Captive insurance, what is it? How do you re-insure?
Do you hate buying business insurance? Have you ever thought – Man, my insurance company is making a ton of profit off of me, I never have claims and pay a lot in premiums.
If these thoughts ever cross your mind and you’re paying over $350,000 a year in business insurance premiums, I have an idea you may be interested in.
Today I’m going to talk about an idea for larger accounts that feel like they’re overpaying premiums because they don’t have claims and feel like their insurer is running away with bags of cash.
This is especially true today when the business insurance marketplace is hardening and premiums are going up for EVERYONE.
If this is how you feel about your business insurance, my idea can put you in greater control and return a portion of your premiums to you as profit dividends each year.
So, what am I talking about?
I’m talking about captive insurance, which is an opportunity to own your own insurance company to cover your business.
Until now, most captive insurance arrangements have been very costly and complex for most medium-sized businesses to capitalize on, but now there are opportunities for lower middle market firms to capitalize on running a captive.
Here, I just want to simplify the concept of captive insurance and in future videos dive deeper into what this all means.
The big takeaway is that if your company has a history of low claims in your business insurance program you’re returning significant profits to the insurance company you’re with.
The only benefit to that is that your premiums are lower than your peers who don’t do a good job of controlling risk.
But, your good performance is subsidizing the poor performance of your peers, and for a lot of business owners I speak to, that aggravates them.
How does a captive work?
In very simple terms, you will pay around the same premiums as you pay now for your package, auto, workers comp, and other business insurance policies.
You’ll assume more risk and pay for a portion of claims that do occur. But that risk is capped.
You’ll also need to capitalize on your captive insurance company and pay for certain costs associated with it.
Like any business if your revenue – the premiums you pay is greater than the costs – meaning the operating costs and claim costs, then you’ve created a profit that can be returned to the captive owners.
The bottom line is you beat the market and you win when you outperform your peers.
The larger the premiums you pay now to an insurance company, the bigger the win.
Want more info about Captive insurance?
Reach out and let’s chat and see if your business is a candidate for this strategy.
