5 Things You May Not Know About Captives

A closely held insurance company, known as a captive, is still misunderstood by many people outside the risk management profession.

  • First: A captive is an insurance company, not an insurance product.
  • Second: Unlike many companies you have dealt with in the past, it is owned by someone you know – most often you, yourself.
  • Third: a captive’s most effective use is to round out existing coverage by insuring very real perils which are probably not currently covered. The can include such things as accounts receivable concentration, litigation defense, operating risks and product warranties. A captive can cover exclusions and deductibles that carriers have refused to cover or for which the premiums have been prohibitive. In a specific case, crop insurance may become viable for a farmer.
  • Fourth: When a captive is properly implemented and managed, there can be substantial tax benefit to both the insured operating company as well at the captive itself.
  • Fifth: Asset Protection can be an additional layer of security to enhance the business owners well being.

Finally, a captive can offer a way to design solutions to other issues experienced by almost all business owners and can include business continuation coverage and be an effective wealth transfer vehicle.

If you would like to know more about how a captive will benefit your company, I’m always available to provide answers and may be reached through the contact form on this site.

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