Self-insurance

• Self-insurance should primarily be used by large companies. Insurance is based on pooling the funds of numerous people or companies exposed to similar risk. By combining the resources of multiple companies, an insurance company builds enough resources that the financial damage from a loss will not bankrupt itself or the insured company. For self-insurance to work, a company must have enough resources to pay off a loss without going bankrupt. Small businesses do not have the resources for self-insurance and should purchase insurance.