Insurance can be complex and hard to understand for the novice, so CIC Services decided to give you some knowledge about the most important captive insurance terms that every business owner and insurance agent needs to know. This list will help uncomplicate your decision to start your captive journey.
Captive Insurance Terms
Assets are something that your company owns that have value such as buildings, stocks, vehicles, and cash. You are likely to insure your assets in case of an incident or accident.
2. Risk Management
Risk management is a term used to explain the process of assessing the risk associated with your company’s assets. Risks are anything that poses a threat to your company and can be anything from natural disasters to uncertainty, legal issues, or human error.
A deductible is an out-of-pocket cost that a policyholder must pay before an insurance company will cover a loss. You can have a general deductible or a specific deductible related to certain losses.
Premiums are the payments that you pay to an insurance company for your policy coverage. They can be a monthly payment or a yearly charge.
5. Enterprise Risk Management
Enterprise Risk Management is an internal process where a business analyzes risks to find ways to utilize them in a way that creates value. The value created out of risk management can increase value to stakeholders in the short and long term.
6. Captive Insurance
A captive insurance company is an insurance company that is started by a business to provide insurance for businesses associated with them. It can also be called a captive. It is normally a subsidiary of the company that created it. Although it is complicated to set up, it can be done with the help of a captive insurance manager or service.
7. Captive Insurance Manager
A captive insurance manager oversees managing your captive and recruiting other professionals to make sure your captive is running smoothly. They work with regulators, accountants, lawyers, and risk managers to ensure that your captive is easy for you to operate alongside your main business.
8. Insurance Agent
An insurance agent works for an insurance company to sell insurance and assist customers with buying insurance. They are usually considered a third-party.
When a problem or incident occurs that is covered by an insurance policy, the policyholder may file a claim to have the insurance company pay. A claim is what is filed when a payout from insurance over a covered incident is required.
When a company decided to take on the risks of their business themselves instead of getting insurance through an insurance company. Funds set aside by a business to pay potential future claims are not tax-deductible. However, a captive, which is a formalized type of self-insurance, can deduct funds set aside to pay for potential future claims.
Although this isn’t a comprehensive list of important captive insurance terms, we hope it aided in your understanding of captive insurance and insurance options in general. If you have more questions about whether a captive insurance program is right for your business, contact the CIC Services team today!