Understanding Self-Insurance: Definition, Examples, & How It Affects You  

After a personal injury accident, understanding the at-fault party’s liability insurance is key to effectively pursuing the compensation you deserve. But in some cases, you may find yourself facing what’s known as a self-insured company (or individual). Even though self-insurance looks quite different from a standard liability insurance policy, you are no less entitled to compensation from a self-insured party. But how does self-insurance work? And why do companies self-insure in the first place?  

This blog will run you through the basics of self-insurance, and how it differs from other types of insurance, so you know what you’re up against. But remember that you don’t have to deal with self-insured companies alone—by teaming up with an attorney for personal injury, you can fight for compensation with a seasoned legal expert on your side.  

Self-Insurance Definition  

Self-insurance means a company (or individual) pays accident claims out of its own funds instead of buying insurance. Some common types of self-insurance include:  

• Home and property insurance  
• Health insurance plans provided by employers  
• Commercial auto insurance  

The ability to set aside funds for insurance purposes requires a fair amount of financial security, which is one of the reasons self-insurance tends to be more relevant to companies than to individuals. Although it’s not impossible for an individual to insure, many individuals are more likely to benefit from the safety net provided by an insurance company.  

Why Do Companies Self-Insure?  

There are a variety of reasons companies may self-insure, and they are likely to be influenced by local regulations on insurance. However, there are a few central aspects of self-insurance that stand out as potential benefits:  

• More Internal Data. When claims are handled by a third-party insurance provider, the insured company might not have access to a record of these claims. By self-insuring, the company can maintain internal data, which can be a helpful reference for financial planning.  
• More Flexibility. Insurance companies offer some customization, but still typically provide premade plans. When an employer chooses to self-insure, they can personalize their coverage according to the needs of the company.  
• More Money Saved. Self-insurance can be a less costly and more practical option for the employer who plans properly around their possible expenses. As long as no significant damage occurs, they can hold onto the majority of the money they set aside at the end of the year, causing it to cost less overall than what their premiums would be otherwise.  

Accidents Involving Self-Insured Entities  

If you find yourself in an accident where the at-fault party is a self-insured company or individual, you can still pursue compensation. The damages they are liable for can be paid out of the funds they’ve set aside for self-insurance.  

The good news is that, for the most part, personal injury claims against self-insured companies are still subject to the same rules as traditional personal injury claims. Generally, states require self-insured entities to set aside reserves equal to or greater than the minimum liability requirements for traditional insurance, so you can still recover adequate compensation.  

However, there are a couple of factors that are important to consider when dealing with self-insurance.  

Less Regulation  

Since they are not themselves insurance companies, self-insured companies can be exempt from state regulations which primarily affect insurance companies. One relevant example is the timeline in which they have to pay you.  

Many states set forth specific timeframes within which an insurance company has to pay the agreed settlement amount to someone who makes a legitimate claim. However, self-insured companies may not always be subject to the same deadlines.  It’s important to have an attorney by your side who can follow up with the at-fault party and help you get paid in a timely manner.  

Third-Party Administrators  

Some self-insured companies will handle the administrative process of dealing with accident claims themselves. On the other hand, some will choose to have a third-party administrator, often an insurance company, handle this aspect of their insurance.  

It can be confusing to be told that a company is responsible for its own insurance and then be told to contact an insurance company, but it’s important to take note of who you need to communicate with.  

When gathering insurance details at the scene of the accident, make sure you know who will be handling the claim on behalf of the at-fault party. Your state’s statute of limitations limits the amount of time you have to pursue compensation, so you don’t want to waste time talking to the wrong person.  

Defensive Tactics  

One of the fundamentals of traditional insurance is that the risk is shared by various parties, who pay premiums to the insurance company. This may lower the overall risk faced by the insurance company, allowing them to comfortably part with settlement amounts when necessary.  

However, things work a little differently when it comes to self-insurance. Because you are seeking compensation from their own assets, self-insured companies can be especially defensive against accident claims. They may try to use a variety of strategies, especially during pretrial negotiations, to minimize your settlement amount or avoid paying altogether.  

This is where Senft Injury Advocates comes in. With decades of experience handling personal injury cases, we can prepared for these tactics and push back, fighting for the amount you deserve. If you’ve been in an accident and need legal assistance, call 24/7 for a free consultation, so you can get started without risk.