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
Method of transferring pure risks that is perhaps the seed of the modern day insurance policy. Ancient Greece held to the concept that a loan on a ship was canceled if the ship failed to ...
Elements within a group under study that have the same characteristic (s), have the same expectation of loss, are very much alike with respect to the variable under consideration, and do ...
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Money paid through state and federal programs to workers who are temporarily unemployed. The program, which was created by the social security act of 1935, is managed by the individual ...
Insured peril in some property insurance policies that encompasses any accidental damage to insured property while being removed to safety from the immediate threat of damage by another ...
Account established to manage the assets of a minor. This account is under the auspices of a custodian (either an individual or an institution). The gift tax exclusion would apply on any ...
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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