Pros and Cons of Business Insurance Options

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There are three different ways of obtaining business insurance. Since different companies have different volatility thresholds, each business may require various services. Understanding the different available options can help.

Insurance Options

Companies that opt for self-insured policies take the monthly premiums from their employees and add that to a fund expressly set up for paying out claims. Traditional insurance is where companies purchase plans from major insurance carriers. Employees pay the company, and the company pays the premiums. All claims, however, go through the insurance carrier. A final type of insurance is called captive insurance industry. This option allows companies with similar insurance needs to form a group and pay into a common fund from which any claims are paid. 

Pros For Each Option

For captive insurance and self-insured plans, employers have more control over the types of claims. Also, they seem to have some tax and income benefits since the premiums can be tax deductible and funds can be kept in interest-bearing accounts. Traditional insurance plans take responsibility out of the companies hands and allow a third party full responsibility. 

Cons For Each Option

The self-insured option is primarily available for larger companies with the capital to fund the account. Smaller companies would probably not have this option. The fact that companies have no say in how traditional insurance plans operate is simultaneously a con. By abdicating responsibility, companies have no control over policies. If employees are unhappy enough with the options, they may leave. Captive insurance companies need to be checked out to make sure all of the investments are legal. Some captive insurance companies are considered scams, so companies need to make sure they invest with a reputable group. 

The best type of insurance will vary and can depend on the size, capital, and needs for each company. Companies should speak with qualified representatives of the different types of insurance carriers to see which option has the best benefits. 

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