Self-insurance is a situation in which a person or business that is liable for some risk does not take out any third-party
insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
, but rather chooses to bear the risk itself.
In the United States the concept applies especially to
self-funded health care Self-funded health care, also known as Administrative Services Only (ASO), is a self insurance arrangement in the United States whereby an employer provides health or disability benefits to employees using the company's own funds.About.com > What i ...
and may involve, for example, an
employer
Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any othe ...
providing certain benefits – generally
health benefits or
disability benefits
Disability benefits are funds provided from public or private sources to a person who is ill or who has a disability.
United Kingdom
In the United Kingdom disability benefits are covered by Department for Work and Pensions. There are numerous ben ...
– to employees and funding claims from a specified pool of assets rather than through an insurance company, as the term is traditionally used. In self-funded health care, the employer ultimately retains the full risk of paying claims, in contrast to traditional insurance, where all risk is transferred to the insurer.
See also
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Insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
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Risk management
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Third party administrator
In the United States, a third-party administrator (TPA) is an organization that processes insurance claims or certain aspects of employee benefit plans for a separate entity. It is also a term used to define organizations within the insurance indu ...
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Self-funded health care Self-funded health care, also known as Administrative Services Only (ASO), is a self insurance arrangement in the United States whereby an employer provides health or disability benefits to employees using the company's own funds.About.com > What i ...
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List of insurance topics
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Self insurance