What does it mean to be "self insured"?
11-04-2008, 01:20 PM
#1
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What does it mean to be "self insured"?
Lately, I've had many people use the dreaded words "self insure" and each time I hear it I cringe knowing full well that the majority of people using the words don't understand fully the risks and/or pieces involved with TRUE "self insurance". This phrase has a lot of aspects that most don’t realize.
Let's start out by simply defining self insurance. According to Wikipedia, the definition is as follows:
SELF INSURANCE: Self insurance is a risk management method in which a calculated amount of money is set aside to compensate for the potential future loss. More colloquially, the term "self-insured" is used as a euphemism for uninsured.[1]
If self insurance is approached as a serious risk management technique, money is set aside using actuarial and insurance information and the law of large numbers so that the amount set aside (similar to an insurance premium) is enough to cover the future uncertain loss.
There are really two major reasons why people get watercraft insurance.
1. To coverage damage done to the boat itself, this is referred to as the physical damage coverage.
2. To coverage any physical damage or bodily insured done to someone/something else.(This is your biggest exposure because there is no cap on the amount of damages)
Now, let's look at each reason with respects to Self insurance.
Self Insurance for physical damage is much easier to comprehend and grasp. Your investment in your boat is a set dollar amount. You damage it, you lose X amount of dollars. Basically, you know your risk and are "ok" with losing that amount of money. This rational I can respect and understand, especially for those boatowners in FL and Coastal states, to an extent. It all depends on the amount of the exposure.
The second reason above, the liability of damage done to someone or something else is the scary part that I feel that most people using the term Self Insurance do not have a clear understanding of what they are really saying. Accidents happen; it is why people carry insurance. We all know that lawsuits can end up with judgments of obscene amounts of money, well into the millions. In the event of a death, a million dollars isn't hard to comprehend. No one ever wants to think that they will do something to harm someone else. You can be THE SAFEST boater out there and while you are reducing your chance of an accident by being a safe boater it only takes one split second for a freak accident to happen that could wipe out your life savings and life as you know it. Unfortunately this year we've been reminded of the fact that powerboating is a dangerous sport with unknown and unexpected things happening when we least expect them.
Let me give you a scenario to put all of this into perspective. You and your family take out your neighbors on your boat. You are out cruising a very familiar body of water to you. You decide that you're going to do a quick run at a higher rate of speed. You hit a wake wrong and one of your neighbor’s children is ejected from the boat. The child suffers serious injuries and will be injured from the accident for the rest of the child's life. The family sues you for the bodily injury and the pain suffering and advanced care the child will need. A judge places a judgment against you for $1,000,000. Can you afford $1,000,000 to pay the family? Most people can't.
If you are going to claim to self insure yourself talk to a professional about self insuring properly. There are proper ways to do it and catastrophic exposure policies out there.
Bottom line is that before you claim to self insure; know the extent of your risks and act accordingly. Don't put everything you have worked so hard to obtain on the line because accidents happen everyday, there is nothing to say that an accident won't happen to you next.
If you have any questions about self insurance, please call me. I will be happy to take the time to talk to you. I am here to be your resource for all your boating insurance needs.
Let's start out by simply defining self insurance. According to Wikipedia, the definition is as follows:
SELF INSURANCE: Self insurance is a risk management method in which a calculated amount of money is set aside to compensate for the potential future loss. More colloquially, the term "self-insured" is used as a euphemism for uninsured.[1]
If self insurance is approached as a serious risk management technique, money is set aside using actuarial and insurance information and the law of large numbers so that the amount set aside (similar to an insurance premium) is enough to cover the future uncertain loss.
There are really two major reasons why people get watercraft insurance.
1. To coverage damage done to the boat itself, this is referred to as the physical damage coverage.
2. To coverage any physical damage or bodily insured done to someone/something else.(This is your biggest exposure because there is no cap on the amount of damages)
Now, let's look at each reason with respects to Self insurance.
Self Insurance for physical damage is much easier to comprehend and grasp. Your investment in your boat is a set dollar amount. You damage it, you lose X amount of dollars. Basically, you know your risk and are "ok" with losing that amount of money. This rational I can respect and understand, especially for those boatowners in FL and Coastal states, to an extent. It all depends on the amount of the exposure.
The second reason above, the liability of damage done to someone or something else is the scary part that I feel that most people using the term Self Insurance do not have a clear understanding of what they are really saying. Accidents happen; it is why people carry insurance. We all know that lawsuits can end up with judgments of obscene amounts of money, well into the millions. In the event of a death, a million dollars isn't hard to comprehend. No one ever wants to think that they will do something to harm someone else. You can be THE SAFEST boater out there and while you are reducing your chance of an accident by being a safe boater it only takes one split second for a freak accident to happen that could wipe out your life savings and life as you know it. Unfortunately this year we've been reminded of the fact that powerboating is a dangerous sport with unknown and unexpected things happening when we least expect them.
Let me give you a scenario to put all of this into perspective. You and your family take out your neighbors on your boat. You are out cruising a very familiar body of water to you. You decide that you're going to do a quick run at a higher rate of speed. You hit a wake wrong and one of your neighbor’s children is ejected from the boat. The child suffers serious injuries and will be injured from the accident for the rest of the child's life. The family sues you for the bodily injury and the pain suffering and advanced care the child will need. A judge places a judgment against you for $1,000,000. Can you afford $1,000,000 to pay the family? Most people can't.
If you are going to claim to self insure yourself talk to a professional about self insuring properly. There are proper ways to do it and catastrophic exposure policies out there.
Bottom line is that before you claim to self insure; know the extent of your risks and act accordingly. Don't put everything you have worked so hard to obtain on the line because accidents happen everyday, there is nothing to say that an accident won't happen to you next.
If you have any questions about self insurance, please call me. I will be happy to take the time to talk to you. I am here to be your resource for all your boating insurance needs.
11-04-2008, 07:09 PM
#2
Stacey,
Great post but I'll take the other side just for argument's sake (note I carry full comp, fire, theft, 500k liability on both my boats even on my kids 15 Whaler)
1. Insurance is a sunk cost (you get nothing in return) so for a 3 month boater (assuming up north) to lay out $XXX for 90 days coverage, of which you may be on the water 12 of those days (1 day a week for the 12 week season) seems to be a good risk.
2. You have an older boat/ paid for. 1st older boats are more difficult to insure and then you get to fight with the ins. company to get paid whatever you think the boat was worth.
3. You are broke/ have no assets. The judgement is one thing but every lawyer knows it isn't worth anything if you can't collect it........
So if you are a blue collar guy making 30K a year, renting a house with a 20 year old Scarab/Formula that rides like a tank and runs wide open at about 60 mph and you only have a few bucks of discretionary income to spend in the summer my guess it won't be for the insurance policy.......
I think insurance is the biggest scam out there......until you need it for something catastrophic.
Case in point: Paid workers comp (premium this year is about 10K) for the last 19 years without ever having a claim. Got my first claim 5 weeks ago, employee broke his arm. Total payout will be about $4500 including lost wages (at 60%). Safe to say the insurance company made out ok in that risk assessment!
If I had more money I would skip Homeowners Insurance/ Windstorm completely (another 7K a year for nothing). Boats and Cars are tough since they encounter the unknown everytime they are used.
So consider the other side of the coin........
Great post but I'll take the other side just for argument's sake (note I carry full comp, fire, theft, 500k liability on both my boats even on my kids 15 Whaler)
1. Insurance is a sunk cost (you get nothing in return) so for a 3 month boater (assuming up north) to lay out $XXX for 90 days coverage, of which you may be on the water 12 of those days (1 day a week for the 12 week season) seems to be a good risk.
2. You have an older boat/ paid for. 1st older boats are more difficult to insure and then you get to fight with the ins. company to get paid whatever you think the boat was worth.
3. You are broke/ have no assets. The judgement is one thing but every lawyer knows it isn't worth anything if you can't collect it........
So if you are a blue collar guy making 30K a year, renting a house with a 20 year old Scarab/Formula that rides like a tank and runs wide open at about 60 mph and you only have a few bucks of discretionary income to spend in the summer my guess it won't be for the insurance policy.......
I think insurance is the biggest scam out there......until you need it for something catastrophic.
Case in point: Paid workers comp (premium this year is about 10K) for the last 19 years without ever having a claim. Got my first claim 5 weeks ago, employee broke his arm. Total payout will be about $4500 including lost wages (at 60%). Safe to say the insurance company made out ok in that risk assessment!
If I had more money I would skip Homeowners Insurance/ Windstorm completely (another 7K a year for nothing). Boats and Cars are tough since they encounter the unknown everytime they are used.
So consider the other side of the coin........
11-04-2008, 11:15 PM
#3
HP Marine Ins. Specialist
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Stacey,
Great post but I'll take the other side just for argument's sake (note I carry full comp, fire, theft, 500k liability on both my boats even on my kids 15 Whaler)
1. Insurance is a sunk cost (you get nothing in return) so for a 3 month boater (assuming up north) to lay out $XXX for 90 days coverage, of which you may be on the water 12 of those days (1 day a week for the 12 week season) seems to be a good risk.
2. You have an older boat/ paid for. 1st older boats are more difficult to insure and then you get to fight with the ins. company to get paid whatever you think the boat was worth.
3. You are broke/ have no assets. The judgement is one thing but every lawyer knows it isn't worth anything if you can't collect it........
So if you are a blue collar guy making 30K a year, renting a house with a 20 year old Scarab/Formula that rides like a tank and runs wide open at about 60 mph and you only have a few bucks of discretionary income to spend in the summer my guess it won't be for the insurance policy.......
I think insurance is the biggest scam out there......until you need it for something catastrophic.
Case in point: Paid workers comp (premium this year is about 10K) for the last 19 years without ever having a claim. Got my first claim 5 weeks ago, employee broke his arm. Total payout will be about $4500 including lost wages (at 60%). Safe to say the insurance company made out ok in that risk assessment!
If I had more money I would skip Homeowners Insurance/ Windstorm completely (another 7K a year for nothing). Boats and Cars are tough since they encounter the unknown everytime they are used.
So consider the other side of the coin........
Great post but I'll take the other side just for argument's sake (note I carry full comp, fire, theft, 500k liability on both my boats even on my kids 15 Whaler)
1. Insurance is a sunk cost (you get nothing in return) so for a 3 month boater (assuming up north) to lay out $XXX for 90 days coverage, of which you may be on the water 12 of those days (1 day a week for the 12 week season) seems to be a good risk.
2. You have an older boat/ paid for. 1st older boats are more difficult to insure and then you get to fight with the ins. company to get paid whatever you think the boat was worth.
3. You are broke/ have no assets. The judgement is one thing but every lawyer knows it isn't worth anything if you can't collect it........
So if you are a blue collar guy making 30K a year, renting a house with a 20 year old Scarab/Formula that rides like a tank and runs wide open at about 60 mph and you only have a few bucks of discretionary income to spend in the summer my guess it won't be for the insurance policy.......
I think insurance is the biggest scam out there......until you need it for something catastrophic.
Case in point: Paid workers comp (premium this year is about 10K) for the last 19 years without ever having a claim. Got my first claim 5 weeks ago, employee broke his arm. Total payout will be about $4500 including lost wages (at 60%). Safe to say the insurance company made out ok in that risk assessment!
If I had more money I would skip Homeowners Insurance/ Windstorm completely (another 7K a year for nothing). Boats and Cars are tough since they encounter the unknown everytime they are used.
So consider the other side of the coin........
I am also not trying to impose one or the other on anyone, I just want everyone to be informed.
That's all. Thank you for playing Devil's Advocate, you make great points!
Besides this part of the forum needed to get some discussions going anyways! hahaha
11-06-2008, 05:46 PM
#4
Guest
Posts: n/a
Majority of boat owners insure because there is a lien on the boat from the lender, I'm sure if insurance was'nt required by the lienholder there would be a substantial amount of owners either self insured or not insured. The liability consequences are potentially huge, but alot of people just can't afford the insurance and will just take the chance. It's just like gambling.
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