Free Your Small Business from Worry with Captive Insurance

Business owners at their bakeshop

Lawsuits, property damage, lost income—these are some of the many risks businesses big and small face every day.

When natural disasters strike, the business’ physical location and the objects inside may be damaged. A customer may have an unsatisfactory experience, so they file a lawsuit which causes the company a considerable amount of money. The business may be spending more than its earning.

All these risks have equivalent costs, and businesses, especially small ones, need to prepare for them. These are what business insurance is for. Sometimes, though, businesses may feel restricted from general liability insurance.

Fortunately, there is another insurance option that will give you freedom within your business, and it’s called captive insurance.

Captive Vs. General Liability Insurance

The most common business insurance is general liability insurance. It’s a comprehensive insurance policy that covers claims for property damage, physical injury, and lawsuits. In the past, this type of insurance was popular, but companies now look for a less conventional but equally secure option.

With captive insurance, the primary goal is to provide improved risk management for your business. Captive insurance companies are established by one or more commonly owned businesses to insure individual owners. Because you’re basically operating your own insurance company to insure your business, you’ll have an insurance policy that’s more tailored to what you need, as opposed to the set rules of general liability.

Benefits for Small Businesses

The primary goal of getting captive insurance is to free you and your small business from worrying about the fallout of business risks. If you’re considering captive as your business’ insurance, keep in mind these benefits:

Tax Assessment Protection

According to, the taxation and insurance law issues related to captive insurance companies are complex and ever-evolving. In spite of this, the protection for tax assessment is a sought-after benefit for the parent company.

As Investopedia explains, your company, for example, pays the insurance premium to your captive insurance company and you wish to deduct these premiums from your home country, which is often a high-tax jurisdiction like the U.S. Because of this, you will locate captive insurance companies in tax havens—countries that offer foreign businesses little to no tax liability—so you can avoid tax implications.

Access to Unique Insurance

Since you or your business owns the captive insurance company, you can tailor-fit the policies to cover the exact risks of your business. You have the freedom of customizing specific terms and conditions to best utilize the insurance policy’s benefits to your business.

Through captive insurance, you can have coverage that is otherwise unavailable commercially or too expensive to get from different commercial insurance markets.

Increased Income Through Captive-Specific Tax Savings

In an article for Forbes, The Business Owner’s Definitive Guide to Captive Insurance author Peter J. Strauss explains that captive premium is tax-deductible. The premiums collected by your captive company are also tax-exempt up to $2.3 million every year.

Today, over 90 percent of Fortune 1000 companies utilize a captive insurance company. Because of this, small business owners think it’s not for them. With these benefits, though, not only will you get risk security, captive insurance also contributes to your company’s long-term success.