An Affordable Alternative to Commercial Liability Coverage

Alternatives to expensive insurance plans provided by industry-leading organizations are often found through captive programs. These alternative programs offer that same financial or risk protections as a traditionally-held insurance plan, yet in this instance, the captive group assumes the risk of those who are ensured. However, those who are ensured are also those who are presenting the risks. The information at states that a majority of the plans offered by a captive program are the same as an insurance provider, such as captive workers comp or general liability. However, there are some differences in how claims are processed or paid.

How Rates are Determined

  1. Casualty lines are either partially or fully funded to cover expected losses.
  2. Expected losses are determined by an actuary who takes a summary of payout characteristics against historical loss amounts.
  3. Losses are generally only covered through specific retention or a deductible amount; usually at about $250,000 per occurrence.

The difference between coverage, occurrence limits, and the involved risk of the shareholders or captives is what makes this insurance form more economical for some smaller businesses, those in a niche industry, or those with unique risks. There are also financial benefits to working with a captive, as there are certain tax benefits as well as investment returns that accompany the shared nature of expense against risks.