As many businesses decide what insurance to buy, they often wonder whether captive insurance is right for them. Like with any company decision, a cost-benefit analysis should be conducted before choosing to purchase this type of coverage. However, the advantages of captive insurance are numerous.
Reduced Reliance on Commercial Insurance
As the captive grows, its surplus increases, giving the insured more risk protection and capacity. This means you can rely more on your captive insurance than anything else. If you are unfamiliar with how this type of coverage works, a captive consulting company can provide the help you need.
The price of traditional coverage typically has a significant markup to cover the insurer’s costs and provide them with a profit. While partaking in a captive cannot eliminate the costs of insurance, they can significantly reduce them. How much of a reduction you see will depend on several factors within the captive insurance company.
A traditional insurance company will set the price of their policies based on industry trends, rather than on how individual companies’ loss experiences are. In other words, the price your business pays for insurance is based on the general market and how other companies are faring. If your company experiences a reasonable and stable loss experience each year, choosing captive coverage will let you see stable pricing.
Provision of Coverage When Otherwise Unavailable
In certain cases, traditional insurance companies may not be able or willing to provide your company with coverage. Working with a captive to provide additional capacity can help provide a solution to this problem. A captive can provide many types of coverage, including product liability, professional liability, oil pollution, hazardous waste, or labor strike insurance. Whenever you cannot find traditional coverage, it may be time to look for a captive.
What makes sense for one organization may not work for another and this is true with insurance policies. Although there are numerous benefits to captive insurance, you should always consult industry experts and make informed decisions when it comes to your business.