Originally Posted by seatotaler
Can somebody explain to me how " self insurance works" ?
My insurance has gone up from $787 in 2018 to $1850 this coming new year. Same coverage, no claims. I've had enough,,,, next year could easily be over 2 grand, what's stopping them? My boat is more than 30 years old and in immaculate condition, with a recent survey
to prove it which the insurance company wanted to see. My insurance company switched underwriters because the one I was with, no longer insured boats that old.
Ironically I have a 1948 car. I have vintage plates on it and I pay about 1/10th the amount of my other more modern car, per year. Both with the same coverage.
Formal "self insurance" is completely impractical for an individual. It's something large companies can consider. Basically they have to take out bonds or set aside moneys sufficient for the risk as defined by actuaries. There is a lot of paperwork and complications. In the end, the company simply pays for any claims plus oversight costs of the program. If you have 10,000 cars in your fleet, things average out and they can save on the profit margin the insurance company would collect. Though often they will utilize an insurance company to manage the program all be it at a lower profit margin as the company is taking on the risks if claims are higher than expected. Even then most companies don't do it.
Informally, "self insurance" is simply going without insurance and if there is an issue, you pay directly for any claims.
- If you have a $5k boat, this may be reasonable to insure against the loss of the boat. By the time you get into boats that are worth hundreds of thousands, that's a risk too big for most people to consider.
- For the liability aspect, it's a lot riskier. If you are found at fault in an accident
, sink a million dollar boat or worse injure/kill someone, you could be on the hook for hundreds of thousands. Also most marinas
require liability insurance and they will want to see something more formal than a note from you saying you will pay for it.