Self-insurance is a strategy that can offer certain businesses a more direct approach to risk management. Instead of transferring risk to an insurer through premiums, a company allocates its own capital—often into a dedicated fund—to handle claims for events like liability, auto, or property losses. In my experience advising businesses across transportation, construction, and commercial real estate, I've seen that this approach can provide greater autonomy over limits and cash flow, and can help sidestep some insurer fees. Typically, claims are managed internally or with the help of a third-party administrator, requiring diligent monitoring and compliance. However, it's important to recognize the tradeoff: self-insured businesses assume more financial exposure, especially when facing major losses, and must navigate added responsibilities around claims and legal requirements. This model tends to suit companies with robust financial reserves, a higher tolerance for risk, and an appetite for hands-on management. For owners who prefer predictability and less administrative burden, traditional insurance may remain the prudent path.
