Self Insurance Policies

Insurance premiums have increased by a considerable amount in past few years. This is because of events like 9 11, hurricanes, Tsunami etc that causes huge loss to insurance companies. After such issues some of the small insurance companies have even become bankrupt. Moreover even policies have reduced coverage with increased premiums. There are essential areas which are not even covered by basic policies and for such issues you need to take separate policy coverage or purchase insurance coverage.

It is at this instance that self insurance policies become really helpful. In this method no insurance policy is purchased for any risks that might occur in future. Self insurance policies are those in which the insurer keeps aside a sum and manages the fund for paying off claims that occurs out of accidental issues that are claimed. But in self insurance policies method all you need to know is what are the possible risks and how much money is needed for covering such an issue if it happens in future. But at the same time such events for which self insurance policies are planned must be something that the insurer cannot avoid or foresee. Certain instances like earthquake, hurricane etc are not covered by self insurance policies. This is because such instances are so unpredictable and the losses are also too high to be affordable for a person or company. Self insurance policies are usually planned out by large companies who do not wish to pay large sum towards premium and self insurance policies are done as per government rules and regulations.

Working method

Self insurance policies do not give full coverage to all the issues that are likely to happen or occur in future. Self insurance policies do not cover risks that have large loss of values. These types of policies cover a part of risk only and that are catastrophic potentially. You can also purchase a stopgap policy along with self insurance policies. This will help the insurer to gain coverage for losses that occur above self insurance policies fund limit. Premium towards commercial policy will be less as time passes by. This is because commercial insurer is not in the first layer of claim payment. 

Is self insurance policy a good idea?

Self insurance policies are not good for individuals. It is better for individuals to purchase insurance than going for self insurance coverage. But for larger companies self insurance policies are good as it gives coverage to certain areas that are not covered by certain insurance policies even if purchased for high premiums. The idea is not considered good for individuals for an individual will not be having enough savings for premiums and for negotiations with insurers or captives of self insurance. More over the method will not work well for a small business as well.