The Smart Alternative to Conventional Insurance
Have you ever had an insurance claim be denied? If the answer is “yes,” then you’re not alone.
Conventional insurance policies found in the marketplace are often limited—there are countless business owners who have filed claims, only to have them denied or covered for only a portion of its overall value. The significant premiums spent on these policies often fail to adequately cover the intended risks because of exclusions and high retentions.
Some hidden risks are best addressed through a solid alternative risk financing program—one that not only affords full coverage of risks, but one that offers ancillary benefits such as tax-deductible premiums, retained profits resulting from effective loss control measures, and reduced expenses.
Establishing a captive insurance company provides these benefits and allows its owners to specifically tailor customized policies for their businesses that are often too expensive or unavailable through the conventional insurance markets.
Put plainly, establishing a captive is the perfect alternative for qualified business owners.
Today, over 90% of Fortune 1000 companies own a captive insurance company. They enjoy the full benefit of risk coverage plus more efficient financial planning. Excess retained earnings can be held by the captive, paid out as dividends or loaned as part of a comprehensive investment portfolio.
Forming a captive may be one of the best risk management and financial planning tools available.
Alternative Risk Management
The National Association of Insurance Commissioners out of the US, defines a captive as an insurance company that is created and wholly owned by one or more non-insurance companies to insure the risks of its owner or owners.
One of the primary benefits to owning a captive is having more control over your risk management. In most cases, conventional insurance premiums do not yield any real benefits if no claims are filed within a given year.
Premiums are tax-deductible and the monies paid count as revenue to the insurance company. With a captive insurance policy, your premiums accumulate over time and can become a financial asset to the owners who control the affiliated business—they can even be used as dividends or loans.
Through effective estate planning, ownership of a captive insurance company can also be transitioned to heirs through the use of trusts or other entities.
So why form a captive? Tailor-made risk coverage, cost-efficiency, better tax planning, wealth transfer, and more.
Types of Captives
Usually a captive insurance company writes insurance coverages on closely affiliated businesses that include the affiliated businesses that share a common parent with the captive.
There are various types of captives in operation today.
Single-Parent (Owner) Captives. A person establishes a “single owner captive” to insure its own risks and the risks of its subsidiaries and affiliates. Many single-owner captives also provide coverage for other, non-affiliated organizations. Single-owner captives that insure only affiliated risks are termed “pure” captives. Serving this type of client forms the core of Captive Insurance Solutions business.
Group Captives. These captives are owned by multiple, non-related organizations (policyholders). The captive is usually sponsored by a trade group such as homebuilders, franchisees, or other professional or industrial groups. Captive Insurance Solutions offers services to these types of clients.
Rent-A-Captives. These captives are pre-established entities that insure the risks of unrelated parties for a fee. Captive Insurance Solutions offers rent-a-captive services on a fee basis using well-capitalized and established captive insurers.
Am I a suitable candidate for a Captive arrangement?
The ideal client is a business owner or group of owners with a substantial operating business that has meaningful uninsured or underinsured risks or who wants more control over their spending of insurance premiums. The operating business would need to have a minimum of $2 million in pre-tax profits, before partners, salary bonuses and other forms of compensation. On this basis Captive Insurance Solutions can faciltate a pre-assesment with one of our Captive Managers, to determine the likelihood of a successful captive arrangement.
Where to from here?
This is the easy bit.. contact us by email or phone to discuss our free intial consultation and introduce you to this exciting new alternative.
A “captive” is an insurance company specifically established to insure the risks of an organization.
Owning your own insurance company comes with advantages that help you gain better control over your business’s risk management, earnings, and tax planning.
Conventional insurance policies often limit or exclude coverage for certain inherent operational risks.