What You Need to Know About Captive Insurance

The business insurance industry can be confusing to navigate when you are looking for the best deals on the right coverage for your company. There are many options in both traditional and captive insurance, even when you filter your search to be specific to your industry. For many businesses, a captive is the best option, but you will want to know some of the basics. Your consultant can help you learn more about what captives are and how you can apply for or create a captive insurance company.

What Is It?

A captive insurance company is defined as a wholly owned subsidiary that manages risk-mitigation for the parent company or group. The captive insurance industry grew to fill a gap for businesses that needed specialized coverage at affordable rates, particularly in industries where traditional underwriters were leaving the market or charging too much for some industry-specific risks. By joining or forming a captive, you can save money on premiums, have more control over the plans and features offered, and even have the chance to earn dividends. Since this insurance type is based on a pool of like-minded companies, you can often increase your dividends and reduce premiums through implementing risk-reducing safety policies.

How Do You Get It?

Your first step to getting any type of insurance coverage is to itemize your risks and determine which policies cover each one. You can then make cost/benefit analyses on your risks to see whether commercial insurance or established captives are the best place to shop for each. Extreme risks, such as product recalls or construction project failures may need to be self-insured. If you cannot find a captive or commercial policy to cover your risks, then it is a good idea to consult with a captive insurance advisor to find an affordable alternative or to form your own captive.

Captive insurance offers affordable alternatives to commercial policies for many businesses, especially those in high-risk industries whose commercial plan options are dwindling. You can join an established captive or create your own with the help of a consultant or resource group.