Corporate Insurance Purchases and Taxes

An examination of the economics of Corporate purchases of insurance indicates that one strong motivation for insurance purchase lies in the tax laws as they affect insured losses. After a theoretical examination of this point, the analogy is made between the decision to insure or not insure and the decision to lease or not lease. A numerical example is provided by way of illustration. In this way corporate purchases of insurance can be viewed as a tax minimization method of financing losses that arise from insurable risks.