What Does Self Insurance Mean?
Self-insurance, also known as risk retention, is the financial decision to depend on one's resources for future losses instead of buying a policy from an insurance company. This is done by saving a portion of the income to cover for those eventual losses.
Insuranceopedia Explains Self Insurance
The term can be misleading because there is no insurer involved, just allocated savings by a person or an entity.
A person might opt for this financial act if he or she thinks that premiums paid for a policy from insurance companies exceed the actual coverage. Also, for certain losses, a wealthy individual seems better served by self-insurance because his or her financial resources can withstand these losses. It is still prudent, though, to have certain amenities covered by an insurance policy, like auto insurance for one's car.
The person with a modest income, however, is better off with an insurance policy since his or her income might not be enough for certain exigencies, like hospitalization costs.