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What is the purpose of a captive insurance company?

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A captive insurance firm is owned by the sum of its parts. What does this mean? It means that everyone who has a policy through the captive insurance firm, has a share within the firm. They buy into, or participate in the program, which then allows them access to a wide range of policy providers that are not normally available on a commercial level.

A captive insurance company allows its members to tailor a more affordable and targeted insurance policies towards their organizations. This creates more control, better budget, and a wealth of knowledge that you can draw in from; especially if you are unsure about alternatives to insurance firms.

What Captive Insurance Firms Do?

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The majority of captive insurance firms started with one single purpose in mind. They are started in order to offer their participants greater control over their premiums, how claims are handled, the process of litigation, and other such areas. When you opt for a traditional commercial insurance firm, a lot of these choices are taken away from you. You must do what they ask of you and use the services and members of staff that they provide. Many firms find this is a hindrance and that it can incur greater costs than simply choosing these for themselves.

Captive Insurance firms were created to solve this need. They allow firms to offset risks, such as workers compensation to other firms, effectively letting themselves lose the risks they don’t want to cover. This increase in control is also extended to the details that will let you manage the exact components found within your policies. If you don’t want certain aspects of your package – you don’t need to accept them. Commercial insurance firms simply don’t have this option.

Why you Might Need Captive Insurance for your Business

Why would firms want to cover themselves in this way? As well as gaining a greater degree of control, you will be able to handle all of your claims processing in house. Not to mention that you will be subject to the reduced rates and premiums that reinsurance grants you. To add the proverbial cherry to the top of an already attractive business cake, you are able to profit when the firm does; since you are a participant. If there are profits at the end of the year, you receive a shareholder’s stake.

Using Captive insurance, you are able to tailor your coverage to exactly what your firm requires. You have more freedom to move cash around, as well as having access to some of the cheaper insurance markets. There is a lot more flexibility involved, and you might even profit from it. The more you think about it, the less the question is what a captive insurance provider is, and more about what they can do to help your firm.