There are many kinds of insurance available for purchase to protect in all kinds of situations. There are homeowners, renters, auto, health, and life insurance. Businesses carry professional and personal liability as well as workers’ compensation. One type you may not be familiar with is self insurance.
Self Insurance Defined
Self insurance is another method of having money available to pay damages and expenses in the case of something unexpected. Rather than make monthly payments to an insurance company that will reimburse you when you need it, you put aside money on your own and dip into that savings when something happens that requires payment. This could be medical expenses, auto repair costs after a fender bender, or damage to property. Pretty much anything that can be covered by a standard insurance policy can work for self insurance.
Pros and Cons of Self Insurance
Self insurance works best for incidents that are likely to cost little money to take care of. The money put aside is less than paying a premium. It is a good way to go if situations that could be costly are unlikely to occur. On the downside, self insurance involves a considerable amount of risk. Should you be liable for something that is very costly, you may not have enough to cover it and that could cause major financial problems.
There are many ways to insure yourself. Putting aside your own money can be effective. Consider all of the factors before choosing to self insure.