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

Procedure in which investment income is paired with each life insurance policy according to the time frame in which the premiums for that particular policy are received. ...

Time interval between the date benefits end under Social Security and the date these benefits resume. For example, survivor benefits are paid only as long as the parent (if less than age ...

Branch of knowledge dealing with the mathematics of insurance, including probabilities. It is used in ensuring that risks are carefully evaluated, that adequate premiums are charged for ...

Provision of liability policies and the liability sections of package insurance policies, such as the personal automobile policy (pap), that pay medical expenses without regard to fault. ...

Specified limit on the dollar amount of coverage for a given loss. ...

Falsification of a material fact in such a manner that, had the insurance company known the truth, it would not have insured the risk. A material misrepresentation gives an insurance ...

Agreement of two or more insurance companies to provide a product or service. ...

Monetary value of the reputation of a business. Goodwill is an intangible asset and thus may be difficult to measure. ...

Continuing on an indefinite basis. ...

Popular Insurance Questions