The argument against business insurance

17 Jun

I know some folks who would rather “self-insure.” According to Michigan State University, “When you buy your own insurance on the open market, in effect, you are paying someone else (an insurance company) to take on the risk that they will pay out more in benefits than they collect from you in premiums. This is known as being ‘fully-insured’ or ‘fully-funded.’ Alternatively, if you decide to assume the risk yourself – i.e., to save your premium dollars and use them to pay your…bills on your own – you are considered ‘self-insured’ or ‘self-funded.’” MSU self-insures its medical plans. MSU has the resources to self-insure.

I also know some retail establishments that self-insure. Granted, they don’t have the resources of Michigan State University—they self-insure for another reason. They feel fully-funded insurance is cost-prohibitive. They would rather assume the risk themselves and put the money elsewhere than pay for additional insurance.

When I attended my first SMB Nation conference (SMB Nation is a company that helps educate small and medium businesses—SMBs—about business technology), one of the most popular presentations was a panel discussion on best practices. Five of the most respected names in my field were on a stage answering questions. Someone from the audience asked if anyone on the panel carried business insurance. Nobody raised a hand.

It’s a gamble. You should discuss your exposure and your willingness to pay for insurance with an insurance agent. My seventh challenge to you is: determine your business insurance strategy and how you will pay for it. From Escape the Cubicle


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