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Line 1: − + − For example, a company may determine that its annual collision damage on company owned vehicles is $120,000 but the insurance to cover this risk costs $130,000. The decision is then made to self insure. Normally, a company would accrue $10,000 per month for self-insurance for collision damage. In the US, such an accrual would not be deductible for tax purposes, although the actual damages paid for would be.+ − − +
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'''Self Insurance''' describes a decision, normally by a [[corporation]], not to insure a particular [[risk]]. Put another way, self-insurance means no insurance.
'''Self Insurance''' describes a decision, normally by a [[corporation]], not to insure a particular [[risk]]. Put another way, self-insurance means no insurance.
For example, a company may make a decision not to insure for collision damage for company owned vehicles. In such a situation an analysis was probably done that paying for individual collision damage as it occurs is less expensive than buying an insurance policy to cover it.
For example, a company may make a decision not to insure for collision damage for company owned vehicles. It may determine that its annual collision damage on company owned vehicles is $120,000, but the insurance to cover this risk costs $130,000. The decision is then made to self insure. Normally, a company would accrue $10,000 per month for self-insurance for collision damage. In the US, such an accrual would not be deductible for tax purposes, although the actual damages paid for would be.
Companies may also self-insure their health insurance plans for employees. Usually, they will use a "third party administrator" to administer the claim administration for such a plan, paying only for claims approved plus a fee to the administrator. To cover major medical expenses (such as an organ transplant) the company would also purchase a "stop loss" policy, whereby the policy will cover claims above a certain amount (for either an individual's claims or total claims for the company).
Companies may also self-insure their health insurance plans for employees. Usually, they will use a Third Party Administrator or TPA to administer the claim administration for such a plan. The company will also purchase a "stop loss" whereby an insurance policy will cover claims above a certain amount for either an individual's claims or total claims for the company.
[[Category:Business]]
[[Category:Business]]
[[Category:Finance]]
[[Category:Finance]]
[[Category:Insurance]]