Pros and Cons of Self-Insured Status
November 24, 2023
There are many pros and cons for Florida residents and businesses who elect to register as a self-insured. Basically, this means you are personally assuming the financial risks associated with insuring your vehicle(s).
So, if an accident happens, the self-insured is responsible for the injuries caused to others and any property damage, in addition to their own injuries and damages to their vehicle. Although there can be benefits for those who qualify as self-insured when compared to purchasing Florida auto insurance, there can be big drawbacks.
Some individuals and certain businesses, especially those in the automotive industry, can save considerable money on insurance premiums. But, an increased risk of having to pay out-of-pocket for a large claim looms as an everyday possibility.
Nonetheless, Florida allows motorists and companies that meet the requirements set forth in state statutes to be self-insured under Section 324.171, F.S. This section outlines the financial requirements to allow qualified individuals to be issued a certificate as self-insured. It is important to take note that the Florida Legislature removed surety bonds as a mean of obtaining self-insurance.
FLHSMV Certificate of Self-Insurance
Normally drivers in the Sunshine State are required to purchase a minimum of $10,000 for Property Damage Liability and $10,000 for Personal Injury Protection, which is known as PIP insurance, and these policies protect those involved in a car crash from delayed medical treatments and expensive payouts for property damage. Since Florida has No-Fault Laws, your insurance even pays for your injuries (and passengers) after an accident that you did not cause.
By comparison, a Certificate of Self-Insurance issued by the Florida Highway Safety and Motor Vehicle is valid for a period of one year from the effective date. However, the self-insured must have cash reserves equal to the minimum limits of liability, which in the Sunshine State for one crash is $10,000 of bodily injury to one person, $20,000 of bodily injury to two or more persons, and $10,000 of coverage for another person’s injuries or property damage.
State statutes also require a notarized copy of a Statement of Net Worth that confirms unencumbered net assets of at least $40,000, not including a homestead or residence. In addition, a list must be submitted of all vehicles to be covered by the self-insurance certificate. Self-insurance can be a cost-cutting measure for someone who qualifies but it is a risky gamble that has the potential to financially damage the self-insured motorist or company.
Who Benefits Most from Self-Insured Status?
Individuals and business entities ideally should only consider self-insured status for Florida auto insurance when they have enough money set aside to cover potential losses in the event of a major accident. A key factor to consider for managing such risks is an outright comparison of the maximum potential loss versus the financial resources of an individual or company. If you belong to one of the categories below, you might consider self-insured status:
- Independently Wealthy - If it isn’t difficult for you to meet the minimum requirements for obtaining a Florida certificate and paying for injuries or damages does not compromise your financial stability, you may consider applying for self-insured status. It saves paying for insurance premiums and gives the individual control over financial decisions.
- Automotive Companies – Business entities who are in the automobile industry may financially benefit by being self-insured. It is a strategic way of managing the company’s financial risks by reducing insurance costs. This is effective when coverage is considered to be too costly based on the number of vehicles the business needs to register.
Self-insurance is a big risk, which means it could come with a big reward or a big loss, but it always depends on "the unknown". Since it could save a significant amount of money on annual expenses, individuals or businesses who can definitively afford to pay out-of-pocket for claims could benefit in the long run. But unless you have tens of thousands of dollars set aside to pay for more expensive claims, you probably shouldn’t consider self-insurance.
Most drivers and businesses should purchase auto insurance from a reputable insurer that is registered with the state of Florida. That is most efficient way to manage fiscal responsibility in the event of a crash. At Nsurance Nation, our independent agents can identify your best options to avoid out-of-pocket costs should accident expenses balloon beyond PIP limits. Contact us today to learn more about your hard-earned assets.
