What is the difference between a company that fully insured and one self insured?

Fully Insured Company

A fully insured company purchases insurance from an insurance company to cover its potential liabilities. The insurance company agrees to pay for covered claims up to the policy limits, and the fully insured company pays premiums to the insurance company in exchange for this coverage.

Advantages of being fully insured:

* The insurance company assumes the risk of paying for covered claims, which can protect the fully insured company's assets and financial stability.

* The fully insured company can avoid the need to set aside funds to cover potential liabilities.

* The fully insured company can benefit from the insurance company's risk management expertise and claims handling services.

Disadvantages of being fully insured:

* The fully insured company may pay higher premiums than a self-insured company, as the insurance company is taking on the risk of paying for covered claims.

* The fully insured company may have less control over the claims handling process, as the insurance company is responsible for making decisions about coverage and settlements.

* The fully insured company may be subject to underwriting restrictions and exclusions that limit its coverage.

Self-Insured Company

A self-insured company assumes the risk of paying for its potential liabilities itself, rather than purchasing insurance from an insurance company. The self-insured company sets aside funds to cover potential liabilities, and it pays claims directly to claimants using these funds.

Advantages of being self-insured:

* The self-insured company can save money on premiums, as it is not paying an insurance company to take on the risk of paying for covered claims.

* The self-insured company has more control over the claims handling process, as it is making decisions about coverage and settlements.

* The self-insured company can avoid underwriting restrictions and exclusions that may limit its coverage.

Disadvantages of being self-insured:

* The self-insured company assumes the risk of paying for covered claims, which can expose its assets and financial stability to risk.

* The self-insured company must have the financial resources available to cover potential liabilities.

* The self-insured company must be able to manage the claims handling process efficiently and effectively.

Which Type of Insurance Is Right for Your Company?

The best type of insurance for your company depends on your specific circumstances and risk tolerance. If you are a small company with limited financial resources, you may want to consider purchasing full insurance to protect your assets and financial stability. If you are a larger company with the financial resources to assume the risk of paying for covered claims, you may want to consider self-insuring to save money on premiums.