Is Your Business Too Small For A Captive? Think Again.

Healthcare plans are an important part of almost every organization’s benefits package, but not every organization needs to stick with the traditional option that comes from one or two insurance providers. Captives allow you to take control of both your risk and your costs while still maintaining the same high-quality coverage as the larger companies. To learn more about captive insurance and why it could be a good idea for your small business, consider the information outlined below:

What is Captive Insurance?

First things first, before we can delve further into the topic of captive insurance and how it might be beneficial for your small business, it’s important to understand what captive insurance means. Put simply, captives are insurance companies owned and controlled by those they insure, hence the name “captive.” These captive insurance arrangements allow businesses to acquire risk financing in a very different way than available in the traditional insurance marketplace. The idea is to unbundle a traditional insurance company and form your own.


Here are some facts that are important to understand about captive insurance:

  • A captive owner risks his or her own money.
  • Captive owners have more control over the way their program is set up and subsequently managed.
  • Captive insurance can be a good option for small to medium-sized businesses that join together to establish their own insurance. Conversely, larger employers may choose to establish an insurance company on their own.

There Are Different Types of Captive Insurance

When it comes to captive insurance, there exists more than one type. For example, captives formed by a single company are known in the industry as “single-parent” captives. In most cases, this type of captive will be formed by a larger company that can afford to fund its own risks with minimal cost-sharing or shift to an insurance or reinsurance company.

Benefits of “Single-Parent” Captives:
  • Long-term stability.
  • Cost control strategy.
  • Data transparency.
  • More customization options.
  • Collaboration.

Another type of captive insurance is a group captive. This is where several companies join together to share the risk of the group as a whole. In many cases, companies that are smaller or up to medium-sized who want to control their own risk via captive insurance are most likely to make up this category. In a group captive, companies may belong to the same industry, or they may belong to different industries.

Benefits of Group Captives:

  • Access to turnkey coverage solutions.
  • Relationship with top-tier carriers.
  • Experience and flexibility.
  • Reduced middleman expenses.
  • Dedicated program services and support team.
  • Help with risk management.

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Is Captive Insurance The Right Move For Your Small Business?

Of course, as a small business owner, you want to make sure you are always making the right choices for the betterment of your business. Even if you are unsure captive insurance is the right choice for you, it’s a good idea to evaluate and explore the possibility of this type of insurance with an open mind. It’s also important to contemplate their choice carefully as many clients enter captives without realizing it takes a considerable amount of time, energy, and effort, which ends up meaning they have a poor and very costly experience.

Captives are an invaluable planning tool for businesses with an entrepreneurial mindset. Winter-Dent is an expert in captive insurance and assessing your company’s readiness and ability to take such a risk. Even if a captive isn’t right for you, Winter-Dent can customize many other programs to help you meet your objectives and possibly prepare for a step towards captive insurance down the road.

Why Captive Insurance is Beneficial

Obviously, before you consider entering into a captive arrangement, you want to understand the benefits of such an agreement. The following are just some of the many benefits of this type of arrangement and why you should contemplate captives as a small business owner:

Curious to Know if Your Company Might  Be a Good Candidate for a Captive?

  • Captives can result in lower overall insurance costs. This is most often noted when you manage risk well. This means you have the ability to create more long-term funding stability. This can also be a great alternative to traditional insurance options for small and medium-sized businesses that can’t afford traditional options.
  • You will enjoy more flexibility when it comes to setting your premiums, designing your coverage options, and overseeing your risk retention. Your coverage and how it is structured will be under your direct control. This is ideal for groups needing nontraditional coverage options.
  • With captives, there is usually a higher level of emphasis on safety and other forms of loss control. This is because such captive strategies can provide a financial reward when the losses are controlled. As a business, improving safety policies and procedures are an obvious extra incentive to minimize claims. When your managers and staff have their mindset, they can think of creative ways to incentive minimal claims. Generally, the more employees are aware that their choices and actions at work can affect the bottom line of the organization, and therefore their income, the better the culture and office morale.

Captive Insurance Can be a Good Move For Your Small Business

At Winter-Dent, we have the resources to help you evaluate your position and set up a group captive if you decide that it is a good idea for your organization. Each step of the way, we will make sure the process is working well for your company and that there are no unexpected snags. Whatever health insurance strategy you choose, our ultimate goal is to help your business succeed.

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