Did you know that 49% of Form 5500 filing health plans were self-insured or mixed-funded in 2016?
More people are seeing and reaping the benefits of self-insurance when it comes to loss, injury, or illness. But what is self-insurance? And is self-insuring the right choice for you?
What Is Self-Insurance?
Self-insurance is where you set money aside in case of an accident or loss. It can either be done by you putting money into a bank account or by setting up a self-insurance program. Some people choose to set aside money and self-insure, as well as have an insurance plan, this is called mixed-funded insurance.
Whether you’re a business owner or just want to have some extra funds in case something goes wrong for you or your family, anyone can self-insure. Self-insurance means that if something does go wrong (such as medically or damage to your property) you pay for it out of your own pocket.
For example, if you were in a car accident and you’re self-insured, you would have to cover the costs of repairs, legal requirements, and any medical bills.
What Are the Benefits of Self-Insurance?
The main reason people choose to self-insure is that they can save money. Premium insurance policies can be expensive, especially if you never make a claim. If you go through a self-insurance company then costs may also still be cheaper because overhead costs (such as policy administration) are less.
Another benefit of self-insuring is that you can create a more bespoke plan for your needs. Self-insurance plans often can provide more unique coverage that commercial insurers don’t cover. For example, self-insured medical plans can be tailored to you and your needs.
In terms of a self-insurance for businesses, a benefit of self-insuring is that there’s an improved loss experience. This often happens because the company becomes more accountable and puts in place better loss prevention procedures and safety programs.
If you’re a business owner and you’re looking to take out some self-insurance but want a more formal plan, captive insurance has everything you need to protect your assets and business.
However, self-insuring also comes with disadvantages. For example, the unexpected cost of injury, loss, or illness can cost more than your savings cover. If this happens then you might have to take a loan out or find a way of financing the cost in other ways. Self-insurance might also mean that you spend time dealing with claims and/or the administration parts of your insurance.
Sort Out Your Self-Insurance
Now that you know what is self-insurance and the benefits of being self-insured, make sure you sort out your plans now. Remember being self-insured can mean a number of things, you could take out an insurance plan or you could simply put money aside. The most important part about being insured is that you have a plan and the funds that work for you.
Be sure to check out some of our other articles to find out more about the different types of insurance.