Why Self Insurance is Scary

Many companies as well as individuals have begun looking for ways to cut insurance costs. One idea that many use, or at least consider, is the concept of self-insurance. While this concept seems as though it could save some money it is important to spend some time considering all of the negatives, as well as the positives, to make certain you do not get yourself in over your head. Before you cancel that insurance plan, make sure you consider the following reasons why self-insurance is scary.

  • Assumption of Greater Risk – This is especially the case if you are creating an individual self-insurance plan. If something goes wrong, you will pay out of pocket, or out of your insurance plan. It is quite possible that you will never need to tap into the funds that you set aside. However, if you were to become catastrophically ill after just a year or two of paying into your self-insurance, what would you do?
  • Budgeting is Difficult – Health care prices change very frequently. Standard insurance can help alleviate this change, but for the self-insured you will feel every change. What if the price of your needed medication increased by 200%–would you be able to get through the month and still purchase your medication?
  • Administration can be Tricky – Handling the administration tasks that are associated with a self-insurance plan can be nearly a full-time job for those self-insuring for the staff of a small business. Every claim will require direct handling and each person you add to the policy requires a mountain of paperwork.
  • It is not as Cheap as you Think – Some states require those using self-insurance to carry stop-loss plans. This covers you in case of a catastrophic insurance issue; however, it does cause you to pay for some form of insurance anyway. This could mitigate much of the savings of choosing self-insurance.

As you can see, self-insurance may not be quite as simple, painless and cheap as you originally thought. Spend some time learning more about what self-insurance would be like in your particular case, then call an independent agent, such as one from The Greenwood Agency. In certain cases, working with an agency can save you a significant amount of money and will alleviate you of the stress associated with self-insurance.

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