Captive Insurance: Why is it a Good Tool for Small Business Owners?

If you’re a small business owner, you should be taking a look at captives insurance. Check out this guide to learn how it can help you.

It can be hard to be a small business owner. There are a lot of challenges you have to face all on your own and the stress can be high. It’s important to take any action that might put you ahead and make your job easier.

That’s why many small business owners are considering captives insurance. Are you familiar with captives insurance and how these policies differ from traditional insurance?

Understanding this can help put your business ahead and ensure a brighter tomorrow for your company. Read on and we’ll walk you through what you need to know.

What Is Captive Insurance?

You’re likely familiar with how traditional insurance works. You give underwriting information to an insurance company who then presents you with a contract. They decide on the payments and premiums required in order to provide you repayment of losses when disaster strikes.

At the end of the day, the amount of power you have comes down to saying yes or no. Otherwise, you’re writing a check to the insurance company and holding on to the policy as a safety net.

Things are a little different when it comes to a captive insurance company.

Captives are insurance companies that are created as subsidiaries of a parent company and provide risk management services for that company and related others. Often, business owners create a captive insurance company if they are unhappy with the options presented to them from traditional insurance outlets.

In a way, getting into captives is a form of ‘self-insurance.’

Captive Insurance: Why is it a Good Tool for Small Business Owners?

Benefits Of Captive Insurance

As a small business owner, you might not be happy with the existing insurance policies available to you from existing companies. Depending on the line of work you do and the kinds of risks involved, you may not find what you want from searching the marketplace.

Working with a captive insurance company can help to ensure you obtain much more advantageous benefits in a situation in which you need an insurance bailout.

It can also help to lower the monthly premiums one would have to pay to maintain their insurance.

In addition to the above, a captive insurance company can offer a number of advantageous tax benefits. The parent company to a captive insurance company could include all of their premium payments as tax deductions, for one.

Distributions could also be made to owners of the captive insurance company at incredibly favorable tax rates, meaning more money to go around.

The biggest benefit, at the end of the day, remains the ability to insure certain actions or lines of work that would find no support in the broader insurance industry. Captives are the key to ensuring all businesses can find the insurance they deserve.

Understanding Captives

If you’re a small business owner, it’s essential that you look into captive business insurance. While captives might not work for every company, they can be a true godsend for others.

Need more business advice or tips? Keep scrolling our blog for more.

You May Also Like

More From Author