Should You Form a Captive Insurance Company?

Should You Form a Captive Insurance Company?

Running a business comes with a lot of different risks. While every business requires liability insurance, you don’t necessarily have to insure your company traditionally. You could insure your business through captive insurance.

Ask yourself the following questions when deciding if captive insurance solutions are right for your company.

Is Your Risk Management Costs Too High?

When you purchase insurance through the traditional market, you have to deal with a significant markup. If the coverages are already too high, you may be unable to afford traditional insurance. Captive insurance reduces the administration, overhead and acquisition costs. In the general insurance market, the prices can become volatile. With captive insurance, you have more stable costs over time.

Are Your Risks Too Niche?

Sometimes, the traditional market cannot provide coverage for certain liabilities or losses. For example, finding product liability, hazardous waste coverage, labor strike insurance or oil pollution coverage can be difficult when working with conventional insurance companies. If your company cannot be thoroughly covered by conventional means, a captive becomes more feasible.

When you form an insurance captive, you have the freedom to customize the policies. Having custom options provides you with the ability to control your losses and save money. If your risk management costs are high or if you have niche risks, captive policies may be right for your company.