What is the purpose of a self insured fund?

The purpose of a self-insured fund is to set aside money for unexpected losses. When businesses opt for self-insurance, they proactively reserve funds from their budget to cover potential claims or losses that may arise. This approach allows them to manage risk internally rather than transferring that risk to an insurance company. By doing so, they can maintain greater control over their financial resources, potentially lower their overall insurance costs, and avoid the expense of paying premiums to external insurers.

This strategy works well for organizations that have the financial capability to absorb certain risks and prefer to use their own capital to cover losses, providing flexibility in terms of claims processing and potentially freeing up funds in the long run.