Captive Insurance for Small Businesses

Chris Freitas • 24 February 2025

Small businesses have it tough when it comes to managing insurance costs. Traditional insurance policies can be pricey and inflexible, leaving little room to customize coverage or control premiums. But there’s another option that’s gaining traction: captive insurance. Once reserved for big corporations, this approach is now helping smaller companies get more bang for their buck. So, what’s captive insurance all about, and why should you care? Let’s break it down. 


What Is Captive Insurance? 

Think of captive insurance as DIY employee benefits. Instead of paying premiums to a commercial insurer, you and other businesses pool your resources to create your own insurance company, known as a captive. This lets you customize coverage, control premiums, and keep a closer eye on risk management. It’s like building an insurance plan that actually fits your workforce’s needs. 


Types of Captive Insurance 


There are a few ways to set up a captive, depending on how much control and risk you want to take on: 


1. Pure Captives 
These are fully controlled by the members and come in two main types: 

  • Single Parent Captive: One company owns and controls the captive, covering only its own risks. 
  • Group Captive: Multiple companies in the same industry team up, sharing risks and rewards. This setup is great for smaller businesses looking to spread out the cost and risk. 

2. Sponsored Captives 
With sponsored captives, outside investors provide capital, making it easier for smaller companies to get in the game without putting up all the money themselves. 

 


Captive Insurance vs. Traditional Insurance 

Here’s the big difference: 


  • Traditional Insurance: You pay premiums to an outside insurer who then assumes your risk. But these policies are often rigid, with strict exclusions that might leave gaps in your coverage. 
  • Captive Insurance: You invest your own resources into your captive, giving you more control over premiums, policies, and claims. Plus, you keep any unused premiums as profit. 

 

What’s in It for You? Key Benefits of Captive Insurance 

  • Custom Coverage: Tailor your policies to fit your unique needs, avoiding unnecessary extras. 
  • Control Over Decisions: In a group captive, you get a say in everything from premiums to claims processes. 
  • Invest Premiums: Unlike traditional insurance, you can invest your premiums, earning revenue even if no claims are made. 
  • Rewards for Safety: If your business maintains a low claims history, you get better payouts and can reinvest those savings back into your company. 

 

Is Captive Insurance Right for Your Business? 

You might think captive insurance is only for the big companies, but that’s not the case anymore. Thanks to group captives and sponsored captives, small businesses can also get in on the action. It’s a great option if you: 


  • Want more control over your insurance policies. 
  • Like the idea of investing premiums for potential returns. 
  • Prioritize safety and good risk management. 

Whether you run a small manufacturing company, a professional services firm, or a retail business, captive insurance offers a flexible, cost-effective way to protect your business. 


Captive insurance can be a game-changer, but there are a lot of factors that can determine if it works for your business. That’s where KBI Benefits comes in. Our brokers specialize in helping small businesses navigate this complex landscape, offering personalized advice to find the best solution for you. 


We offer a free audit of your current employee benefits plan to help you find cost savings and make sure you’re getting the most value from your existing benefits offerings. If captive insurance is the right fit, we’ll help you make a smooth transition. 


Want to learn more? Contact KBI Benefits today and see how captive insurance could work for your small business. 

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