Self-insurance is a risk management strategy where an organization allocates funds to cover losses from certain risks, instead of purchasing insurance from a traditional insurance carrier.
Self-insurance allows organizations to have more control over coverage, tailor policies to meet their specific needs, and potentially save money on premiums.
However, self-insurance also has some disadvantages, including financial risk, administrative burden, and the need to allocate capital to cover potential losses. As a result, organizations considering self-insurance must carefully evaluate potential risks and benefits before deciding whether it is the right choice for them.
If you’re thinking about becoming self-insured, you’ll need to weigh the pros and cons of taking this type of approach. We’ve outlined the advantages and disadvantages in further detail below.