Definition of "Self insurance"

Shelayna West, Owner real estate agent

Written by

Shelayna West, Ownerelite badge icon

West Premier Home Group-
Keller Williams Legacy Realty

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.

Comments for Self Insurance

Charles Scoma Charles Scoma said:

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  16:55:11

 
Real Estate Agent

Charles,

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  11:03:37
 
 
image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Use of a life insurance policy dividend by the owner of a participating policy. Here the policy dividend is left with the insurance company to accumulate at a guaranteed minimum interest ...

Same as term Application: written statements on a form by a prospective insured about himself, including assets and other personal information. These statements and additional information, ...

Legislation mandating that factors taken into account in the calculation of premium rates for automobile insurance include the insured's driving record, annual miles driven, and years of ...

Maximum that an insurance company can underwrite. The limits of coverage that a property and casualty company can underwrite are determined by its retained earnings and invested capital. ...

Coverage that exceeds the normal insurance capacity of an insurer or reinsurer. ...

Endorsement to an existing policy or a separate policy covering loss of rental income to the property owner, caused by the damage or destruction of a building, rendering it unrentable. The ...

One of two bureaus that writes forms and files standard rates for inland marine insurance. The other is the inland marine insurance bureau. ...

Trust in which rights to make any changes therein are retained by the grantor. At the grantor's death all rights become irrevocable. This type of trust has several advantages: it can avoid ...

Kindling intentionally set in a fireplace, stove, furnace, or other containment that has not spread beyond it. Property insurance does not protect against damage from a friendly fire. For ...

Popular Insurance Questions