How do we become self insured?

How do we become self insured?

When someone says that how do we become self insured, it does not mean that go outside and getting independent health insurance. Self insuring means that you save up enough money to cover the related and possible expenses that may occur in the event that you need to use the insurance. Most people who self insured only do so on life insurance policies, once they have built up enough wealth that their loved ones would be taken care of without the life insurance policy.

What Does It Mean to Self Insured? 

When you self insured, you basically pay for any accidents or bills yourself. You do not have insurance to cover the costs that insurance normally would. You pay for everything completely on your own. This means if your home burns down, you will have to pay to rebuild it. If you are in a car accident, you pay for the repairs and the medical bills. If you worried about car accident, you are responsible for paying a lawyer and any judgment. If you are diagnosed with a serious illness, you pay for all treatment on your own.

Now how do we become self insured business owner

If you choose to become self insured business owner, you will want your money

to work for you while it is waiting to be used. The best way to keep self insurance money working for you is to invest it. Your investments should be in short term investment that can be quickly turned into useable cash without a large loss in value. These types of investments would include money accounts or mutual funds. Avoid long term investments such as stocks and bonds as they are not suitable for a short-term emergency fund such as a self-insurance fund. If you would like, you can also choose a savings account. Your return on a savings account will be lower but it will make quick and easy access to your money while at the same time earning a small return

Things to do become self insured business owner

Eliminate your need for some type of insurance policies that you can assume the risk yourself. For example, you may be able to eliminate purchasing extended warranties on appliances, full coverage automobile insurance for a vehicle that is of little value, or insurance on valuables and jewelry by using self insurance fund to pay for the cost of replacing these items by yourself.

Make your auto and home deductibles larger. By making your auto and home insurance deductibles larger, you will be insuring yourself through self insurance for the amount up to the deductible which will enable you to immediately lower your premium payment.

Everyone needs disability insurance and if you want to be able to afford it you can use self insurance fund to permit you to accept a longer waiting period before your disability insurance kicks in which in turn will enable you to have reduced premiums.

By switching to a health insurance policy that only kicks in after a large deductible, which is sometimes called emergency health insurance, you can save a substantial amount on your health insurance premiums. By using this type of policy, you will use self insurance to pay for your doctor visits and minor medical procedures and your emergency health insurance will be there as a safety net if a substantial medical emergency arises.

Set Up an Emergency Fund

An emergency fund is even more important when you are self-employed because you will not qualify for unemployment insurance if your work were to completely dry up. If you want to keep the business open you should have an emergency fund set up to cover the costs to stay open for at least six months. At that point, you will need to determine if you need to close the business or not. These costs include all the costs that make your business run from day to day.

Additionally, you should have a large emergency fund to cover your personal expenses. If you are the only breadwinner in your family or you are single, plan for a year of personal expenses for your emergency fund.

These are the main things in your mind when you are thinking about how we become self insured? In the next article we will discuss about what is a self funded health plan?