Self Insurance
Definition of "Self insurance"
Protecting against loss by setting aside one's own money. This can be done on a mathematical basis by establishing a separate fund into which funds are deposited on a periodic basis. Through self insurance it is possible to protect against high-FREQUENCY, low-severity losses. To do this through an insurance company would mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies.
Popular Insurance Terms
Excess funds above the amount required to establish legal reserves for the policies in force. These excess funds are generated as the result of mortality savings, excess interest earned on ...
Cash value of life insurance that accumulates according to a table in a policy. It reflects premiums in the early years that exceed the pure cost of protection during that period. If a ...
Legislation that raised taxes on life insurers and further defined life insurance. Because the tax equity and financial responsibility act of 1982 and 1983 (TEFRA) failed to raise the ...
Group whole life insurance policy designed to reduce an employee's exposure to income tax on the value of life insurance provided by the employer. The policy separates the term element from ...
Retirement plan under which benefits are fixed in advance by formula, and contributions vary. The defined benefit plan can be expressed in either of two ways: Fixed Dollars: Unit benefit ...
Premium that remains unchanged over time, regardless of any change in the nature of the risk. ...
Annuity that begins payments after a single premium is paid. For example, the annuitant pays a single premium of $100,000 on June 1 of the current year and begins receiving a monthly income ...
Insurance company that does not utilize the rates and policies of a rating bureau. ...
Coverage usually written as an endorsement to property policies such as the Standard Fire Policy. A loss must be by the intentional acts of vandals. This peril is of particular importance ...
Comments for Self Insurance
Our company is in the business of constructing homes. We own some 25 houses we lease. We are willing to cover the cost of reconstruction of the leased properties as a the limit of insurance. However here in Texas there are two ways insurance companies write policies - ACV (actual cash value) and 80% coinsurance. We would like to set up a trust account to self-insure the properties. What are the tax imprecations of a trust fund as the third party insurer of our properties?
Aug 13, 2018 16:55:11Charles,
we believe there are several complications to your plan. A self-insurance is typically used to protect against damages that are frequent but are not substantial price-wise. Home construction damages are usually not inexpensive; we're not even sure if it's possible because of labor union's rules etc. We suggest you talk with an accountant about the tax implications of self-insurance and also with a real estate lawyer to check not only if it's possible but viable. Good luck!
Aug 14, 2018 11:03:37Have a question or comment?
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