Trial And Appellate Solutions

Is self-insurance right for your business?

Managing risk is a constant source of concern for business owners and key decision-makers within companies, but the price of insurance premiums has many looking for more cost-effective options. Self-insurance is one such option that more and more businesses are adopting. Before determining if this option is a good fit, you should explore some of the advantages and disadvantages.

Only pay for what you need

Under a self-insured program, a company sets aside funds to pay for events that would otherwise be covered by a traditional insurance policy. Significant cost savings can result as monthly premiums vanish and covered events, if they do occur, are paid for with money that has already been set aside.

Self-insurance allows a company to better understand its own exposure to risk, and therefore fine-tune its policies to place money where it is needed and remove it from where it is not needed. Such flexibility is rarely an option under a traditional insurance plan.

But you must make sure it is enough

A key drawback of self-insurance is that if a catastrophic loss does occur, your business only has its own funds to rely on and cannot turn to the virtually limitless pockets of an insurance provider. This drawback comes with an advantage, however, in that it increases the need for risk management and greater accountability across the organization. Self-insured businesses have the opportunity to better know themselves, and in turn, often run more efficiently and with less exposure to risk.

You aren’t on your own

When insurance disputes arise, you will no longer have your insurance company to fight legal battles on your behalf. This does not mean you have to face these conflicts alone. An experienced insurance law attorney can represent you in defending against claims and other matters that arise from your self-insured status.

Before making any key decisions, consult with a knowledgeable lawyer who can help you weigh the advantages and disadvantages of self-insurance. It is not right for all businesses, but for many, it has proved an effective means of saving money and managing risk.