When you embark on the journey of starting your own business, there are a number of factors to take into consideration. Startup cost, employee development, and business structure are just a few. One thing that you will eventually come across is the need for insurance. There are plenty of conventional insurance options for new and existing business owners, but if you are forward thinking in exploring income opportunities while also saving costs and meeting your insurance needs, then you should consider captive insurance.
How Is It Different?
Like typical business insurance, captive insurance provides business owners with the protection of their assets and property by covering losses of income, damage to property, lawsuits, and employee sickness/injury. Where it differs is in its structure and how you and your business will fit it. This is because you will not only become a member of the insurance group and policyholder, but you will also become a part owner of the insurance as well. Ownership is also not passive as policyholders not only own the insurance, they also help control it to the mutual benefit of all.
The Risks And Rewards
You may think, at face value, that captive insurance sounds a lot like mutual insurance, but there is one major difference. The profits are not kept within the created insurance company or given back as rebates on premiums. It is divided among the policyholders as profit. This is a benefit as well as savings in the costs typically built into traditional insurance such that which is tacked on to provide agents with there commissions. Policyholders put up the money that funds the captive and they do assume risk as they pay out losses. The key is to realize that captives are a separate business. They are just as important as your main business venture and should be treated as such.
Going about joining or establishing a captive can be a difficult road to navigate. When the time comes to make decisions about captive insurance you should seek out authorities in the field who know the pros and cons and consult with them.