Small Business Brief


Captive Insurance Company 101: Why Your Business Wants Captives

Insurance and finance can be a powerful combination if you know how to work them together.

There is a powerful solution to marry the best of both worlds in a legal and productive way.

The way forward is a captive insurance company. How does it work? What do you need to do?

Below we will give you all the information you need.

What Makes a Captive Insurance Company

A captive insurance company is a corporation created to write insurance, often property and casualty insurance to a small group of insurers.

This small group often owns the insurance company, creating the “captive” relationship. With control over the insurance company, they have control over the profits of the premiums and can cover their riskier investments.

The Benefits of Captive Insurance

Knowing the many benefits of a captive insurance company allows you to make the best choice in whether the concept is a worthwhile investment for your company.

1. Save Money on Insurance

The primary purpose of a captive insurance company. As all the profits for the insurance go towards your own company, you cut a lot of the excess costs of the average insurance plan.

2. Tax Benefits

There are many small tax benefits you can find when you deal with a captive insurance company. 

There is a large sum of potential tax-exempt or tax-deferred payments that you would pay to the captive insurance company, keeping your money still in your system.

You can improve your cash flow by massive amounts by taking secured loans to the operating company. 

3. Manage Your Claims and Assets

When you control both the company that receives insurance and the company giving the insurance, you know you will get a fair deal. 

Your costs and concerns about any of your claims connect right with the estimated losses of your future investments.

You know your future better than any other random company, and can alter claims according to this information while keeping your future investments private.

The same works for your assets. You can use the insurance premiums and payments to protect substantial parts of your investment.

4. Fronting and Reinsurance

Reinsurance can be a powerful tool for getting the most out of your insurance investments. The process is where a commercial insurance company purchases its own insurance.

With your own captive insurance company, you can manage the costs yourself and come out with better quality insurance for both sides of the transaction. 

Understanding Captive Insurance

These benefits and definitions only scratch the surface of what can be possible with a captive insurance company. 

Is a captive insurance company a good fit for your business? You can do so much, but you might need more personal guidance.

Get the benefit of quality information and advice you can trust. Learn more about captive insurance today with Capstone Associated. 

Good for Business

Now that you understand the concept of a captive insurance company better, you can put the concept to work on your own business.

For all your small business news and advice, you can find it all and more here on Small Business Brief.