Weighing Your Self-insurance Options

Many major companies have some form of self-insurance. Self-insurance is when a company preserves funds to give them the ability to cover future losses rather that going through an insurance company to purchase a policy. This may sound simple, but it can get a bit complicated. There are reasons that some businesses would not want to self-insure.

  • It's time consuming.  To cover what a common insurance policy would cover, you will have to prove to your vendors that you have sufficient funds.
  • It can be expensive. Typical liability limits will be one million dollars. The cover yourself adequately and satisfy your landlords, you will need to carry at least that amount. Excess liability insurance is typically cheap, so it would be a good idea to purchase that on top of the one million you are holding.
  • It can hinder the growth of your business. Self-insuring will tie up assets because you have to keep a separate fund for losses. If you are looking to grow your business, self-insuring may not be the best route because it will tie up capital.

Businesses typically start to self-insure when their liquid assets are 7 digit plus, and 8 digit plus net revenue. If your business isn't quite at that level yet, there are things you can do that are similar to self-insuring. 

  1. Carry higher liability/property deductible. Many insureds will have a small deductible of $1,000. If you can afford a small loss, but not a large one, think about having a higher deductible around $10,000. When carrying a higher deductible you wont have to report the smaller claims either, which will look good to insurance companies.
  2. Cover equipment that is crucial to your viability. Your brewing equipment is very valuable to your business. You can choose to self-insure everything other than your brewing equipment, and talk with your broker about proper coverage for your brewing equipment. 

We understand self-insurance can be confusing, and can be looked at a few different ways. Talk with a broker who has knowledge in the industry who can help you come up with a plan that works for your business. Please feel free to contact us with any questions.