What does it mean to "self-insure"?

Self-insuring refers to the practice of setting aside funds to cover potential losses instead of purchasing an insurance policy. This approach involves taking on the financial responsibility for risks directly by reserving a portion of one's own resources to pay for any potential claims or losses that may occur. It effectively means that an individual or business decides to manage their own risk rather than transferring that risk to an insurance company.

This method can be advantageous for those who anticipate having sufficient funds to handle potential losses or who prefer more control over their financial planning. It also demonstrates a level of confidence in managing risks internally, as it involves assessing possible future expenses and ensuring adequate savings or reserves are in place.