Self-Insurance
A method of risk financing where a business sets aside its own funds to cover potential losses instead of purchasing traditional insurance
Detailed Explanation
Large, financially stable businesses may choose to self-insure certain risks like workers' compensation or health insurance. This is often used for predictable and frequent types of losses.
Practical Example
A large corporation manages its employee health benefits through self-insurance, covering healthcare expenses directly instead of purchasing coverage through an insurance provider. They often use a Third-Party Administrator to manage the claims.
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