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  • Writer's pictureLucas Nava

When should you consider starting a health insurance captive?

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When deciding whether to start a health insurance captive, it's important that you're aware of which kinds of coverage are available. As it turns out, there are multiple coverage types that are suited for your captive needs.

Low frequency/severity claims don't need to come from traditional carriers if claims rarely occur. Even if they do, they tend to be low severity. Traditional carriers would charge you more for premiums than Everlong Captive Health Insurance would for the captive.

A successful coverage option for those seeking captives has been claims with low frequency and high severity, joined by a stop-loss strategy. When companies interact with traditional health carriers with these types of coverages, the companies tend to pay high premiums for events that have a very low likelihood of occurring. As long as the stop-loss strategy is implemented, a captive would be more beneficial as – if a severe claim does occur – enough excess coverage is available to resolve it.

Finally, a captive might be to your benefit if you have risks where premiums to policy limits are very close. A captive can underwrite the risk, the overhead is lower than it would be with traditional carriers, and no benefit would be gained from traditional carriers if you're paying out approximately as much as you'd expect to get back should a loss occur. In such a case, you may be better off paying the premium to yourself or your captive, taking the deduction, and investing the money in a way in line with your captive's investment policy.

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