The term self-insured is typically used to describe a person or company that is financially prepared to cover the costs of major life events such as a car accident, medical emergency, or death. This is achieved through a combination of living frugally, investing wisely, and building up savings in addition to the income earned from a job or investment. While some may choose to self-insure, most experts recommend carrying some form of insurance on cars, homes, and health to avoid financial disaster in the event of an unavoidable loss.
A person is considered to be self-insured if they have enough money in investments to cover their final expenses and leave behind an inheritance for their loved ones. You can tell when you’re ready to be self-insured by examining your return on investment (ROI) compared to your annual income. When your ROI beats your income, you’re able to cancel your life insurance policy and begin saving for the unexpected.
Self-insured people can also afford to raise their deductibles on the types of insurance they can’t avoid, like auto and home insurance. This lowers their monthly premiums, while still providing a safety net in the event of a catastrophic loss. However, many experts warn against raising deductibles on life insurance, as it can significantly reduce your coverage in the event of an accidental death. In this case, it’s best to wait until you reach Baby Step 7, where you are debt-free and have more in savings than your annual income. самоосигуряващо се лице или ЕООД