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Thursday, December 17, 2020

Protecting Your Business: How Top Captive Insurance Companies Do It

We have heard so much in the news lately about businesses trying to stay afloat. A lot of business owners have researched insurance options and many have decided that choosing from the top captive insurance companies is a good idea.

Some people have never heard of captive insurance companies. Keep reading to find out how these companies work.

Top Captive Insurance Companies

If you are like most people, you may need a little captive insurance education. Some of us have not heard of this type of insurance before.

Captive insurance companies provide risk mitigation services for a parent company or group of related companies. It is a wholly-owned subsidiary of a larger firm. In essence, it is self-insurance.

Captive insurance companies finance losses in a structured form. They usually supplement commercial insurance policies.

A business can form its own insurance company to insure against risks. They offer custom-built insurance coverage.

How It Benefits You

With captive insurance, you can get tailored insurance coverage that meets specific needs. It may improve your company's cash flow and give greater control over claims.

Captive insurance companies supplement commercial insurance, so you have more coverage. This reduces worry over claims risk.

This type of coverage may include anything from legal expenses to cyber-attacks. It will offset business and operational risk.

Business owners maintain control over claims processes. This eliminates the chances of denials. Click here for more information on captive insurance benefits.

You also get tax benefits. These companies are regulated and required to operate as genuine insurance companies. You will keep all the earnings and keep the money in the captive to protect against unexpected losses.

Forming a Captive Insurance Company

The first step companies take in forming this type of insurance company is to figure out what type of captive structure you need. This will require some thought.

It may be a parent structure, which owns the captive and insures the risks of the parent company. This is a subsidiary of the company.

It could be a group or association captive. This group shares all the risk and owns the captive.

Companies usually do a study next. This will audit your risk management needs.

Most companies hire a captive manager. This person will oversee all aspects of the captive, including choosing a domicile, or territory that licenses the company.

The last thing that is done is submitting the application. You will have to prove that you have the capital needed for the captive.

Do You Need One?

Many companies are tempted to form captives. This is generally a good idea, but you need to prepare to be in the insurance business. After all, captive insurance companies are bona fide insurance companies.

Remember, you will expose your capital to some risks. You may need collateral upfront so know what your financial position is.

The top captive insurance companies serve a wide variety of business needs. If you're looking for a great supplement to traditional insurance, a captive will be a great fit for your company. Follow us for more insurance tips!

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