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
Means of funding permitted under the employee retirement income security act of 1974 (ERISA). The administrator of a pension plan can comply with required minimum funding standards by ...
Search, attraction, interview, and employment of insurance agents. This is a primary function of the general agent (GA) or agency manager. ...
Amount in a cash value life insurance policy that a policy owner will receive upon surrender of the policy, minus any outstanding loan and accrued interest. A table in the policy shows the ...
Coverage providing funds for maintenance of a business as closely to normal as possible in the event of a loss of a key person, owner, or partner. ...
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 ...
Same as term Unallocated Funding Instrument: pension funding agreement under which funds paid into a retirement plan are not currently allocated to purchase retirement benefits. The funds ...
Costs associated with the selling of a new insurance policy to a policyholder. The costs include the acquisition commission as a percentage of the first year's premium, underwriting ...
Insurance policy in force only after the insurance company approves the application. Today, most companies use the insurability conditional premium receipt. ...
Nonforfeiture option that uses the cash value of an ordinary life policy as a single premium to purchase term life insurance in the amount of the original policy. The length of the term ...
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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