Why 'self Insuring' Is Dangerous And How To Find A Better Way
Are you considering the idea of 'self-insuring'? Self-insurance is attractive to many people as a money-saving option, but it can be a dangerous move as well. To protect yourself and your finances, here are a few tips for anyone thinking about self-insurance.
What Are the Dangers of Self Insuring
Self-insuring is simply the choice to avoid purchasing a personal insurance coverage policy and instead relying on one's own income and assets to cover potential bills. The theory is that an individual with large assets can save money on premiums. However, the risks are compound.
First, you will have to cover all the expenses of what would have been a covered incident. With such things as medical care or bodily injury, this can get very expensive. Due to the risk of running out of funds, some institutions may not even work with you if you don't have coverage. And your total out-of-pocket expenses are not capped as they would be under nearly all traditional insurance policies.
In addition, the primary party that anyone will sue for damages will be yourself rather than an insurance company. If you are deemed at fault in an accident, the injured parties will come directly for your assets — putting you at risk of a judgment of thousands or even millions in personal liability as well as extensive legal costs.
How Can You Use Self Insuring Wisely
Clearly, avoiding insurance coverage completely puts you at much greater risk. So, how can you find a practical middle ground? One way is to partially self insure by raising your deductibles and therefore lower monthly premiums. This allows you to have the needed protection if a very expensive accident occurs while letting you 'self insure' for the smaller expenses.
You can also pick and choose what you could afford to reasonably self insure. For instance, you could drop comprehensive vehicle insurance in favor of liability-only coverage. Your rates go down, and all you would be 'on the hook' for is the replacement cost of your vehicle (rather than injuries to others). Or you may opt for long-term disability coverage only, effectively self-insuring the extended waiting period if something happens.
The goal of insurance is to protect your health and your finances. So, rather than forgoing important insurance coverage, use self-insurance for targeted benefits. Want more ideas on how to do that? Start by meeting with a personal insurance agent today.