Most people are familiar with deductible based insurance plans. Employers also have the option to choose self-insurance for their company.
With a self-insured plan, business owners take on the responsibility of claims management and pay the associated expenses “out of pocket” up to a set amount, called the Self-Insured Retention, or SIR. The insurance company then pays liability claims exceeding the fixed limit.
A deductible based plan pays the entire amount of the claim, up to the policy limit, then charges the business the deductible. The insurance company processes all claims adjustments.
Advantages of a Self-Insured Plan
Self-insuring can provide several benefits for a mid to large-sized business:
- Lower Premiums – Insurance companies charge less as the employer is assuming the initial risk.
- No Collateral – Collateral is not a requirement.
- Increased Cash Flow – Owners will only need to pay in the event of a claim, leaving more capital available.
- Control Over Claims Process – Claims falling below the SIR are handled by the employer.
Things to Consider
- Time – Self-insured policies require the business to devote their own time and resources handling claims.
- Capital – Employers must have enough money to cover costs within the SIR.
Experience – The business must manage all requests below their set limit without any insurance company input.