If you own a business that includes a considerable amount of risk, then you may find it difficult to afford private insurance for your employees. While some risks can be avoided or planned for, others may appear without warning and pose a significant threat to your business model. The value of captive companies, or those that provide insurance to parent business entities, may be useful for you. There are several types of captive organizations, and learning how each operates might help you choose one that best suits the needs of your business.
1. Pure Organizations
If you have a singular business, then creating a pure captive organization may help you with your insurance needs. This type of captive company offers insurance to its parent company and, in some cases, its affiliates. This may make claims management more streamlined and allow your parent company to endure lower costs for insurance coverage.
2. Protected Cell
This type of captive organization is also sometimes known as a rental cell, as those who use it for insurance purposes are usually unrelated to its practices. For example, other companies that use the cell may neither own it nor operate in the same sector. As such, a protected cell may prove beneficial for your insurance needs, especially if your business is too small to warrant the creation of your own captive company.
Captive groups usually include businesses all operating in the same financial or company sector. These may include professional groups or industrial organizations that have similar employment risk factors in common.
Using captive organizations for your business may offer you tax breaks and lower premiums for your employees. While not all types of captive companies fit all business models, understanding the pros and cons of each can help you find one that offers the most benefits at the least expensive cost.