Generally, you buy insurance coverage from an insurance company that pays for your home, auto, or health in the event of a loss or emergency. However, there is another option that you can benefit from- called self-insurance. Read on to learn more about self-insurance, how it can protect you, when to consider it, and other cost-effective legal solutions in Nevada.
Self-Insurance- What Is it?
As the name suggests, self-insurance is when you set money aside to cover potential losses instead of buying a 3rd party insurance policy. In other words, you act as your insurance company, covering for your own losses as they occur. It further means you don’t buy insurance coverage from a company.
Let’s take a look at an example to understand it better:
Suppose you want to self-insure for home insurance. If your home gets damaged due to fire or any reason, you’d have to pay out-of-pocket to repair the house rather than filing an insurance claim. However, self-insuring is risky. Depending on the losses you face, you could save money or incur more costs than conventional insurance coverage.
Moreover, self-insuring is also when you knowingly choose low-level insurance to avoid high premiums-think of it like a la carte. So, you can buy some coverage from an insurance company while self-insuring other areas.
Whether an individual or a business, you can use the self-insurance strategy. Companies often forgo the 3rd party insurance by independently setting funds aside to cover claims that may arise unexpectedly. Self-insurance can be easily used against any loss or damage.
Self-Insurance What’s the Logic?
The logic behind self-insuring is simple- it protects you without the insurer taking a cut. It is vital to understand that insurers calculate premiums on the forecasted risk. The forecasted figures are designed to profit them by generating more money than they have to pay. So, under this concept, self-insuring allows you (individual or business) to put some funds aside- protecting you without paying a good amount of money in the form of premiums.
Pros and Cons of Self-Insuring – Is it Right for You?
Here’s a quick overview of the pros and cons of self-insurance:
Cost
Self-insuring is economical, especially for businesses, because losses don’t occur frequently. It allows you to avoid the high cost of monthly premiums by providing an affordable alternative by maintaining funds separately that you can use to cover losses or emergencies that may occur unexpectedly.
Interest
The funds/amount you earmark under self-insurance can help you accumulate interest until required. Hence, your money grows substantially if your losses are infrequent.
Greater Control
Another benefit of self-insuring is that you have greater flexibility and control. Self-insurance spares you from insurance policy fine print that contains stipulations and exclusions. It further means you can easily spend the fund designated to cover practically any incident. Therefore, you don’t have to stress over or worry about using the vendor preferred by the insurer.
Full or Partial- Your Choice
It is completely your choice whether you want to self-insure partially or fully. There is no limitation or restriction. Sit with experienced attorneys to evaluate your options and determine the best option for your situation.
Financial Independence
When you begin to self-insure, you become financially independent. Here’s how:
You begin to save money on high insurance premiums. And do you know what that means? That’s right, saving on premiums empowers you to invest more money in investments like mutual funds.
Cons- What Are the Disadvantages of Self-Insuring?
High Risk of Incurring Significant Loss
Sometimes you may incur extraordinarily costly losses. Hence, you may not be able to cover such an incident alone. Due to huge losses, most businesses prefer to buy 3rd party insurance instead of self-insuring.
Poor In-house Administration
You will need to hire an administrator or manager to administer your self-insurance funds. They will be responsible for managing funds, paying out claims, and maintaining records. All this means the additional cost of hiring an individual to look after your funds which can further result in higher costs, thereby losing the idea of convenience and cost-efficiency that we expect from self-insurance.
Inconsistent Expenditures
As the number of claims and their frequency is variable, it can be difficult to anticipate the money you need to allocate for your self-insurance funds. This inconsistency can lead to problems in fund allocation and management unless sorted properly.
Conformance to the Law
In Nevada, employers with enough employees must hold certain insurance policies to conform with the law. Failure to comply with government regulations can lead to hefty fines and penalties. It means you may qualify for self-insurance but must buy certain insurance policies for legal conformance.
In a nutshell, you must evaluate the pros and cons of self-insuring before you opt for it. Consider working with an experienced lawyer to discuss your situation and determine whether self-insurance is best for you or whether you should buy 3rd party insurance policies. Also, if you’re looking for asset protection, your lawyer can provide other cost-effective legal solutions in Nevada.
The Bourassa Law Group has a team of experienced accident injury attorneys. We can leverage our experience and expertise to determine the best asset protection and coverage option. Schedule a free consultation with us today.
