Insurance Law Lesson 66: Self Insuring

A person who does not have insurance is said to “self insure.” He will bear the risk on his own. There are other ways to self insure, in whole or in part.

Next to not having a policy is setting up some form actual internal or personal insurance vehicle. A company might do this because they have some contractual or legal requirement to be insured. This is more literally self insuring. Creating an insurance vehicle that is funded and administered by the “policyholder.”

A deductible or a self insured retention (“SIR”) is a form of partial self insuring. In my experience, the difference between these is that a deductible is paid when the insurance pays, or even after. Conversely, an SIR amount must be exhausted before the insurer begins to pay.* This is especially relevant in liability policies with high SIRs.

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