Business owners who provide insurance for their employees often believe their only choice is to self-insure. While this is a viable option, it is not the only one. Choosing between self vs. captive insurance is worth careful consideration, especially for those companies whose income fluctuates throughout the year.
Pros of Self and Captive Insurance
Self-insurance is a common choice among small businesses. Companies who choose this option always know where their money is going. They also only pay as employees make claims, meaning both employee and employer save money if they do not use the insurance.
Captive insurance, on the other hand, is more streamlined. It allows for more financial control that lets you pay smaller deductibles. You also have more flexibility with the money than self-insurance would provide.
Cons of Self and Captive Insurance
Despite the positives, there are drawbacks to both options. Self-insurance costs more to set up initially. You’ll also be responsible for processing and paying for employees who rack up high claims, either through an accident or health issues.
Choosing captive insurance may allow you more financial control, but it also means you are responsible for putting in the time and effort to set up and maintain the insurance. Captive insurance may prove prohibitive to those unable to devote the proper resources.
The choice between self vs. captive insurance is an important one to make. Be sure to weigh your options carefully.