Money self-insurance

The more money you have, the easier this is to do. For example, you might buy dental insurance. But perhaps your dentist does not choose to participate in such a plan. The policy is good only if you switch dentists. Solution Insure yourself. Instead of paying, say 15, into a policy each month, use the money to build a kitty for future dental bills. Such a fund becomes a self-insurance policy. 

Self insurance works best when the risk is small. Deductibles are, in a sense, self insurance. The more money you have, the higher the deductible can be. If you can afford to pay the first 2,500 of medical expenses each year, a deductible of this amount will greatly lower your monthly medical insurance premium. 

There are several different ways of applying self-insurance. One method involves depositing money equivalent to an insurance premium into a special company fund. This fund can then be used to handle any losses or emergencies which may occur. At the outset, this fund would be small and would be inadequate to handle any major losses. Consequently, if this method is used, it may be necessary to supply an original base fund or else assume a disproportionate amount of risk until the fund has built up to a practical value. Under ordinary conditions, the premiums paid into a self-insurance reserve are not tax-deductible. 

Self-insurance is being considered for one portion of a chemical company. The fixed-capital investment involved is 50,000, and insurance costs for complete protection would amount to 400 per year. If self-insurance is used, a reserve fund will be set up under the company s jurisdiction, and annual insurance premiums of 300 will be deposited in this fund under an ordinary annuity plan. All money in the fund can be assumed to earn interest at a compound annual rate of 5 percent. Neglecting any charges connected with administration of the fund, how much money should be deposited in the fund at the beginning of the program in order to have enough money accumulated to replace a complete 50,000 loss after 10 years ... 

In a dictatorship system, the boss has the power to fire and subordinates arc quite cognizant of this power. Consequently, subordinates know they have entirely too much to lose— money, health insurance, security, self-respect, image in the community, children s education, future plans, etc., to buck the system. Another reason Dhruve raises for not tattling on the boss is that complaining about your boss makes you a victim. Implicit in victimhood is lack of toughness can t cut it in the business world. 

---