Self Insurance

Self Insurance A method in risk management in which a company or person sets aside a sum of money so they can use it to mitigate an unexpected loss, rather than pay premium to an insurance company to cover that unexpected loss. A typical self Insurance example is when an employer takes on the risk of providing health insurance coverage for their employees. Second example is when owner of a building situated atop a hill adjacent to a floodplain may opt against paying costly annual premiums for flood insurance. Instead, they choose to set aside money for repairs to the building if in the relatively unlikely event floodwaters rose high enough to damage their building. One the advantages of self insurance is that while you are disaster-free, you get to pocket the money you would have paid in insurance premiums. This can end up saving you a lot of money, especially if you don't incur a financial loss. The biggest disadvantage of self insurance is that the individual or company face with self insurance may not understand their exposure to risk. In this light when the person or company does not prepare and save for their level of risk, they will not be able to cover the proper amount of loss when it occurs. Self insurance will only applicable to policies that are not mandatory by the law. For example you will not practice self insurance in the case of a third party motor vehicle insurance cover. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful