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
Assets that are not readily convertible into cash 'without a significant loss of principle, such as an automobile, a house, television set, a radio, etc. ...
number of people born as a percentage of the total population in any given period of time. ...
Insurance company's total investments in financial securities. ...
a contract in life insurance that includes elements of whole life and term insurance. in pensions, a combined life insurance policy and a side (auxiliary) fund to enhance the amount of a ...
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 ...
Same as term Annual Policy: contract remaining in force for up to 12 months unless canceled earlier. After 12 months the policy can either be renewed or not renewed by the insurance company ...
Commercial life insurers that operate on the legal reserve system as opposed to fraternal life insurance companies, many of which now operate on a legal reserve basis. ...
Chart showing rate of death at each age in terms of number of deaths per thousand. ...
Insurance arrangement in which all employees of a given business firm are accepted into a plan regardless of their physical condition. The employee cannot be required to take a physical ...
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?
We're here to help.