Making the Transition
Self-Insurance is a risk transfer strategy used by employers to finance their workers’ compensation, auto, and general liabilities. Self-Insurance has become an increasingly attractive option for many employers due to rising costs associated with workers’ compensation, auto, and general liability commercial insurance coverage.
A Self-Insured workers’ compensation plan allows you to assume the financial risk for providing workers’ compensation, auto, and general liability benefits to your injured employees. Self-Insured employers pay the cost of each claim ‘out of pocket’ as they incur, instead of paying a fixed premium to a workers’ compensation, auto, or general liability insurance carrier.
Employers typically choose to Self-Insure their plan because it gives them more opportunity to control costs and ensure their injured workers are receiving timely and proper care. With a Self-Insured plan, employers pay claims as they are incurred, as opposed to paying costs up front in the form of premiums to a commercial insurance carrier. This approach helps to maximize cash flow.
Employers who do opt for a Self-Insured plan need to protect themselves against unpredictable or catastrophic losses. While the larger employers may have financial reserves to cover virtually any claim loss, most Self-Insured employers purchase excess insurance coverage to reimburse them for claims with losses above a specific dollar level.