What Keeps You Up At Night?

“What Keeps You Up At Night?”

This is the age-old question that haunts business-owners all over the world. What is it that worries business-owners more than anything else? What could happen to impact a business that the business-owner cannot adequately plan and prepare for? Is it invasive competition? Government regulations? On-the-job accidents? Cyber crime? Floods or earthquakes? What about a disgruntled employee who could sabotage the owner’s reputation? Or a key customer who decides to retire and shut down their business? Is it collection issues that jeopardize cash flow? Could it be business succession planning?

risk management puzzle.jpg

Would it surprise you to learn that there IS a way to protect your business against these, and a myriad of other risks? The solution to these nightmare scenarios is CAPTIVE INSURANCE! Simply put, a businessman can set up their own “captive” insurance company, which issues policies to insure against these types of risks. The businessman pays premiums to his own insurance company, and those reserves are available to pay claims. If no claims occur, that “war chest” builds and grows in a potentially tax-advantaged way.

Montera Captive Insurance Management goes through a thorough risk evaluation process with our clients, identifying anything that could possibly happen to jeopardize the business. Our clients are thrilled to know that their businesses are protected against a variety of risks that they didn’t know they could insure. They are surprised that certain types of risks can be insured! For instance:

1.    A manufacturer won a bid on a large project. They weren’t able to complete all the work themselves, so they got bids from some sub-contractors for those other components of the project. Their final bid was based on the bids from sub-contractors, but when it was time to start the project, one of those subcontractors backed out. They had to come up with a work-around, which cost them a substantial sum of money. They had a policy in place in their captive insurance company to insure against contractual failure, so they were able to file a claim and recover those significant costs!

2.    A contractor owned a very specialized machine they were using on a project. That machine broke down, and it would take several days to bring in an expert mechanic to fix it. The project was time-sensitive, and if they failed to complete the project on time, they would be faced with possible fines and liquidated damages. The company had a policy in their captive insurance company to cover not only the repair on the equipment, but it also covered the costs of renting another machine to complete the project on time!

3.    A successful business-owner depended on one of their customers for a significant percentage of their revenue. That customer closed their doors, resulting in substantial loss of income. The business-owner had a policy in their captive insurance company covering lost revenue due to unforeseen loss of a key customer. They were able to file a claim to help the company replace their lost revenue as a result of the loss of that customer!

4.    A business has a fleet of vehicles which are all paid for. Rather than insure the comprehensive and collision coverages through a commercial carrier, they chose to retain that risk in their captive insurance company. If any of their vehicles are damaged in accidents, their captive pays those claims. The money they save by insuring comp and collision coverages within their captive is huge!

5.    A medical clinic has an MRI machine which gets used regularly. The technician is an avid skier. The doctor worries that if the technician breaks a leg skiing and is out for several weeks, that MRI machine will sit dormant until the technician can return to work, resulting in the loss of thousands of dollars in billable revenue. They have policies in their captive insurance company which not only insures the MRI machine against breakdown and damage, but insures against the loss of revenue produced by that key employee!

Many people have heard that captive insurance companies are not legitimate, that they are only set up for tax avoidance purposes, that the IRS is trying to shut them down, etc. The bottom line is, captive insurance companies, when formed correctly, can be an incredibly valuable risk and business management tool to protect businesses against things that go bump in the night. Contact Montera Captive Insurance Management to learn how we can help you sleep better!

Posted on May 25, 2017 .