self-insurance
Noun: A risk management strategy where an individual or organization chooses to bear potential financial losses themselves by setting aside funds, rather than transferring the risk to a third party by purchasing a conventional insurance policy.
This term describes the practice of acting as one's own insurer. It is typically used in financial, business, and personal planning contexts to discuss alternative methods of handling risk.
Examples: * The large corporation opted for self-insurance for its employee health benefits, creating a dedicated reserve fund. * Self-insurance can be a cost-effective strategy for predictable, high-frequency losses. * Before choosing self-insurance, a company must carefully assess its ability to absorb large, unexpected losses.
- "To practice self-insurance": To implement this strategy.
- Many municipalities practice self-insurance for certain liability risks.
- "A self-insurance fund/reserve": The pool of money specifically set aside for this purpose.
- The company maintains a robust self-insurance reserve to cover property damage claims.
- Self-insure (verb): To use or engage in self-insurance.
- The business decided to self-insure its fleet of vehicles.
- Self-insured (adjective): Describing an entity that uses self-insurance.
- As a self-insured employer, they handle claims directly.
- Risk retention: A broader term in risk management for consciously accepting a potential loss.
- Captive insurance: A closely related concept where a company creates a subsidiary insurer to underwrite its own risks, which is a formalized structure for self-insurance.
- Deductible: The initial amount of a loss that is borne by the policyholder in a traditional insurance plan, representing a small-scale form of risk retention.
- Cash flow underwriting: The practice in self-insurance where funds are paid out as losses occur, rather than as fixed premiums to an insurer.
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insuring yourself by setting aside money to cover possible losses rather than by purchasing an insurance policy
