so. As warranty and service agreement funds are set aside for future potential claims these funds are deductible operating expenses and surplus reserves are given tax preferential treatment.