Insurances are important to secure one’s health finances, death, business or properties. That’s why a lot of different insurances have been created to suit people’s needs. One of the insurances that business people run is captive insurance for business. This type of insurance is basically owned by insurers themselves and is supported by the business they run. Captive business definition
is basically putting up your own insurance and shareholders are the same shareholders from the business you belong to.
What is Captive Insurance?
It is a type of self-insurance run by a certain business. The main purpose of building this captive insurance is to insure their business , it is also called captive insurance business. Captive insurance comes in many types and you can choose which one suits your company’s needs best.
Reason Why Captive Insurances are Build
To control Cash flow
In businesses cash flow should be monitored to be able to know how much money is going out and going in the business. BY having your captive insurance, you will be able to monitor where your insurance money is being utilized.
To Be able to Create Coverage Suitable for you
Insurances have their coverage already laid out and you just java to choose which one you would want to avail, but with captive insurance you can actually create the coverage you think can benefit you more. Broader coverage is also possible in captive insurance which is not possible if you take insurance from insurers.
To be able to Save Money on Risk Management Cost
By being able to monitor the cash flow in your insurance money, you can be able to avoid risk in your management cost.
How To Build Captive Insurance?
Select a Structure
The first step in building captive insurance is determining what type of insurance you need. You have to be able to be certain of the type of insurance that you need.
Feasibility is Needed
To check if the type of insurance has a lesser management risk, feasibility is needed. Feasibility is also a requirement in building insurance, therefore you have to create one.
Choosing A Manager
For your insurance to run, a manager is needed. Candidates should be knowledgeable in taxes, accounting, regulation and claim management. Managers that have worked with insurance companies can be a good choice, since they can be able to tell you what needs to be done and what’s not to be done. However, if someone in your company is good enough with the skills a manager should have then it can also be an option.
Choosing A Domicile
Domicile contains all the details needed in insurance including capitalization, investment restrictions, income and local taxes. Make sure to have all the domicile needed in your captive insurance, since amending it will not be easy. Check on all the details of your domicile before finalizing it and make sure everything you need is included in it.
Submission of Application
Once everything is finalized your application will be submitted. Managers can help in the process of your application since they know better.
Types of Captive Insurance
This is captive insurance owned by only one company. The insurance solely focuses on the owner of the company.
These are a group of businesses with the same industry and build up captive insurance to protect themselves for financial risk.
For this type of captive insurance, a third party can rent captive insurance for companies who have one. The third party can avail of the insurance coverage of the captive insurance company without going to all the cost and hassle of building one.
These captive insurance companies are the ones with annual written premiums of less than $1.2 million. This type of captive insurance is taxed under US revenue code.
Captive insurance for business is helpful since it can lower the risk of losses. What’s more, monitoring your own cash flow will be a wise move, so you can do strategies if your profits are not doing good. Beside the purpose of insurance is to secure people from their financial needs, therefore creating insurance for your company is a good idea. Why get insurance if you can have one made for your own company.