Levi Watson

Maybe your insurance agent has used this term with you, but most people are not entirely clear on what it means. Self-insurance is a pretty simple idea, but it's also an important one to understand.

Self insurance is when a person or a business accepts the risk of financial loss and depends on savings or statistics to safeguard them. If you've ever suffered a loss, whether you were covered for it or not, this may sound like a pretty scary - or a pretty foolish idea. It doesn't have to be.

We all self-insure against certain risks every day. Most people don't carry health insurance for their pets. Veterinary care is more affordable than medical care for people, and with some planning, we pet owners can usually save a little each month to anticipate pet-care costs. The federal government doesn't usually carry auto insurance on the cars that it owns because its financial resources are enough to cover the kinds of losses incurred even in a very expensive car accident. No one buys insurance to offset the loss of income they expect to suffer if Martians come and stain all of their neckties.

Some losses, like necktie-staining Martians, are too unlikely to insure against. Some few entities, like the federal government, have the resources to self-insure against even profound losses. Some risks, like the cost of our pets' health, are predictable enough that the insurance products currently available to insure against loss are poor investments.

There are some times when it's best to accept the risk of financial loss for yourself.

There are other times when it's not the best - or when it's impossible.

Your family depends on you. If you died today, who would pay for your funeral? Who would pay for your relatives to come say their farewells? Who would pay your mortgage?

You're a good driver. If you were hit by a driver who isn't - if you were hit by a driver without enough insurance to cover your losses, could you cover those losses yourself?

If a fire destroyed your home, or an identity thief forced you to rebuild your credit and finances, or if a door-to-door solicitor slipped on your sidewalk and sued you, what would you do? How much loss can you tolerate? Who's there to help?

Self-insurance isn't always a bad thing - it's just a fact.

It is important, though, to know what you're self-insuring and what you're protected against, and it's important that you're comfortable with your risk.

Call your insurance agent today and find out what risk you're self-insuring, and what risk you're sharing.

Annual veterinary bill: $125

Dog food for a year: $300

Cost of a single, unexpected attack on a neighbor: $1,000,000 and felony prosecution. . .

Those of us who have dogs already know that their companionship is priceless. We call dogs "man's best friend" for good reason - they're lovable, patient, fun, friendly, entertaining, and fairly inexpensive - some of the same traits we wish were more common in the people we know. Did you know, though, that your dog could cost you your house, and maybe even your freedom? In an article she wrote for MSN Money, Liz Pulliam Weston explains how an attack from a beloved family dog could cost that dog's owners a million dollars or more and even land them in jail. Weston quotes the Insurance Information Institute as saying that the average cost of a dog attack last year was $24,511 - and that that number is getting bigger!

Weston goes on to give readers a lot of good, common-sense advice about breed selection, training, fence-building, and so forth, but the parts of the article that stick out are the need to admit that even your lovable dog could attack someone and the need to insure yourself against that possibility.

1. Be honest with your insurer about having a dog and about the breed of the dog. Withholding information could void your policy, leaving you without any coverage.
2. Make sure that you have umbrella coverage for twice your net worth, in case you become one of those people whose dog does attack someone this year. Weston estimates that a $1 million dollar umbrella policy costs an average of $300 a year.

At that price, it takes more than three thousand years to pay out in premiums what your policy will protect against. If you're insured through me, and you own a dog, call me or come in today to review your policies to make sure that you're covered. If your insured through someone else, call them and make sure you're covered - or, better yet - call me.

We're not surprised that it's expensive to not be insured. Don't you be surprised if reviewing your coverage saves you everything.