Self Insurance

Obviously, there are risks in business, and while self insurance does not make the risks go away, it makes it easier for you not to go totally broke when you encounter such financially draining risks.

Self Insurance


Interestingly, this is a kind of risk management scheme that you can employ in your business in other to protect yourself and your pocket from unexpected deep financial loss.

Most businesses have been including this strategic method every day as part of protecting their businesses from loss. Not just from loss but from many other unexpected hurdles that can negatively affect their business.


Also, individuals are not left behind. So many people now self insure themselves and leave out the insurance companies that are known to be providing insurance services.

What is Self Insurance?

Self insurance almost explains itself. It is a risk management strategic move by a person or a firm to protect itself from future unforeseen financial loss.

Now, this strategy involves putting some high amount of money aside that can handle any future loss or damage which would have required the assistance of a third-party insurance company.

Most people opt for self insurance both for their business and for personal use. Even you can pay for your medical bills, damages or loss on your property, your car, and any kind of loss you may encounter, with self insurance.

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By the way, this strategy can save you some money when compared with the outrageous premium you pay to insurance companies while the situation you pay for never occurs.

In contrast, some states in the U.S require you to carry some coverage policy from an insurance company like car liability insurance.

Who can use self insurance

Of course, anyone that can shoulder loss alone and can set enough money aside can become self insured. You must consider your family and medical history before you take such a decision. Also, business firms can add a type of self insurance for their companies and for employees as well.

Furthermore, those making use of rented properties can become self insured instead of spending more money on renters insurance companies.

Generally, most people find it more reasonable to save the premium policy money instead of paying expensive premiums and allowing insurance companies to make profits from them.

However, the decision to choose self insurance should be critically analyzed.  Make sure you can save money enough to take care of huge unexpected damage or loss. That is, before going into action.

What can be insured?

In continuation, as long as you have the capacity to put aside a certain sum of money that can take care of loss and damages, you can add anything you want to insure. Mostly, people always self insure

  • Properties
  • Rental properties
  • Medical care
  • Businesses
  • Employees
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Meanwhile, before you think about self insuring your home, you just have to be financially well to do. This is because a home is a high-risk asset. Just like while living on a mortgaged home, the leaser would only take you seriously if you have a homeowner insurance policy.

So, self insurance works mostly for people that live on a property they paid off for.

Although even as a paid-off homeowner, you have to decide if you can foot the bills in times of disaster. That is the financial burden of rebuilding your home from scratch if it got damaged by fire or natural disaster.

Advantages and disadvantages of self insurance

Self insurance has its ups and downs. Before you make a decision to self insure either yourself or your company, you have to weigh the advantages and the disadvantages.

  • Saves cost

Firstly, the most important advantage of this type of insurance is the savings. Self insurance helps companies to save more when they do not have to pay huge amounts to insurance companies.

  • Lowers business risk
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Companies that run on self insurance are more aware of the risks in business. So, they sit up and devise means of protecting their company from any type of loss they can think of.

  • Improves loss experience

companies that pay their own claims do not allow such to linger more than necessary. This also helps the company to improve the loss experience.

  • Safe working environment

Businesses that have all their employees under company self insurance take good care of the employees and go the length to provide a safe work environment for them.

  • Less tax payment

Premium comes with its own taxes. And self insurance can help an individual or a company avoid paying huge premium taxes.


  • Exposure to risks

This is one of the disadvantages of this risk management. Your company is in charge of employee insurance and it adds more risk to the company. In an event of an accident or injury, the company takes full responsibility.

  • Financial inconsistency

Also, due to risk management that the company has to keep handling, the financial consistency of the company might become inconsistent. Once the company keeps saving and deducting a sum of money to put aside for insurance, it will be hard to maintain the income flow level.


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