To cover damages at the time of an accident or road disaster, there are not only insurance companies, the new modality to deal with these situations is self-insurance, which allows to resolve the expenses of an accident. Learn in this article everything about this modality, the key aspects, its background and more.
Self insurance protects the people involved in an accident. It is designed to protect you and your passengers, elderly ones in your care, those in your care and so on. Self insurance is a form of insurance. It can be provided by most small businesses and big businesses. Due to its large number of insured, it is often referred to as business insurance.
It is the use of favorable means to solve the cats of an accident. This means, the company or the person admits the effects of the materialization of some dangers to which it is exposed.
This is the opposite of the negotiations of a policy, where the dangers are trap to a third specialist who is often an insurer or credit institutions.
Special Self-Insurance Fund
Forming a special fund is a necessary requirement for self-insurance and demands economic capacity.
These goods must be liquid, this means, they need to be available quickly. Similarly, they are intended only to cover fortuitous situations and not common or current expenses such as canceling services.
Another main point is that the emergency fund must advance the maximum expenses that a disaster will demand. For this reason, the necessary cost must be counted base on reliable statistics regarding the intensity and frequency of the foreseen contingencies.
From this point of view, it is essential to identify the dangers to which people, companies or private companies are exposed, as well as the possibility of each of these events occurring.
There are some issues to take into account before deciding on self-insurance, these are some of them:
- Fixed Capital: a disadvantage of self-insurance is the freezing of assets that can be forward, for example: any investment.
- Eventual Expenses: if you invest in an insurance appropriate to the needs of the company or the person, there is no expense, but savings. There are businesses, with an index of persistent causes over time. Therefore, it is logical to anticipate contingencies by negotiating a policy.
- Need for control: the emergency fund for self-insurance must be compulsorily monitor and manage. This entails investment of resources and time.
With what has been explain, it could be say that the choice of self-insurance is favorable when the danger in question has low repetitions (or almost improbable) and little complexity. If not, it is better to obtain coverage from a third party.
Self-Insurance and Self-Assumption of Risk, Which is better?
It is essential to separate self-insurance from self-assumption of danger or risk (of the insured). In both possibilities there is no external insurance company.
The distinction is that the first case is integrate into a special financial fund only for contingencies. Now, the same insurer will not have the caution, moreover, it will be commit to reinstate the damages of a disaster or accident.
What is the self-insurance scheme?
We can define the self-insurance regime as a situation in which a person faces the economic consequences derived from their own risks with their assets.
Being clearer, a person chooses not to hire an insurance company, but legally assumes the risks and is responsible with their assets.
It should not be confuse with the material loss due to not having contract insurance. A person who does not take out insurance for his vehicle and crashes into a tree will not be able to claim anyone. Instead, if you hit a pedestrian, you must pay for this damage.
What are the disadvantages of self-insurance?
By not paying an insurance premium, the community and dispersion of risks are eliminate. For this reason, it cannot technically be consider insurance.
Clearly, in the event of an accident, the person who opted for the self-insurance regime must respond with their assets to injured third parties.
Is self-insurance car insurance?
No. We should not confuse self-insurance with auto insurance coverage. Although in other countries such as Mexico it is the name of car coverage, in Argentina it does not apply.
Occupational Risk Self-Insurance
Now, for work accident self-insurance, there is a modality indicate by Law. Precisely, National Law 24557, indicates that employers must choose to contract a Work Risk Insurer (ART).
But, immediately afterwards, it indicates that only employers who, complying with certain legal requirements, can self-insure can opt.